978. Insights: Innovating through crisis, how can banks stay ahead?

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1:14Financial services is evolving at a rapid pace. Certainly in the last, say, five to seven years or so, the pandemic was unprecedented and banks and FIs are still dealing with a fallout, right? Rising interest rates in response to horcruistic inflation saw established banks such as SVP and Credit Suisse completely collapse. Where the priority had previously been on innovation and customer experience and growth, suddenly banks were facing real market difficulties and the threat of contagion. And the focus has subtly shifted to securing core business-critical operations. This turbulent landscape has been further exacerbated by the uncertainty caused by the the chaotic introduction of tariffs by the US, and increased geopolitical tensions, such as the war in Ukraine and the escalating conflicts in the Middle East.

1:59So there's a huge amount going on that affects the banking industry. And banks themselves look and feel different as we talk here in 2025. I've been a consultant now for almost 18 or so years, and I certainly feel that that pace of change is happening rapidly. So, you know, banks have rapidly upskilled their teams on modern digital practices from UX through to engineering. Fintech is also no longer a looming threat. I mean, it's certainly been that way for years, but as we speak here today, it's absolutely a reality. Today's banks compete with Revolut or Nubank just as much as they might compete with any other incumbent.

2:35So what we're here to talk about today is what does all this mean for the advice that those banks receive and therefore for the consulting industry. I'm David Barton-Grimley here at 11FS. And in this episode of FinTech Insider Insights, we'll explore how analysts, advisories, consultancies, experts, that whole wide industry of consulting can better serve financial institutions and help them navigate the changing financial landscape with greater flexibility, speed and impact. We'll look at how new and exciting technologies can enhance delivery, how and when to partner in exchange with external support, and the type of challenges and opportunities external expertise can help you overcome.

3:16So, I am joined by some experts who spend all their working lives looking into the ever-changing market and advising their clients. And first up, we have Ross Gallagher, Head of Consulting at 11FS. How's it going, Ross? So, listeners may know you as a regular host to FinTech Insider, and that's all very well and true. But could you give a quick potted history of your background and consulting roles ahead of our discussion today? Yeah, for sure. I mean, it's great to be here. I mean, David, like you, you know, I've spent my career consulting with clients in one guise or another. I guess specifically over the last eight years at 11FS, the focus has really been on working with them to sort of fully harness that true potential of digital, right?

3:59Build innovative propositions, but, you know, in a way that customers actually love. I now run the consulting business at 11FS, as you said. I guess for anyone that doesn't know, we're a specialist financial services consultancy. We work with clients in markets all around the world. I'm really focused on helping them solve for their sort of biggest and most important challenges. Awesome. And next up, we have a welcome return to a regular guest of the show, Kate Drew, Director of Research, CCG Catalyst Consultant Group. Thanks for joining us today, Kate. Listeners may be familiar with you and your fantastic insights on the week's stories on our new show.

4:37But tell us a little bit about your role and background at CCG. Absolutely. Well, first of all, thank you so much for having me for this conversation. Like you said, I lead research at CCG Catalyst. We're a boutique financial services consulting firm in the U.S. And I oversee our entire research practice. That includes all of the research that we publish and on the client side as well. And, you know, I obviously this is, you know, a topic I'm super passionate about. I've been in the consulting world for the last 10 years or so, but always on the research side. So my job is really helping our clients understand the market, the wider market, the market that they're in, and, you know, how to plan for the future in the context of those trends.

5:24And actually, just on that exact point, Kate, it probably makes sense to come first to you for a bit of a view on what you've seen. And, you know, in the introduction, I mentioned all sorts of different things really that have happened. And I'm sure there's even more. I mean, you know, we can talk about things like AI, for example. What's your view on some of those more kind of macro shifts that you've seen banks face into? Yeah, I think the last few years have been especially interesting. Because when I first started out in consulting, all of our clients were really chasing innovation. and, you know, chasing the future.

