What’s troubling our banks? It’s not a lack of creativity, it’s Stockholm Syndrome

  • Why are these experiences being delivered by the startups above, and not by established banks?
  • Why do “outsiders” continue to develop new approaches when insiders have data and relationship advantages with their customers?

A Brief (!) Overview of Stockholm Syndrome

Stockholm Syndrome is a term created by a Swedish psychiatrist in the 1970s to describe a psychological phenomena where hostages would develop sympathetic feelings toward their captors. If you’ve ever seen the film Dog Day Afternoon, then you remember the attitude of the hostages toward Pacino over the course of the movie. That’s Stockholm Syndrome.

The Impact and the Answer

Bad analogies aside, the impact of this phenomenon in our industry is obvious: products are designed to replace existing systems and processes, rather than reinventing the experience overall.

  • SoFi (among others) reinvents the lending market while traditional lenders cling to FICO scores and traditional origination channels.
  • Mint (among others) brings data aggregation and PFM to the masses while traditional banks figure out how to cobble together a consolidated, internal view across multiple systems.
  • Credit Karma (among others) empowers customers to own their credit history while traditional institutions continue to charge a fee to access the very same data.
  • Ambidextrous organization design — This approach describes a team that is separated (physically, culturally, and structurally) from the traditional teams within the organization. This gives the new team freedom from delivering everyday goals that might cloud their ability to dream up new realities.
  • Organizational Detox — Similar to the above, leaders need to allow existing members of the org who work on these new projects to wash away the residue of the constraints they faced in their jobs. It’s easy to ask for an open mind, but our actions need to back up our words.
  • Delaying the marriage of experience and business case — too often, a new experience is created internally only to be shot down because it is too expensive, or has no hope of customer acquisition, or only works for a part of the customer base, etc. We need to defer judgment long enough for the experience to be tested. As disruptive as these changes are to our customers, they may be even more disruptive to our organizations.

Conclusion

As I’ve written before, traditional banks are being forced with a mutually exclusive decision: do we focus on the relationship, or do we focus on operations? Those are the two, mutually exclusive, options that each bank must choose between.

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