We have entered a digital era where the pace of technological innovation seems to have become the main driver of change, disrupting entire industries and century-old business models. Not only that, but banking is becoming an increasingly competitive environment due to modest economic outlooks, regulatory changes, evolving customer behavior and the rise of fintech.

While traditional banks have been facing increased competition due to the unbundling of the value chain, challenger banks have been maturing into fully-fledged digital native banks. They aim to become the primary bank for customers and have been moving away from just offering a specific service on the side, such as foreign exchange or digital payments.

Contrary to the financial crisis of the previous decade where banks needed to be bailed out overnight, today’s crisis involves the slow but fundamental deterioration of banks’ business models. Banks are currently sandwiched between managing cost efficiency and margin pressure, while simultaneously being challenged by fintech and bigtech to generate new sources of revenue; no wonder many traditional banks face the risk of slow but steady deterioration of their financial performance.

On top of that, COVID-19 has ramped up the urgency to facilitate remote ways of working and focus on digital marketing and sales. Clearly, traditional banks are under pressure and will have to transform into more adaptive and agile organizations in order to preserve their existing customer base and market share, while staying ahead of the game.

Market leaders such as ING, Goldman Sachs and BBVA have collectively embraced this new era of banking and are well underway with the necessary transformations supported by deep pockets and top-notch transformation consultants. Much of the public focus has been on these larger banks and their ability to gradually change their way of working, improve customer experience and adopt emerging technologies such as big data and artificial intelligence. They are fighting for the primary relationship of the digital-native client base.

However, it’s not these market leaders that are truly at risk. It’s the smaller and middle-sized banks that face the greatest challenges, since they lack the benefits of scale held by larger banks.



As in many other industries, the mid-sized players face a lack of sufficient scale, capabilities and budgets to adopt to the new situation fast enough. Many are just trying to stay afloat while running on legacy systems and using outdated ways of working. These banks are essentially being forced to ‘rebuild an airplane in mid-flight’ as they spend valuable time and resources on cost reductions and regulatory compliance while at the same time transforming the operating model, enhancing the value proposition and improving customer experience. For this group of banks, it is crucial they invest their time and resources effectively. Unlike large banks, they cannot afford to start large transformation hubs or dedicated fintech venture capital funds to help drive innovation.

However, it’s not all doom and gloom for these mid-tier banks. They often have the advantage over their larger competitors in that they already have a particular niche focus and strategy. This allows them to offer more tailored propositions and a better customer experience to specific customer segments. In addition, technological progress has made changing core banking infrastructure more accessible, lowering the hurdles for smaller players to compete. More importantly, smaller banks can learn from the mistakes and copy successes of the transformation programs being executed by their larger counterparts.

It offers the perfect moment for these mid-sized banks to leapfrog from laggers to leaders within their respective niche segments.



Small and mid-sized banks typically have limited scale and budgets to carry out their digital transformation. The most effective and efficient way to transform is by combining in-house transformation with selective external expertise. What are the key success factors for smaller and mid-sized banks regarding digital transformation? Based on our experience, we’ve highlighted the six most important ones:

1. Strategic Focus

When it comes to strategy, the toughest nut to crack for many larger players is prioritizing their actions. They don’t want to give up certain business practices and, reinforced by internal political discussions, are paralyzed when it comes to decision making. They end up with many initiatives and digital experiments but without any central coordination or a clear direction.

The effective way to succeed is to compare initiatives against clearly defined focus areas and goals. Companies without a coherent digital strategy often fail to outgrow the experimentation phase. However, due to the strategic focus of smaller players, they are often better positioned to decide strategically between initiatives.

2. Long-term Commitment

Many banks have failed to successfully implement their digital transformation model and eventually switched back to old ways, due to a lack of long-term commitment. A digital transformation needs to be institutionalized by redefining roles and responsibilities of employees including new capabilities, training and KPIs. A successful transformation doesn’t simply happen by appointing a chief transformation officer. Success comes from long-term commitment from the CEO to middle management and the rest of the organization. Ultimately, a digital transformation doesn’t come overnight and requires a long-term commitment.

3. Embed the Transformation

Often short-term wins are prioritized over the long-term goal of becoming more agile and innovative. Banks often use external resources to achieve short-term success without fundamentally changing the skills and capabilities of the organization. Due to the tight budgets, smaller banks must rely more on internal resources leading to the actual transformation of (digital) skills and capabilities. Furthermore, mid-sized banks tend to be less hierarchical and have a more entrepreneurial culture, giving a natural boost towards digital adoption. This puts those banks in a better position to embed the required changes into the organization.

4. Clear Vision on Technology

Many larger banks have embraced the idea that to be an effective tech player, it is crucial to have a comprehensive strategy on modular technology and data platforms is crucial. Modularity is essential to cement the required agility within systems and quickly adapt to changing market dynamics. Implementing fintech partnerships has become more popular and effective, with more and more fintechs offering PaaS and SaaS propositions to banks.

In short, it’s essential for the entire organization to have a strong technological focus. However, that focus should come with a clear vision on how technology enables business and delivers real customer value. Too often, players failed by letting the technology lead the vision, which resulted in tech-driven offerings that customers simply don’t want or need.

5. Organization-Wide Adoption

Many larger banks have failed to take their employees along the journey of digital transformation due to a lack of vision and effective prioritization. Employees’ commitment to digital adoption is crucial for a successful transformation. Upgrading technology is easy, but it’s employee buy-in that truly counts. Smaller banks are well positioned for organization-wide adoption as they are typically less vertically organized.

Banks often try to transform individual siloes instead of the entire organization. Although different client segments and business areas may be replaced at different times and speeds, digital transformation will ultimately impact the entire business. From day one, the goal should be to transform the entire organization, back to front.

6. Effective Monitoring of Progress

Lastly, a successful digital business transformation strategy requires effective monitoring. Embracing uncertainty is part of the journey, yet the lack of performance measurement and progress monitoring makes it hard to set goals and evaluate improvement. It is crucial to pre-define what progress and performance look like before embarking on a transformation, be it the number of fully digitized customer journeys, new product features or straight-through processes. It is the most effective way of deleveraging risk and uncertainty in a transformative and innovative process.



Modernizing your bank can be both exciting and challenging, and you’re likely to need help along the way. At Fincog we believe that banks should focus on their core competencies and competitive advantage in order to safeguard their future. This requires a structured approach and thorough understanding of both the market environment as well as the internal organization.

So we first help you to analyze the market, competitive landscape and customer trends, together with your key activities, strengths and weaknesses. This results in a strategic vision on target market, segment and unique positioning of the bank.

Following the strategic vision we move on to design of the blueprint of the future organization. This usually results in a complete design of the business, key propositions, a high-over operating model and/or product prototype development and mock-ups.

From there, our implementation support seamlessly takes you from strategic vision to transformation of the bank and launch of new digital ventures. Our role throughout the process will be to safeguard your strategic vision while being pragmatic in solving challenges that arise.

Fincog has in-depth knowledge of both established financial services and fintech. Thereby we bring a fresh and impact-driven approach to creating the most relevant and sustainable solutions tailored to our clients across the globe. By combining strategy with implementation, Fincog designs what is feasible and builds what is envisioned.


Want to read more? Here’s a story on how we helped an Eastern European bank with its digital transformation