6:02And there was a lot of enthusiasm and there was a lot of excitement. And over the last few years, we've really seen that shift. In the U.S., I think it's for a number of reasons. I think, you know, obviously, the collapse of SVB was extremely problematic for the industry. There's a lot of regulatory uncertainty as well. And there's also a lot of competitive pressure, right? It's very easy for customers to shop around for rates. It's putting a ton of pressure on the traditional banking business model. And so if you look at sort of those two things, the competitive landscape and the uncertainty that's been created by some of these macro factors, you've really lost a lot of that enthusiasm, you know, I see for just, you know, sky's the limit, right?

6:55and that's definitely been challenging to try and you know help institutions navigate their way through that when you know in many cases having an appetite for innovation is still the answer even if it doesn't feel you know quite appealing you know right now. Amazing. Ross what do you think? Well I guess just sort of bringing that point to life you know I think I really feel for banks and kind of like financial institutions at the moment because it's really difficult. And of course, they're so exposed to everything that we've seen around inflation and the rise in interest rates and cost of living.

7:38Um, you know, I almost feel like there's a, there's sort of like the world pre 2021, you know, when, when, when inflation, um, and interest rates started to hockey stick as you said in your intro and then there's the world sort of post 2021 but i think the the point kate that you made about um you know innovation not just being something that we should be thinking about in the good times i think is absolutely spot on because when you think about mondo when you think about revolute all of these guys were kind of born out of the financial crash in the late 2000s, right? So I think some of those bigger threats that really impact on those incumbent players emerge when, you know, they're probably already consumed with those business critical things, David, that you mentioned in your intro.

8:30So I think right now is a really, really interesting time for that perspective because with how turbulent everything has been over the last four or five years, and I think banks have had to become naturally more inward focusing um to uh to really deal with that stuff and then you think about the transformative potential of emerging technologies like ai that are so fundamental i think we're at a bit of a uh a tipping point it's a really interesting moment yeah i agree ross it's so hard that's something i've also heard from from my clients as well as they have to do all of that with less money um but don't stop doing all of that like do do it and i've certainly seen um you know, just on a personal note.

9:16Clients that I've worked with over the last few years, it's really, really difficult. It's really hard. Kate, I want to bring you in. No, I was just going to add that in the US, I mean, I feel that so much because we work with a lot of community banks that don't have, you know, the resources to necessarily access all the latest technology. So in an environment where everything is already difficult and you know that technology doesn't stop moving forward just because things are difficult, it becomes really, really hard to, you know, prioritize and kind of navigate through to the future. Because you bring up, you know, AI and you think about, okay, this is advancing at an extremely rapid pace that is industry agnostic, and it's going to continue to do so.

10:04It's not going to stop just because we're having, you know, a difficult time at a macro level. So you need to be thinking about the future from that perspective, too, which is really, really hard to do if you're already not an organization that is set up for advanced technologies, which, you know, many community banks in the U.S. are not. Yeah. One more thing to throw into the mix as well is like, all of that is compounded upon the fact that certainly over the last 10 years, a lot of banks have learned that these big kind of multi-year digital transformation programs or IT transformation programs tend to fail.

10:44and the failure rates globally, there have been all sorts of reports and data out there about that are double-digit percentage, like well into double-digit percentage failure rates. And certainly like, you know, if you work in banking and you're in IT or you work with IT, you can see that, you know. You can see it's like, well, what are we doing here, you know? Is this program ever going to end? Is it going to move into BAU? Are we ever going to be able to release products and features on this service? Or do we have to pull it or migrate on to a different platform? Or what on earth do we do? So there's also that sort of, there's that kind of like, a lot of learning has taken place, I think, in a positive way.

11:26We kind of now know, I think, a lot more about what does and doesn't work in some of these areas. Ross, I want to bring you in. Yeah, and it's such an interesting point. And, you know, some of that is legacy tech in terms of the challenges there. but I think more so it's actually, uh, it's to do with culture, right? Internally. Um, you know, the mindset of these fintechs that have come to market and been really quite successful, they're set up in a way and they operate in a way that they can just move much more quickly. They can be much more responsive to customers needs. They're much closer to customers.

