Why traditional bankers make terrible fintech CEOs

by James · October 20, 2022

Over the past decade, many traditional financial products – such as peer-to-peer lending platforms and mobile wallets – have been redesigned by a wave of fintech designed to meet the evolving needs of consumers and businesses in a digital world. To stay ahead of this innovation and remain competitive, traditional banks have had to start thinking and acting like technology companies. It is easier said than done.

The limitations of traditional banks go deeper than legacy technology and outdated service models: they are cultural. More precisely, they are held back by a leadership profile that prioritizes safe games and familiar hierarchies over innovation, flexibility and inclusion.

If bankers want to make it in fintech and run a successful business, they need to stop thinking like bankers and more like technical CEOs.

Here are five things wrong with the traditional banker mindset:

Table of Contents

Bankers are pessimists

To be a good CEO, you need to have a vision – but that alone is not enough. You must also communicate this vision to the board, investors and employees with positivity and optimism. If you can’t get your stakeholders to believe in your version of the future, you’ve already lost.

Banking is by nature a pessimistic and risk-averse industry. The upside in banking is always limited, but the downside is total – this creates a worldview focused on making money without risking losses. This risk aversion translates beyond money into a greater desire to prevent failure rather than achieve excellence. And while that’s a fine survival strategy in an inert market, it won’t hold up against the swelling tide of disruption tearing through the financial sector.

Bankers don’t innovate

Banking is one of the most regulated industries in the world, and innovation always invites a degree of regulatory scrutiny. This means that bankers prefer not to be ahead of the curve and would rather wait until someone else has proven that something works.

Bankers think you can set culture with a policy

The average bank has thousands of pages of policies that set standards for appropriate behavior. In general, bankers believe that any problem can be solved with a new policy. After all, if all you have is a hammer, everything starts to look like a nail.

But while policies may limit and document the official rules that govern a business, culture is ultimately determined by the people in a company and how they actual behave (especially when no one is looking). As scandals like Enron has shown us in the past, just saying that integrity is a core value does not mean that it actually reflects the company’s culture. Having a good culture is therefore primarily driven by who a business is willing to hire, fire and promote – and whether it makes these decisions in line with the company’s values.

Very rarely do older banks emphasize culture fit when hiring: either you have the right pedigree and experience, or you don’t. However, this can often attract employees from a limited demographic and they are far more likely to fall prey to groupthink and ignore the impact of their actions on their co-workers and customers.

I’ve seen firsthand when “culture fit” becomes synonymous with demographics and pub talk rather than how someone handles challenges and treats their co-workers, regardless of seniority.

When we founded Griffin, we made it a priority to outline the company’s values and create a framework for assessing culture fit for every new hire, whether they were joining the C-suite or just starting their careers. This consists of a 90-minute interview that assesses a candidate’s approach to what really matters – how they work together, how they think about accountability and whether they are kind and thoughtful. Although this means a slightly longer process for the candidate, it helps us maintain our culture and emphasize its importance from the start.

Bankers are driven by hierarchy

Banking culture is steeped in hierarchy. These days, there’s a solid rationale behind that hierarchy—it exists to make accountability explicit. But that hierarchy has a downside, which is that it makes it harder for great talent who aren’t at the top of the pyramid to get noticed.

A good CEO understands that everyone they hire potentially has something valuable to contribute, whether they’re straight out of university or have 30 years of experience. At Griffin, many of the team’s most influential members are only early in their careers, but by virtue of their willingness to dive deep into critical projects, they are able to make a huge difference to the company.

It’s worth pointing out that it’s not enough to just hire smart, driven people – you need to make sure they have the context and psychological safety to speak up if they see a lost opportunity or a looming iceberg. Part of being a good CEO means accepting challenges and seeing them as an opportunity both to test whether something is the right choice and to communicate the rationale behind the strategy and vision to the rest of the company.

Bankers are in denial about the future of their industry

All banks are now technology companies, whether they like it or not. But the hard truth is that big players continue to kick the can down the road when it comes to technology. Decades of technical debt make it increasingly difficult for banks to know where customer data resides within their infrastructure – we know of at least one bank that has more than 30 official “systems of record” as a result of various acquisitions that were never fully merged a single core stack. And that doesn’t even get into how much inheritance infrastructure making it expensive and slow to bring new products to market.

Another bank – one of the biggest in the UK – has tried to solve this by introducing a microservices model on top of the same mainframe they’ve been using for the past 50 years. These are temporary fixes at best rather than real solutions. As bank CEOs (and CEOs in particular) often think of their tenure in five-year terms, the risk of embarking on major changes in technology strategy remains persistently out of reach for the organization.

Even where you see large change programs, they are often approached as risky projects as opposed to iterative changes. ONE usual The technology company often has to rip out and change parts of its stack as it grows – but it usually does this by spinning up a new technology stack and starting by just adding new traffic or customers to it, rather than moving everything on once. This is a much smarter approach to managing the risk of major technical change compared to the kind of major restructuring that has been attempted TSB in 2019, which led to chaos and multi-day shutdowns.

Change is rarely popular – it’s messy and disruptive. A good CEO knows how to push past discomfort and not only initiate and lead massive change, but bring key stakeholders on board as allies. If bankers do not begin to embrace the technological CEO mindset, the traditional players will be left in the dust by challengers who are already leading the charge in faster, smarter and more resilient technology.

David Jarvis is CEO of fintech Griffin.