The Impact of Agile for Financial Services

by Sara Caldwell on January 29, 2021

Caldwell-03_featuredThe Business Value of Agile Innovation is our new series looking at  the many ways Agile can transform specific sectors for the better. Financial services leaders have their own considerations when it comes to Agile–considerations shaped in part by as much if not more time-to-market pressure than other industries. Below, we’ll look at what we really mean when we say “agile”, then we’ll dig into the top two reasons financial services companies should embrace the methodology.  

What We Mean By “Agile” 

Agile has turned into a buzzword, and many people still think of it strictly as a software development methodology. But Agile is about more than creating software, and leading a transformation is about more than adopting the term and using sticky notes, while still executing with a big-bang approach.  

Agile is about people, process, and tools. It’s about finding economies of flow and working in a way that enables an organization to adapt and stay ahead of their competition. It’s about responsiveness and balancing efficiency and effectiveness, because an organization can be 100% efficient and 0% effective. In short, a true Agile transformation can help teams work together to reduce time to decision and time to market, and we’ll dig into the unique importance of those factors for finance next.  
 

Why Your Financial Services Company Needs Agile Now 

Change has been accelerating throughout the financial sector, and goes beyond the hugely disruptive and well-documented impact of cryptocurrencies. Agile, mobile platforms are threatening financial institutions across dollar-based banking, lending, and payment processing as well. There are many reasons to embrace Agile, but here are the top two we’ve seen in terms of business outcomes: 

#1 Meet Demand for New Features

Occupational psychologist John Seddon has written on service organizations’ “ability to ‘absorb’ customer demand.” This involves empowering employees to respond to customer requests; adapt to change; and apply sense, reason, and intellect to realize those changes. For banking, more and more customers are demanding the convenience of using mobile devices, Google, Apple, and peer-to-peer payment apps to transfer and manage their money.  

In addition, branch-based banks and credit unions are having to compete with purely online fintech startups, many of whom differentiate themselves in the market with innovative offerings. Some, like Chime, boast a fee-free model while fintech startup Aspiration offers cash back on socially conscious spending.  

#2 Make Faster Credit Decisions 

In small business and corporate lending, leading banks have embraced digitization and Agile in order to deliver core services faster. This has allowed them to bring time to decision down to five minutes and time to cash to less than 24 hours. Traditional banks, by comparison, average between three and five weeks on time to decision and nearly three months for time to cash. As McKinsey contributors put it, “these times will soon seem as antiquated and unacceptable as the three weeks it once took to cross the Atlantic.” 

Mortgage lending platform Roostify presents consumers with simplified loan options and reduced time to close. Rocket Mortgage, meanwhile, has become America’s leading home lender with “mortgage in minutes” as a key promise. To keep up, more than one bank now has a vision to automate 95% of their retail underwriting decisions. In the payment solutions space, high-growth Polaris client Clearent automated key stages of their merchant onboarding and underwriting process to bring it down to just 30 seconds.  

 

In financial IT, what got us to today won’t necessarily get us through the future. Things can change quickly and what was true yesterday might not be true today. As we work with teams, we need to help them shift from a Fragile culture that says “I hate disorder and fall apart near it” to an Agile and Anti-Fragile culture that says “the more disorder I face, the stronger I become.” For help spearheading your own Agile transformation, reach out to us for a free discovery session. And stay tuned for an upcoming post where we’ll cover overcoming obstacles to agility and preparing your organization, team, and tools. 

Topics: Agile, agile coaching, finance