Breaking Digital Gridlock, + Website

Strategic technology strategy for smaller financial institutions

Breaking Digital Gridlock empowers credit unions and community banks to make the shift to digital—even without a seven-figure consulting budget. From leadership, to technology, to security, and more, this book provides effective, real-world strategies for taking the leap without tearing your organization apart. With an emphasis on maintaining the culture, services, and features you have carefully crafted for your customers over the years, these strategies allow you to make your organization more resistant to digital disruption by adopting key technologies at key points in their evolution. Expert advice grounded in practicality shows how FinTech partnerships and strategic technology acquisition can foster new growth with minimal disruption, and how project management can be restructured to most effectively implement any digital solution and how to implement and leverage analytics. Specific implementation advice coupled with expert approaches offer the ability to modernize in an efficient, organized, financially-sound manner.

The companion website features a digital readiness assessment that helps clarify the breadth and scope of the change, and serves as a progress check every step of the way. Access to digital assets helps smooth the path to implementation, and a reader forum facilitates the exchange of ideas, experiences, and advice.

• Identify revolutionary versus evolutionary technology opportunities
• Empower employee innovation, and stop managing all risk out of good ideas
• Understand blockchain, machine learning, cloud computing, and other technologies
• Forge strategic partnerships that will drive growth and success amidst technological upheaval

It is widely accepted that digital is the future of banking, but knowing is not the same as doing. If your organization has been riding the fence for too long amidst uncertainty and budget constraints, Breaking Digital Gridlock provides the solutions, strategies, and knowledge you need to begin moving forward.