12:06They're very different budget cycles. They're set up and they operate fundamentally different. Um, It's difficult to do that at scale. And so, yes, I agree that there are lots of learnings. I mean, we've seen a greater level of disruption over the last decade or so in financial services in this industry than we've seen probably for 150 years before that, right? So there are absolutely going to be learnings from that. Not to keep drawing it back to AI because this isn't a podcast necessarily about AI, but I think when you look at something like that, then through the lens of AI, it's really, it becomes even more interesting because I think you've got those sort of established incumbent players with their legacy tech, legacy culture, both of which I absolutely agree with you have come a million miles over the last decade or so.

12:59Then you've got the sort of the fintech, what we would call fintechs, those ones that have come to market over the last decade or so, who are just set up better to respond to things like AI, both from a technology perspective, but then also from a culture perspective. But then you're looking at the new wave of like those businesses, those challenges that were actually sort of born AI native. And so there's almost tiers to this. And I think it's that for me, if I was sitting in a large established bank right now, that's what I'd be looking at as a major, major threat. I wonder, I mean, I think that major shift, like all the disruption that occurred in the last couple of decades was really with that shift to digital, right?

13:43With the shift to digital, to mobile, to new interfaces. And I think a lot about what is that next shift going to look like? And will we be able to take the learnings into that shift? And I think that's essentially what you're talking about, too. And, you know, I wonder, is that shift AI? And what what is it going to look like? Because it's so easy to conceptualize what digital look like now. But before, when we were on the cusp of it, you know, it was a lot less clear. Yeah, I agree. And we're on the cusp of this next thing, which is also probably equally, well, I don't know, even more unclear, I think, than it's ever been.

14:24I'd like to just bring the conversation. We are absolutely going to pick up on AI and the future of consulting in a second. I'd love to ground the conversation in... how these shifts we're talking about has resulted in what clients are asking for from external help. And to the question to the both of you, how have you seen those asks evolve? Like what are they? And I appreciate this is a really difficult question, right? Because the entire outsourcing industry is worth many hundreds of billions of dollars a year, right? But I guess from each of your kind of areas, maybe Kate, we come to you. What kind of shifts in those ask, those projects?

15:06How have they changed? Yeah, it's such a challenging question because they've changed in so many different ways. But maybe I'll talk a little bit about strategic planning because from a research perspective, that's usually where I am most involved. And I think, you know, what I used to hear in those sessions, we would talk about things like open banking or banking as a service. or, you know, even AI a few years ago. And there was, you know, a lot of enthusiasm around how can we innovate. Now, those conversations, we're still talking about those things in some capacity, but the ask is more, how do we deal with this existential threat?

15:50Which is a much bigger question and a much harder question. And keep in mind, like, I'm typically talking with community institutions, right? They're a little bit smaller. They're not the big, big, big, big banks. But that is, it's a very different conversation and it's a much harder conversation. And there are places to kind of pull innovation into that conversation. There should be. But the ask is much less like, you know, how can we, you know, future-proof our business and how can we kind of, you know, with a much more positive, optimistic spin, I guess, and a lot more, you know, how do we deal with this reality?

16:27What do you think, Ross? it's really interesting isn't it because i agree with everything that kate has said because the sentiment is important i think it has shifted from a and maybe actually this goes back to to what i said earlier about the the world pre-2021 and post-2021 there is that shift in mindset from sort of like optimism for the future to like i'm really scared about the right now and help me sort of deal with that it's really difficult because the last four or five years like post-pandemic has been so turbulent. You know, you're absolutely spot on in your intro when you mentioned banks like, um, Silicon Valley bank credit, Swiss, I think, you know, signature bank, big sort of established financial players that essentially collapsed.

17:09And that's really scary in a financial services context, right? You know, contagion is real and that is something that has to be contained. And I think the other thing that has to be pointed out is that contagion and that knock-on effect in a social media digital world is potentially a lot more severe than what we saw in 2008, right? Because people can withdraw funds and rumors can circulate on social media and all of that sort of stuff can happen really, really quickly. And so, you know, I think there has been a trend where banks have switched focus. They have moved away from these large-scale transformation and innovation agendas and really focused in on what's core.

