The man tasked with transforming Bank of Nova Scotia into the leading digital bank in Canada and its key Latin American markets says reaching those goals will require nothing less than a reimagining of how the bank serves its customers.
“This is a cultural change,” says Ignacio “Nacho” Deschamps, group head of international banking and digital transformation with Scotiabank in Toronto. “That’s why we need everybody on board.”
In 2016, Scotiabank tapped Deschamps, formerly the head of Mexico’s largest bank and chairman of the Mexican Banking Association, to oversee both Scotiabank’s international retail banking operations and the bank’s five-year, digital transformation plan.
Scotiabank is pursuing a unified digital strategy across its domestic and foreign markets – a goal that is likely to see a lot fewer in-person interactions between the bank and its customers. By 2021, the bank wants to have at least 70% of its customers globally using digital channels to conduct their banking, up from 30% today. The bank also wants to have fewer than 10% of financial transactions conducted in bank branches by that same deadline.
What’s driving the transformation, Deschamps says, is a critical need to stay ahead of the disruptive forces that already are remaking financial services around the world and to keep pace with customers who increasingly are turning to technology to make their lives easier.
“Some consumers don’t want to use technology, and that’s fine. But, five years from now, how will we grow market share?” Deschamps asks. “I have kids who are getting out of college. They would never pick a bank based on its branch footprint. They would pick it based on its mobile app.”
Central to Scotiabank’s digital transformation, Deschamps says, will be the work of digital innovation teams housed in open-concept, loft-style technology hubs that Scotiabank is calling “digital factories.” In January, Scotiabank officially launched a 70,000-square-foot, state-of-the-art digital factory in Toronto. This year, the bank also opened or is opening digital factories in its four “Pacific Alliance” countries of Mexico, Chile, Colombia and Peru.
The digital factories are meant to attract top developers, data analysts, digital marketers and other talent, supported by banking experts and typically in small teams. These teams will build a prototype app – say, a mobile application for opening a credit card account – as quickly as possible, often in two to four weeks, and test it with small groups of customers, then adapt the app based on how customers interact with the prototype.
“After a few iterations,” Deschamps says, “you can say, ‘Customers really love this, and let’s put a lot of money in this now to make it in the scale we need’.”
While the teams in each tech hub will be working on digital innovations for their own domestic markets, the teams also will be connected to each other.
“The ambition and the vision is to build once and deploy in many places,” Deschamps says.
Branches of the future
Another key part of Scotiabank’s digital transformation is to seek partnerships with technology hubs in academia, with venture-capital firms that invest in the fintech space and with small fintech firms themselves.
For example, in December, Scotiabank announced a partnership with U.S.-based QED Investors to invest in and develop fintech companies in the Pacific Alliance countries. Last June, the bank signed a deal with U.S.-based Kabbage Inc. to provide online small-business loans within minutes to Scotiabank customers in Canada and Mexico.
With thousands of startups launching each year, partnerships are a way to stay on top of what’s happening in the marketplace overall, Deschamps says: “The most important thing is to become an active member of the fintech ecosystem. When we partner with firms or buy services through them or even mentor them in developing their business plans, we learn from that.”
Scotiabank’s digital transformation won’t come cheap; the bank states it’s spending about $2.5 billion annually over the next five years on technology across the firm overall. These costs will be offset, in part, by efficiencies achieved through digital transformation.
And, as that transformation unfolds, the role of the bank branch will continue to evolve from one where financial transactions happen to one where customers receive advice, support and training on digital tools, Deschamps says. He compares Scotiabank branches of the future to what technology firm Apple Inc. offers today at its physical stores.
“You go to an Apple Store today, it’s a digital training centre,” Deschamps says. “Everybody wants to know how to use the new device, the new app. And, today, most of the sales of Apple [products] happen through an e-commerce operation.”
Increasingly, both Scotiabank staff and customers will have access to the same digital tools, meaning more business will be conducted on digital platforms, Deschamps says: “We are seeing much more – for wealth advisors, small-business and commercial [clients] – that iPads [are] being used. We will see a convergence of tools between consumers and [bank] employees.”
Deschamps also predicts that, increasingly, the innovations coming out of the bank’s digital factories will be designed for the mobile platform first, as opposed to the web. Those new innovations then will be taken into the branch and onto other banking platforms.
“Even if we have to follow a different system – the flow of the interaction – if it works on mobile, we need to adapt that very quickly [to other channels],” he says.
Deschamps, after more than a year in his current role, says he remains excited by the opportunity to roll out a digital strategy that covers five markets with a combined population of 250 million people. In fact, travel is a big part of Deschamps’ job: he splits his time between Toronto and the Pacific Alliance countries, where, he says, there’s great opportunity.
“[This region] has a footprint that has a relatively low level of banking penetration compared with [the individual] economies,” he says, “and that provides very, very big potential to grow much faster than in Canada in terms of customer acquisition.”
Deschamps points out that adoption of banking through digital means in the Pacific Alliance countries is, in some cases, ahead of that happening in developed economies, owing to the younger population in the region and to the fact that there sometimes is inadequate access to traditional banking options.
“There still are lots of opportunities with digital – and new risk tools and data analytics,” Deschamps says, “to make banking really more widely available to families and to small business in the Pacific Alliance countries.”
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