Foreword xi

Preface xv

Acknowledgments xxi

Introduction xxiii

Five Myths about Going Digital xxiii

John’s Story xxvi

Part I Processes 1

Chapter 1 How to Improve Internal Processes 3

Regulatory Gridlock 3

Regulatory Gridlock in Action 4

The Risk Spectrum 5

Flawed Bank Processes 7

Continual Improvement 9

Project Management 10

Waterfall 10

Agile 11

When to Use Agile versus Waterfall 13

In-house Staff and Outside Vendors 13

Process Management 16

Team Organization: Centers of Excellence 17

Cultural Considerations 18

Part II Technology 21

Chapter 2 Tech Evolution versus Tech Revolution 23

Evolutionary Technology 23

Evolution in Banking 25

True Revolution 27

The Financial Revolution 29

Chapter 3 The Cloud 35

The Financial Cloud 36

What Are You Afraid Of? 39

It Is Hard to Control 39

It Is Insecure 40

Data Will Be Shared with Others 40

It’s Unreliable 41

It’s Super Expensive 41

There Will Be Staff Cuts 42

The Internet Could Go Down 43

It Is a Direct Expense 43

What about Our Data Center? 44

The Cloud Won’t Conform to Regulatory Needs 44

The Cloud Kills Baby Seals 44

Types of Cloud Services 45

Infrastructure as a Service (IaaS) 45

Software as a Service (SaaS) 46

Platform as a Service (PaaS) 46

Major Players in the Cloud 47

Amazon Web Services 47

Microsoft Azure 48

Google Compute Engine 48

Commonalities between Each of These Platforms 48

How to Choose? 49

Capital One in the Cloud 49

Strategies for Moving to the Cloud 49

Note 52

Chapter 4 Artificial Intelligence 53

Computers Will Be Trainable 53

Machine Learning: Familiar Names 54

Artificial Intelligence versus Intelligent Augmentation 56

The AI Threat 67

Notes 70

Chapter 5 Application Programming Interface (API) 71

Why Create an API? 71

Getting Started 83

For the Technology Organization 83

For the Services Organization 83

The Second Step 84

The Third Step 84

Chapter 6 Blockchain and Cryptocurrency 87

Bitcoin: A Brief History 87

Decentralization 88

Security 90

Blockchain 91

Permissioned Networks 97

How to Use a Distributed Ledger 99

Part III Security 103

Chapter 7 Sovereign Identity 105

Trust Frameworks 110

Encryption and Data Security 111

Sovereign Identity in Practice 113

Weaknesses in the Current Identity System 115

Phishing 115

EMV 115

Consumer Privacy Concerns 116

An Opportunity for Financial Institutions 116

Note 123

Chapter 8 The Hacker Threat 125

The Artificial Intelligence Threat 127

Planning for the Worst 128

Operation Ababil 132

DDoS Attacks 133

Be Afraid When Things Are Down. Be Very Afraid When Things Are Going Well 134

Security as a Process of Innovation 136

The Equifax Breach 137

Scenario Planning 141

Scenario 1: NSA Backdoor 141

Scenario 2: Ransomware 143

Scenario 3: Cyber Infrastructure Attack 144

Scenario 4: Internet of Things Breach 145

Notes 147

Part IV People 149

Chapter 9 The Digital Change Is for Everyone 151

Human Resources 151

Remote Employees 151

Evaluations 153

Career Paths 153

Incentives and Compensation 154

Recruiting 154

Training 155

Dress Code 157

Facilities 157

Workspaces 158

Wi-Fi 159

Equipment 159

Meet-ups 160

Accounting: Software Depreciating 160

Chapter 10 Who Can Break Gridlock? 165

Common Symptoms of People Problems 168

Lack of Consistency 168

Cost and Time Overruns 168

Human Solutions 169

Chief Digital Officer (CDO) 169

Chief Analytic Officer (CAO) 170

Data Is Money 171

Part V Culture 175

Chapter 11 Culture and Innovation 177

Where Does Culture Start? 178

Culture Breakdowns 180

Culture and Talent 181

Steps to an Innovative Culture 185

Collaboration 186

Communications 188

Rewards and Evaluations 191

Achievement versus Alignment 191

Notes 194

Chapter 12 Culture and Technology 195

A Tale of Two Cultures 195

Having It Your Way—BYOP 200

Part VI Strategy 205

Chapter 13 The Long View 207

The Problem: Banking and Financial Competitors 208

Threats: The –tions 209

Interchange Compression 209

Cannibalization 211

Digitization 212

Mobilization 212

Disintermediation 213

The Reality of Change 213

Changing Features or Services 215

Cost 217

Service 217

Security 217

Features 217

How Solutions Can Fail 218

Note 224

Chapter 14 Digital Governance 225

Review Proposed Products and Integration 228

Change Control 229

Review Security 229

Accountability 229

Business Continuity 230

Schedule Approval 231

Build versus Buy 231

Final Approval on Recommended Vendors 232

Data Governance 233

Data Quality 236

Data Security 238

Data Duplication 238

Data Engineering 239

Chapter 15 Using Data Analytics 243

Look Ahead 244

Credit Card Usage 246

Usage Monitoring 249

Digital “Why” 101 250

Digital Marketing 252

Chapter 16 Big Data and the Zombie Apocalypse 259

Apocalyptic Risk 261

Staffing in an Apocalypse 261

Creating Value 264

Digital Insight and Intuition 265

Data Is Valuable 266

Data Is a Discipline 269

Types of Analytics 273

Note 278

Conclusion 279

Cultural Issues 281

People Strategy 282

Process Changes 283

Technology 284

Security 286

About the Companion Website 289

Index 291

JOHN BEST is a thought leader recognized throughout the FinTech arena, with a particular affinity for credit unions. John is the founder and CEO of the financial technology firm, Best Innovation Group (BIG), which focuses on industry-wide code sharing and API prototype development. He speaks regularly at industry events, hosts a weekly FinTech podcast, and facilitates a highly interactive financial technology forum.

Everybody knows that digital is the future of banking, so what's stopping your institution from taking the evolutionary leap into 21^st century banking and giving your members and customers the kinds of e-offerings and services currently available from large commercial banks?

While the answers to that question may vary—ranging from resistance to cultural change, misconceptions regarding the cost and complexity of upgrading to a modern digital system, and even reluctance among hidebound board members—the outcome is always the same: stagnation and a loss of competitiveness.

Don't let your fear of the unknown allow your more forward-thinking competitors to leave you in the dust. You can make the transition to digital, and, as you'll discover within the pages of this book, it's easier, less expensive, and far less disruptive than you may think.

Written by a uniquely qualified author who has spent the past several decades leading technology change at smaller banking institutions, Breaking Digital Gridlock empowers credit unions and community banks to make the shift to digital—without a seven-figure consulting budget.

Combining expert insight and advice, with practical, real-world guidance on leadership, technology, security, and more, Breaking Digital Gridlock provides the solutions, strategies, and knowledge you need to move your institution into the digital future. You'll learn to:

• Identify revolutionary versus evolutionary technology opportunities
• Empower employee innovation and be more receptive to good ideas from employees
• Understand blockchain, machine learning, cloud computing, and other technologies
• Forge strategic partnerships that will drive growth and success amid technological upheaval

The companion website supplies you with a digital readiness assessment that helps give you a clear picture of the scope of the change you need to make, along with a progress chart that guides you through every step of the process. It also provides access to digital assets that help facilitate implementation, as well as access to a reader forum where you can exchange ideas, experiences, and advice with your colleagues at institutions around the world.

No matter the perceived obstacles to upgrading your organization's digital profile, it all adds up to the same thing: institutional gridlock. Don't get left idling in the slow lane. You owe it to your customers to break through the digital gridlock, and this book shows you how.

PRAISE FOR BREAKING DIGITAL GRIDLOCK

"As a science fiction writer I am interested in all aspects of the future, including the future of business, finance, and money. This book is a manual for that future, and it's a fascinating and insightful read."

—Kevin J. Anderson, New York Times bestselling author and noted futurist

"John Best does a brilliant job of breaking down complex topics such as blockchain, AI and machine learning into the what, the why, and the how for non-technical executives. It's the new desk-top reference for our executive team."

—John Janclaes, CEO, Partners Federal Credit Union, Author of Doing What Matters

"In such a fast paced and complex world in technology, John does a great job of breaking down emerging digital technologies. A must-read for any executive looking to digest topics such as blockchain, machine learning, and the future of identity."

—John Ainsworth, CEO, CULedger