Greenfield: From Retail To Corporate

Back in January, we launched Oliver Wyman’s annual “State of Financial Services” report at the World Economic Forum (WEF) in Davos, Switzerland. It focused on how established firms can leave behind many legacy issues that constrain their speed and increase their costs by adopting a “greenfield” approach in parts (or indeed all) of their businesses. It featured the work we carried out in the United Kingdom with the Royal Bank of Scotland (RBS) to help them build their new digital bank, Bó. It now seems that what started in retail banking is spreading to corporate.

Our original report received a positive reaction and highlighted the potential for organisations to “start again” by leveraging the latest technologies, modular third-party providers and agile ways of working to transform how they meet customer needs. It showed a way forward for large players—using a greenfield philosophy as much as technology—to break free of their legacy situations. It’s not surprising, therefore, given the external climate, that we are now seeing increased use by large firms of a greenfield approach to innovation and change.

What is new is how much this approach is now being used by corporate-banking players and not just retail and small business banking—a trend highlighted in our recently launched complementary report, “How Greenfield Can Transform Corporate Banking”.

The business case for greenfield in corporate banking

Greenfield provides a way for institutions to transform more quickly and cheaply and with less risk than traditional models. Organisations facing severe pressure on revenues due to economic and competitive headwinds, whilst costs remain stubbornly high, need to find a new, faster path to transform.

In considering what route to take, there are typically two fundamental questions that organisations are likely to ask. Can they build a new platform quickly in a cost-effective way? And is there a business case for using greenfield relative to other transformation approaches? Many firms, it seems, are finding that the answer to both questions is yes.

For some corporate-banking institutions operating in tough conditions, greenfield is offering a route to reposition their businesses as part of a wider drive to achieve sustainable above-hurdle-rate growth.

The components of greenfield

Greenfield enables clients to deploy a venture discipline and solve a core customer need using advanced data and analytics, new ways of working and a modular platform of digital, cloud-native technologies. The likes of HSBC, Goldman Sachs and DBS Bank, highlighted in our report, may have always had a wealth of resources, funding and data, but they can now combine those with the greater speed, agility and innovation that a greenfield build typically brings. It’s a powerful blend.

Identifying a poorly met customer need in a key strategic area is always the best starting point, but one that is easier said than done. Bringing fresh, design-led thinking on the most important “jobs to be done” is, in our experience, the place from which to work. Taking that as your north star and iterating both the build and customer feedback cycle at speed can achieve a materially different outcome compared to traditional approaches.

Beyond the new technologies and processes, a greenfield approach enables banks to experiment with a shift in their culture and leadership models. Over the long term, this may well prove even more important than the products being developed for customers.

Those players able to best leverage cross-functional, empowered talent in a greenfield environment might be the ones who are also able to transform their wider core businesses faster than new entrants and traditional competitors. Others might copy the technology, but the headstart on leadership could be the determining factor in the long run.

The need for greenfield in corporate banking  

Corporate banks have looked and learned from retail and are now using greenfield to expand their optionality and accelerate change. Going forward, we expect this trend to continue, with corporate-focused organisations having one or more of the following broad objectives from a greenfield approach:

• Develop a new customer proposition, using greenfield to address new or poorly served client needs alongside traditional products;
• Enter a new market, geography or customer segment. Such a project will be about customer acquisition, based on data insights with greenfield speeding up and lowering the costs of early-stage learning;
• Move to a modular, micro-services architecture, breaking apart from legacy systems and changing the “run” cost profile of the business as a result;
• Build an entirely new, digitally led business. For some of our clients, the end game of greenfield may be to decouple from legacy infrastructure and build a new, modern infrastructure that can meet long-term business needs for today’s core business.

Empowering corporate banking with modern technology and ways of working

Whatever a bank’s aim in using greenfield is, one of the most tangible outcomes is the delivery of a new technology platform. The modular architecture allows for a low-cost, agile infrastructure that supersedes legacy infrastructure by enabling differentiated customer propositions and product innovation through a model of ongoing iteration.

Being cloud-based, application-programming-interface (API)-enabled and scalable, the new technologies allow for fully digital experiences with effective controls built in from the outset. With the flexibility to swap out components based on customer feedback and introduce new best-of-breed vendors, fintechs or in-house developers, the greenfield model is built to be changed at speed on an ongoing basis.

And yet, technology is just the start. The real opportunity for transformation comes from adopting a greenfield philosophy that anchors everything back to the customer, challenges accepted wisdom and iterates at speed within a new leadership and culture model. How can you change the cost and efficiency profile of the core business? Perhaps building a greenfield one alongside it might help you find the answer.

Greenfield in future

Where will corporate banks go with greenfield?  Time will tell. It is still the early days, and alongside barriers to change within organisations, the vendor landscape in particular needs to mature further. Bespoke modular systems require an ecosystem of vendors and fintechs that can provide the specialist services specifically required by corporate banks in relation to their trade financing, lending and wholesale payments.

This ecosystem is currently at an emergent stage, yet it creates an opportunity for banks to work with more forward-thinking vendors. In doing so, they will be innovating through collaboration and helping to build the ecosystem itself, as, over time, more vendors come in to meet banks’ demands.

At this point, the UK’s corporate banks might do well to simply get in the flow of new greenfield approaches and “learn by doing” as they consider their own paths to sustainability and relevance in highly challenging markets.