The organizational design of a bank has a high impact on both the operational efficiency as well as the delivery of the customer value proposition. Therefore, aligning the organization to enable the bank’s strategy is imperative to the success of every business. In addition, changing customer behavior and increasing competition requires banks to align their organization to become more customer-centric, technology-driven and open to collaboration.

Based on our longstanding experience within banking and supporting clients in establishing new organizations, this blog post aims to help you to align your organization to deliver a superior end-to-end customer experience by discussing the key differences in the organizational design of a traditional incumbent bank compared to a modern challenger.

Key differences in the organizational design of Incumbents and Challengers

When looking at the organizational set-up of an incumbent bank and a new digital bank we have observed several key differences.

Product vs Client-Centric

First and foremost, incumbent banks traditionally designed their organization from a product perspective resulting in a product-oriented service approach. This means that banks originally acted as a manufacturer focused on being best in class in the production and processing of banking products in selected core markets and leveraging on economies of scale due to limited competition in the market. However, to deliver a superior customer experience, banks are ought to take a client-centric approach to meet the quickly changing customer demand and keep up with the newly emerging competition.

Modern digital banks have developed the banking model to take a 360-degree client perspective across the entire organization. Siloed departments as existent in the traditional way of banking have been replaced by cross-functional client-focused teams with the goal of becoming best in class in offering a seamless customer experience, insights and managing the client relationship through an omnichannel approach.  Instead of economies of scale, challengers focus on economies of scope making it essential to gain large shares of client wallets to compensate for the high cost of client acquisition.


Secondly, traditional incumbent banks are often plagued by complex legacy architecture that is costly to maintain and doesn’t offer the flexibility to quickly develop new customer propositions and defend against market structure changes. In fact, approximately two-thirds of technology spent at global banks is dedicated to maintaining legacy infrastructure instead of building new systems or solutions.

Challenger banks, on the other hand, are most often built on digital-first principles following a modular and cloud-based approach allowing for lower cost and agility. Compared to the constraints incumbent banks are experiencing today, building a modular and cloud-based IT Architecture is a highly future-oriented approach. So-called modular microservices can be swapped easily when improved technologies and products become available and therefore allow for scalability and continuous product innovation. This ultimately gives new digital banks an edge over their traditional counterparts.

Partnership Model

To accommodate a client-centric and digital-first approach, challengers leverage global partnerships based on the emergence of new white-lable banking providers that allow companies to in-source some or all the required capabilities to offer financial services under their brand name. There are many possible variations to outsource parts or all of the needed capabilities ranging from the regulatory licensing to technological capabilities and even fully outsourced banking operations.

Partnership models are beneficial due to the fact that it allows start-ups to focus on the customer experience and operate in a cost-efficient way, as opposed to concentrating on the lengthy and complex establishment of a fully self-reliant traditional bank. The downside however is a certain dependence on the associated third party. Working with a partner can mean less flexibility and also less control and insight into money flows which doesn’t apply to a banking organization that holds the majority of its capabilities in-house. Whether to work with a partner or to establish an independent organization depends on your scale and timing.

How Fincog Can Help

Even though challenger banks are showing the right way forward, designing your organization and its structure remains a complex endeavor and depends on a variety of factors. This is why we at Fincog are dedicated to helping clients tailor their organization to their strategic vision and objectives by leveraging our experience in designing new greenfield organizations as well as learning from best practices all over the world