Applying First Principles to Banking
The first principle approach is a problem-solving method that involves breaking down a complex problem into its most fundamental truths or basic elements, then reasoning up from those basics rather than relying on assumptions, analogies, or established methods. This approach encourages critical thinking and innovative solutions by focusing on core principles rather than existing conventions.
Core Utilities of a Bank
A bank has to provide three core pieces of utility:
- A value store – The ability to store money safely (investments fall into this category).
- Money movement – The ability to move your money safely.
- Access to credit – The ability to loan money when you need it.
Key Considerations When Offering a Banking Product
- I need to keep my money safe.
- I need to send money fast.
- I need to save money for [insert need/dream/wish here].
- I need my employer to be able to pay me.
- I can’t afford to buy this thing and I need some short-term credit.
- I need to be able to pay my staff.
- I want to buy a home.
- I need to pay this bill.
- How am I going to pay when I’m in another country?
- How do I make more money to pay my bills?
Lessons from Alibaba
- Adding features that customers like such as emoticons and animations.
- Allowing customers to hold funds in escrow account service because China at that time had very poor customer protection laws.
Takeaways
- Put technology people on your board.
- Hire lots of millennials and Gen-Zs.
- Get agile – the ability to change your organisation’s process and policy rapidly.
- Stop hiring bankers! The skills needed to be competitive in the future won’t require any banking experience.
The focus on “banking experience essential” on the job description will only reinforce the traditional decision making process and reduce the likelihood of survival. - Prioritise the most impactful digital journeys and get started – by using a weighted matrix formula.