17:50And so I think that is a big shift. I completely agree with what Kate said. It's less about how do we take on the fintechs? How do we position ourselves for the future and more about, yeah, this is kind of scary. Help us figure this out right now. Yeah, there's also a pragmatic angle to that as well. I mean, certainly what I've been hearing from clients is what I want to know is pragmatically, what are the things that I should be doing in order to make this change. I'm no longer interested in, you know, the big picture. I'm no longer interested in slides. You know, this is another thing as well.

18:28They're just like the sort of material that we work within, you know, don't present to me. Presentations don't work anymore. I know what this thing is. I know what digital is. I know what a digital channel is. I know what mobile banking is. You don't even tell me what that is. But what I want to know is very specifically. And so the, I think the kind of craft of consulting in some ways, and this is something that has like, I found is a very good thing, is challenge to constantly hit a level of depth that I think when I think if we're being honest with ourselves, like maybe 10 years or so was very shallow.

19:03Right? Like a lot of this was like, hey, you need to be digital, go get yourself an app, you know, you know, you need, you need connected experiences, right? You need, you know, you need personalization. And whilst all of that was true, and maybe it was at that surface level, because a lot of this stuff didn't exist, or maybe you could draw to a point earlier on, Kate, about AI, you can draw parallels to, that's kind of where we are at the moment with AI. But I think it's been great, because you could also argue that the whole point behind looking for external advice is that you're hiring someone or a skill or expertise that you don't have.

19:42you don't have that and you need that and you need that fast right you need that quick because to the points that both of you have been making the costs have been compressed we've got to do this in in much uh a much shorter amount of time um so i've definitely seen that kind of the depth of the ask the kind of way that we interact with customers as well as is in some ways a hell of a lot better right than it used to be it's like you know come come in and immerse yourself in my organization and tell me genuinely how i might be able to make this change or educate and train co-locate like you know all of those kind of things i think have gotten a lot better um over the over the years i would agree with that and i would also say i think the conditions on the ground have almost driven that shift in that it's a lot easier as a consultant to step back when you are doing, you know, the kind of high-level innovation work.

20:44But when a client is asking for your help in survival, it almost creates like a human element that you have no choice but to embed yourself because that's the only way you're really going to be able to help. Agree. And that is a symbiotic relationship, right? Yeah. Ross? Yeah, I think that shared sense of, ownership around your your client's problem their challenge i think becomes really important right um and actually i was i was sort of reflecting david on um what you were saying about how the the culture in a lot of these large organizations has evolved over the last sort of 10-15 years and i think maybe this is a reflection of that right you know it feeds through into how they want to work how they want to partner how they want to engage how they want to solve problems and that point about really embedding that creating that real sense of shared ownership i think becomes really important in the stock tax yeah i absolutely agree i'd love to just ask each of you and you know i can ask myself i guess i mean how do you as consultants and strategists stay on top of all of these market changes because it's so fast there's also something that i've noticed as well there are now so many different things that you need to be on top of and understand and have experience delivering, right?

22:06How do you kind of stay on top of that? Kate, what do you think? So I would say, I love this question because I would say that is my job. And I think as a consulting firm, maybe I'll just take it, you know, as a step back as a consulting firm, I think it's really important to have dedicated research practice because not all consulting firms do. And I think having that capability inside of the firm, you know, kind of a lot of my job is not just, you know, staying on top of market trends and education with clients. But I would say, you know, if we pull it back to the firm level, I think it's really important to have a dedicated research effort that can kind of centralize all of those insights and push it out, you know, to the public and also through the firm.

