Why is Scrum so Difficult for Banks and Insurance Companies?
Reason #1 - Culture
Transparency, inspection, and adaptation are the core principles of Scrum, and transparency is where it all starts. However, for banks, achieving transparency is often challenging. A client from a Chinese bank once described their culture as very "toxic," making it almost impossible for them to attain any level of transparency, especially on the business side. They did manage to start Scrum, but only within the IT department, which limited its effectiveness.
The Agile Manifesto favors items on the left, while banks focus only on the items on the right. They emphasize process and documentation, always requiring more sign-offs.
Scrum requires a cross-functional, self-managing team. Most banks are extremely siloed and structured around hierarchy. Employees care deeply about job titles, which makes it much more difficult to work in a Scrum-friendly environment.
Reason #2 - Value
Source: https://opened.cuny.edu/courseware/lesson/558/student/?section=2
Scrum is about delivering value, which usually means more revenue, better customer experience, and improved employee satisfaction. However, banks and insurance firms may not prioritize these aspects. They collect deposits or insurance product premiums and loan the money out to earn interest difference or invest them in other financial instruments. Consequently, better customer experience may not directly translate to higher revenue. While there's some indirect benefit from more customers signing up, it doesn't necessarily mean customers will invest more money, nor does it guarantee long-term engagement. Thus, the value derived from Scrum may not be immediately observable.
Additionally, banks have a low tolerance for failure. In most companies, failure is not only acceptable but encouraged as a learning opportunity. However, in banking, failure in money-transaction systems is unacceptable, making it difficult to embrace Scrum, where some failure is inevitable for learning and growth.
Furthermore, most companies actively pursue innovation, but banks and insurance firms often engage in FinTech or InsurTech initiatives primarily for marketing purposes rather than genuine market disruption. Many of these innovations do not generate significant free cash flow, limiting the value of Scrum to marketing.
Reason #3 - Technology
Banks / Insurance firms often use technology that is over 30 years old. These outdated systems are not only hard to change but also out of support. Even the vendors struggle to find developers willing to work on such old systems. Once, while helping a client revamp their web and mobile platforms with over 500 developers, I discovered they were still using SVN, a version control system over 23 years old. Modern development tools are built around Git, not SVN. Moreover, company policy prevented sharing version control access with vendor developers, so they had to send code via email. Persuading them to switch to Git took over six months to a year, and even then, not all teams transitioned.
There are numerous limitations in banks and insurance companies due to strict policies. Computers often lack internet access, emails cannot be sent externally, teams are prohibited from using cloud services, there is no access to public networks, and these restrictions significantly hinder teams from utilizing the technologies and tools necessary to achieve agility.
To make matters worse, banks and insurance firms have accumulated significant technical debt over 50 years. They have cut many corners, focusing on scope, budget, and time while neglecting quality. As a result, every new addition tends to break multiple things, making it almost impossible to add automated testing. If it's difficult to change the system, it's very difficult to implement Scrum.
Next - Why Banks and Insurance Companies are Still Pursuing Agility Despite the Challenges
In this first article of a three-part series, we discussed why Scrum is so hard for banks and insurance firms. In the next part, we will explore why they still pursue it.