For twenty years he was part of a management team that grew their bank from 6 to 400 billion dollars and then he started his own business, currently known as Innosect. Now JP Nicols (Seattle, Washington) is a speaker and consultant who advises fintechs and banks all over the world at the intersection of innovation and human potential. How are these institutions doing? And what steps can they take to become even better?
Innovation wasn’t in most bankers’ lexicon when JP Nicols left banking to start his own company in 2012. Considering the fact that most banks were struggling to keep their heads above water coming out of the global financial crisis, this is not surprising. But even before then, there was already a threat to the traditional ways banks had been doing business. Nowadays we call it fintech and we all know it. But at that time, most banks just shrugged their shoulders, assuming they had already detected the threat. Arrogance? Ignorance? From a certain point of view Nicols can understand it. “Banks had been doing the same things, in the same way for hundreds of years. And they were doing alright. So why change?”
Now, with the crisis behind us and 2016 ahead of us, how are the banks doing? “One can differentiate two groups of bankers, or enterprises for that matter. On the one hand you’ll find the traditionalists: the typical banker, mastering the known knowns and best practices. On the other hand you’ll find the trailblazers: the new generation, exploring the unknown and establishing next practices. For years the last group has been pushed aside by the first. Now we see finance companies wanting to combine the best of both worlds.” And yes, banks do offer something trailblazers lack: compliance, scale, a lot of customers. But that’s certainly not enough. They can and must learn from other successful business cases. “We all know the tragic story of Kodak; for decades a pioneer. They saw the threat of digital photography coming, they were even pioneers in it, but they couldn’t get the company to prioritize it as a part of their mainstream business, which they still thought to be celluloid film.’ If banks don’t become humble and open up for change, they will experience their own Kodak moment.”
Two determining factors for success
There seem to be two main components that determine the success of companies operating in banking. The first is rather a cliché: customer centricity. Nicols has a pretty daring way of coping with this cliché. When he speaks at conferences where banks are the audience, he asks them to define in one word what differentiates them from other banks. And every time he gets the same answer: “service”. He points out the irony that they all typically choose the same word as the one that supposedly differentiates them from everyone else, who of course also chose the same word. “Yeah, then they get a little uncomfortable of course. And it gets worse when I say I don’t think they know what ‘service’ is actually about.”
It’s not Nicols’ intention to bash the banks, and he’s not anti-branch. “I truly believe their intention is to serve the client and that they think they are successfully doing so. Being customer centric, however, is about understanding your client and making his life more convenient. Therefore you need to acknowledge that, to use Brett King’s famous words, banking is no longer somewhere you go, it’s something you do. People go to their bank because they have to, not because they want to.”