23:01Ross, what do you think? I agree. I mean, I was going to lead in a very similar way to Kate by saying that's kind of the job. But, you know, in practice, I think this is where sort of like specialist or boutique consultancies kind of come into their own right. You know, 11FS, we are very specialist within financial services. um we are a collective essentially of people who have built and delivered things in financial services who are really really passionate about moving this space forward and everything that we do is about really staying very much at the forefront of the conversation as a means of driving the um the industry forward you know we often say for example with this podcast or with the reports and all of the content that we put out there that we want to put, you know, the content is really designed around moving that conversation forward.

23:59And so we are fully immersed, but really our supposed skin in the game in terms of like operating at the forefront and really helping to move things forward and really shape that conversation. Good point, actually, that you raise, Ross, about the kind of boutique providers, like all of ourselves on this call. We all work at firms that are boutique providers in certain ways. There has been an atomization, hasn't there? Of, you know, much more pure play agencies, consultants, firms, expert networks, for example. There has been this gradual, yeah, atomization from very large firms, which are still there and still growing like the clappers, right?

24:42Big firms haven't gone anywhere. They're still there. But it is interesting to see how clients are commissioning work in different ways to boutiques, to freelancers, to expert networks. It's that whole kind of area about how the way that the consulting industry is structured is changing. And I think when you're a smaller firm like ours, you can be more nimble in certain ways. And if what clients want is to be more nimble, then that helps a lot. All right. And on that note, now that we better understand the current temperature in the market and the role that advisors and consultants can play in driving transformation, we're now going to be looking closer at what that means looking forwards.

25:24So don't go anywhere. This episode is brought to you by Facebook. So you were scrolling on Marketplace and there it was, the bike you'd been searching for. You sent a message and it turned out the seller was super chatty, kind of funny, and an avid cyclist. The next thing you know, you're in a cycling crew. Well, a community cycling group. The thing about Facebook, you might find more than what you're looking for. From a browse to a bike ride, this summer, find more on Facebook. This episode is brought to you by Palmolive. Family time isn't just the big moments. It's weeknight dinners, sitting around the table, everyone talking all at once.

26:08So when the plates are empty and the sink is full, use Palmolive Ultra. Palmolive's most powerful formula removes up to 99.9 % of grease, leaving your dishes sparkling clean. And the new convenient pump makes cleaning even easier, so you can spend less time tackling dishes and more time together. Shop now at palmolive.com.

26:31Welcome back to Fintech Insider Insights, where we're discussing the macro challenges in the market and how FIs can navigate them while engaging external specialists to help them. Now we're going to look specifically at future opportunities and the role new and emerging tech can play in synergy with specialist advisors on driving real industry change. So in the first half of the show, we've talked about challenges and headwinds in the market so far, roughly since 2021, let's say. But if we look forward, we've already started talking about AI and it is already maybe in the early stages of having kind of big change or at least potential for big change within the financial services sector.

27:13Kate, how do you see AI and like consulting about AI? I mean, I think the most important thing, and again, you know, our clients tend to be community institutions. I know I've said that over and over again, but I think it's important, especially in this context, they don't have a foundation in AI the way a lot of the larger banks might have foundations in machine learning that allow them to take advantage of some of these more advanced capabilities, Gen AI and Agentec AI. So for us, it's really about making sure that our clients have a strategy and a governance policy around artificial intelligence and that they lay those foundations now.

28:07Because for the past few decades, you know, other parts of the market have been moving forward. And now we're at this moment where everything is going to leap ahead. and if you don't have those foundations in place, you know, you're really going to be very, very far behind. So that's really how we're thinking about it is how do you get those foundations in place? How do you think about how AI makes sense for your business? What the opportunities are? And then importantly, you know, how do you build governance around that? Ross, what do you think? No, I think that's exactly right. I think it's funny, right?

28:42Because like we're talking about AI now, like we were talking about, I don't know, blockchain or something like four or five years ago and you know it's sort of like every so often there's there's like a new trend and a new buzzword that is sort of everywhere um it kind of loses all meaning when it's just like ai ai ai and i think sometimes what we're lacking and i think kate you touched on this is like what's the use case right what's the opportunity where where is ai going to add value let's let's start there and then you know figure out what the opportunity is to solve it for the technology.