Banks should ramp up technology expertise in their boardroom
The banking sector has in recent years been forced to significantly boost investments in technology, and in its slipstream improve technology expertise in the boardroom. Progress however has been slow – Fergus Gordon, Managing Director and Banking Industry Lead for Growth Markets at Accenture, outlines how banks can close the gap in tech capabilities at an executive level.
Despite pressures pushing the adoption of digital technologies to new heights, a staggering proportion of bank board members still do not have appropriate technology experience – a finding that was revealed by our recent research that evaluated nearly 2,000 directors from over 100 of the world’s largest banks.
In Asia-Pacific, while the level of technology experience at the board level differed greatly by market, there was a clear trend – only 4% of bank board members in China had a technology background, with that figure increasing to 7% and 12% in Japan and Australia respectively. Such numbers fall some way short of our general recommendation that 25% of a bank’s board of directors have technology experience.
Comparatively, even at 25%, technology representation at board level in the banking sector is substantially lower than at leading technology companies, where more than half of board directors typically have technology expertise.
Banks need to move to increase the number of board directors with technology expertise and they need to move now.
Taking tech to the board
Technology expertise is defined as currently or previously holding a technology role, or previously having senior responsibility at a technology company. While technology expertise can look different on every board, the acid test is whether it gives businesses sufficient technology stewardship and guidance without leaving them lacking in other core specialisms.
The evolution of technology over the past few years has certainly put technology expertise in the spotlight, particularly with technology evolving from being considered a useful business tool to now being at the very heart of competitive success. The rate of technological progress has accelerated sharply and forced banks to keep pace. Directors who once had the luxury of carefully pondering their tech investment decisions are now required to think and act a lot more quickly and frequently.
And getting it wrong can be devastating for the business. This was most recently seen in the wake of the pandemic. Immediate technology investments became critical, and boards with technology experience were better able to understand what was required and implement the necessary changes to navigate the disruption.
Having board members with a strong technology background gives businesses not just awareness of new developments but also a deeper understanding of the influence of technology. These directors will possess the ability to separate fad technology from game-changing investments – an invaluable skillset in today’s tech landscape where disruptive technology is proving to be increasingly risky.
They will also have the foresight to look ahead and realise which tech investments can offer the greatest return and impact on the business, which in turn can drive better financials and shareholder returns.
Crucially, board members with strong technology know-how will understand what is needed to make tech investments a success – whether this involves training up employees to learn new skills, investing financial support in the right initiatives or promoting a tech-first culture within the organisation as a whole.
Why the hesitancy to embrace tech at the board level?
If the benefits of having tech experts on the board are clear to see, why then do more banks not make this a reality? Banks have much ground to make up when it comes to appointing tech experts to their boards. Little progress has been made since 2015, a time when cloud was picking up steam and emerging technologies like blockchain and artificial intelligence were becoming popular within the financial services sector.
Back then, when we first conducted this research, just 6% of boards of directors had technology expertise. While that number has since grown to 10% globally in 2021, there is clearly more to be done.
It should come as no surprise that the banking industry is steeped in tradition. We have found this to be one of the biggest reasons for the inertia in embracing tech experience at the board level. Tradition is not, in itself, a detrimental quality. In the context of customer services, for example, tradition can be valuable in encouraging trust and loyalty. From a business growth perspective, however, tradition can often impede embracing change and fostering innovation.
Closing the gap
There are many avenues the banking sector can consider as it looks to bolster tech expertise on its boards.
Making technology credentials a consideration in new appointments can be a great way to ensure incoming directors are already equipped with the necessary technology know-how.
Another method could be increased investment in training and coaching programmes that focus on the latest technology. Tapping into the technology know-how of third-party suppliers and dedicating time during committee meetings to discuss technology improvements can also be an excellent way to grow the tech expertise at the very top. Some large banks have even rolled out advisory councils to keep executive management and the board updated on the latest innovations.
As important as it is for boards to have better technology experience, it would be prudent to ensure that this expertise extends across the entire organisation. Employees at all levels need to be given the tools and opportunities to grow their knowledge across key areas such as cloud, AI and cybersecurity. Those at the top certainly have an important role in fostering a work culture that embraces and empowers continual learning.
Banks with tech-savvy, digitally-fluent boards as well as employees will be better positioned to deal with the uncertainties of the future. Perhaps most importantly, they will be equipped to make the most of what technology can offer, to deliver valuable customer experiences and ultimately better profits.