Good leadership is a key indicator of successful digital transformations. And yet, while the pace of digital transformation in banking is accelerating, bank boardrooms are falling behind. Our new research report called Boosting the Bank Board’s Technology Expertise shows that only 10 percent of banking board directors have technology expertise. We believe the number should be at least 25 percent, but at the current pace of change this won’t be reached until the end of this decade. There are steps banks can take to achieve this target earlier. Doing so is essential to seizing the tremendous opportunities created by technology.
Banks need technology expertise now more than ever
Banking technology is moving forward, whether or not board members are prepared. The COVID-19 pandemic has sped up digital initiatives by years. Many of these are cloud-related; in fact, 47 percent of banks currently process a high degree of workload in the cloud, up from 33 percent in 2018.
The need for a technology-savvy boardroom goes beyond internal initiatives, as the pandemic rewrites customer expectations. While only 15 percent of customers spoke to a bank advisor via video call before COVID-19, 35 percent actually prefer video to a face-to-face meeting now. Similarly, 33 percent of retail bank customers interacted with their bank through mobile apps or websites at least once a week back in 2019. In only two years, this has grown to 49 percent.
Bank boardrooms not keeping pace on technology
As I mentioned earlier, only 10 percent of banking board directors have technology expertise. What’s even more concerning is that in 2015, this statistic was 6 percent. That’s a very slow increase over five years—too slow for the rapid pace at which technology is changing the market. That said, some banks are doing better than others.
Only 15 out of the 107 banks we surveyed had over 25 percent of board directors with tech expertise. When compared to leading tech companies, which have over half of their boards with tech expertise, there is abundant room for improvement.
European Lens: Looking at Europe specifically, some individual countries like the UK are ahead. But Europe as a whole is significantly behind North America – by a margin of 9 to 18 percent.
Ways to increase tech expertise on banking boards
Of course, nothing is set in stone. There are steps banks can take to increase the tech knowledge in their boardrooms.
- Train board members: Directors need to understand the technologies that are changing the world. Continuously coach your board members so that they understand what these technologies do, how they work, how they will be applied and what the risks are.
- Listen to others: Technology expertise is everywhere—you just have to look for it. Take advantage of other resources, like partners, suppliers, consultants and unlikely experts within your organization.
- Talk about technology: Between financials, risk management and other topics, board members have a lot to talk about. Technology can sometimes fall to the bottom of the agenda, if it’s there at all. Make sure technology is always talked about at board meetings. This can be driven by establishing a technology board committee or advisory council.
- Appoint members with tech credentials: In addition to upskilling the existing board, when you have vacancies and are vetting candidates, prioritize technology expertise as well as diversity in your selection.
- Understand the human-technology interplay: Boards need to think carefully about how technology and humans interact to create experiences that are valued by customers, wholesome for employees and, ultimately, profitable for the bank. The potential of technology is only as vast as the people behind it. Banks need a modern, supportive culture to attract and keep the best talent.
- Explore how tech can transform the business: It’s important for board members to understand technology, but that’s only half the battle. The other half is exploring how technology can transform the entire business. This perspective needs to come from board members, who have an understanding of the business that IT teams don’t.
This is the kind of leadership banks need to be future-ready: Board members who constantly learn about new technologies, fully understand the technologies they are currently using, and empower their people to explore innovative technologies and use them to reinvent the business from every angle.
The banking industry has a long way to go to increase tech expertise in boardrooms, but we will get there. We have no choice if we want to stay relevant.
More insights are available in Boosting the Bank Board’s Technology Expertise.