Why Banks and Insurance companies Struggle Yet Strive for Agility
Challenges
In the last part, we mentioned it’s really difficult for banks and insurance companies to do Scrum. Why are they trying anyway?
#1 Regulation
Financial institutions, especially banks, primarily respond to regulations. They adopt new practices only when prompted by regulatory bodies. For example, the implementation of the Faster Payment System (FPS) in Hong Kong required banks to enable instant, fee-free money transfers between banks, often under tight, non-negotiable deadlines. In such cases, banks cannot follow their usual internal processes of waiting, thinking, and analyzing; they must be more agile and adapt quickly to regulatory changes.
Similarly, new changes like API/Open Bank/Data Sharing initiatives force banks and insurance companies to integrate with both internal and external systems, often leading to unexpected challenges. Scrum is well-suited for managing these changes.
Lastly, with the rise of AI and machine learning, data governance and real-time monitoring have become more important. Internal compliance and external regulations are adopting a tech-based, data-driven approach. Planning for one or two years in advance is often not feasible, necessitating an Agile approach.
#2 Survival
Not only are regulatory bodies making moves, but competitors are as well. Digital platforms and products are being pushed by other banks. For example, one of the largest banks in the world approached me for training after almost two years of no progress. Suddenly, they decided to proceed with the seminar and immediate training because a competitor had just launched a major digital product. Although this client released a similar product, they were a month too late. The president then agreed to proceed with the training immediately.
There are also new threats from numerous FinTech/InsureTech companies that move extremely quickly, responding to the market faster. As one insurance client mentioned, "It’s no longer big fish eating small fish, it’s fast fish eating slow fish."
Customer expectations have also changed. Nowadays, consumers, including retail, corporate, and high-net-worth individuals, expect to do everything online without visiting a branch. Both customer experience and response are crucial, not just for external customers but also for internal employees, such as insurance agents.
#3 Value
There is a lot of value to be gained from Scrum. Renting retail space and hiring staff is becoming more expensive for banks, so going digital saves a lot of money. Not just branches, but many processes and reports can be automated as well. For instance, a bank that previously employed 13 full-time employees to generate reports now only needs three people to double-check and modify reports after implementing automation techniques.
Banks and insurance companies that implement digital platforms genuinely care about customer response. They invest extra money to implement changes involving both front-end and back-end processes. This leads to more customers switching to banks and insurance companies that offer a better user experience. Personally, I switched my savings, investments, mortgage, credit cards, and loans, both personal and business, from one bank to another because the latter offered a much better digital user experience and took our experience much more seriously.
Lastly, innovation creates opportunities. Companies often pursue innovation for various reasons, including marketing. There are also opportunities in developing new non-IT insurance and financial products, as well as new digital platforms. Additionally, fierce competition drives the need for continuous innovation. Even the largest insurance companies can only maintain a competitive edge for a few months. When time is of the essence, Agile methodologies provide the necessary flexibility and speed to stay ahead.
So, we have addressed the three main reasons banks pursue agility despite the difficulties. In the last part, we will address how they can adopt Scrum effectively.