BankThink

An open-borders approach to banking

Modern banking often emphasizes the key component of openness: open platforms, open access and openness to new ideas, business models, technologies and clients.

But this openness brings with it some tensions that need to be addressed: ensuring sovereignty of data and preserving cross-border protections for customers and employees, while allowing them to enjoy the benefits of a global entities’ product and market reach across their borders.

Human history and evolution would hardly have been possible without the exchange of people and ideas. European civilization was reinvigorated in the early Middle Ages, through the spread of new mathematical ideas, algebra and so on, that only occurred through the movement of Moorish culture and language across its borders.

What we have seen on a macro level we can also see on a micro level. Organizations that put up walls between their business units, generally known as silos, are not well positioned to take advantage of new ideas and best practices across the organization.

Borders — both geographic and otherwise — do need some protection, but ensuring that nothing crosses over from one side to the other can lead to declines in profitable development and commercially valuable exchanges.

Take the population flows to and from the southern border of the United States. Decades ago, such as in the 1960s, migratory patterns across the border were typically seasonal. Migrant workers came to the United States from the south to obtain temporary employment in agriculture, perhaps fruit picking, in California and other states. But once the season was over, workers would return home to their families. Since the 1970s, however, borders have been progressively hardened, so that it has become, over time, harder for individuals to cross over and return on a short-term basis. While acknowledging the importance of maintaining security between borders and ensuring that dangerous elements are kept out, how do our policies and practices ensure that we do allow for the profitable mixing of people, ideas and productive sharing of opportunities?

Similarly, banks could operate in ways that allow for greater flow of people and ideas across their borders, business units and regional operating functions. Too often, employees and their leaders establish little fiefdoms that operate in a silo or a vacuum. Laws relating to data sovereignty and public versus private domains are often invoked to inhibit the flow of information within an organization. This, however, need not stem the movement of people across business units and branches that can lead to positive sharing of ideas.

One important item to consider is the growing cross-border nature of the threats posed by cybercriminals and money laundering organizations to banks and the global financing system. Vulnerabilities in one part of that system, if they are not exposed, enable crime organizations to take advantage in another. Yet if banks and regulators are able to find ways to agree protocols and conditions for sharing such information across their borders, with employees appropriately positioned and qualified as far as regulators are concerned, then that wrongdoing can be potentially exposed and addressed without compromising innocent customers’ private information and data privacy rules.

More generally, businesses that encourage their employees to move around the organization can break down such silos and foster the spread of best practices. Japanese companies are particularly adept at this: They were first to create the type of manufacturing operation that allowed employees to move around the factory floor so that they become knowledgeable in all aspects of the operation and do not get bored with their role. Similarly, those Japanese banks I work with today appear to follow similar practices moving employees across branches and lines of business.

At the same time, global banks based in the U.S. and the U.K. also currently face language barriers that make it difficult to encourage cross-border sharing. Across their branches, whether in English-speaking countries or not, employees are often required to communicate in English across their email and other official communication channels.

Of course, the spread of English as the primary language of written communication and even oral communication — a shift that may have significant consequences — is not unique to banking. As noted by the author of a recent study that found all top 50 scientific journals are published in English and originate from the U.S. or the U.K., Einstein first published in German, Marie Curie in French. Something of great importance may be getting lost here.

Two questions arise with this trend: First, what does get lost in translation when other languages get left out, and second, what are the costs of the imposition of this language requirement on innovation? A global U.S. or U.K. bank may have as many as 70 country branches with as many as 100 languages spoken across all of them. In order to successfully market to clients in each country, sales people and client relationship managers need to be able to speak in the same language as their local clients. In addition, however, they need to be able to communicate fluently in the English language when they participate in global conference calls and send official internal memos and communications, imposing a burden upon them. Like with scientific research, it is possible that local innovations and ideas in a foreign language may not get shared as widely as those in the native English-speaking world — and some may not spread at all. Second, those who are not confident in their English skills may hold back from contributing and presenting their ideas in a persuasive or positive way.

Banks can more closely consider this tension and find ways to mitigate it. Business games and competitions for new products and business ideas with the emphasis on global entrants are a good way of showing a commitment to facilitating contributions from around the globe. And rotation of members of country branches through global headquarters is another good way to facilitate contributions from different corners of the globe.

Making these types of changes will be challenging for banks at times, but efforts to improve openness are worth it.

For reprint and licensing requests for this article, click here.
International banking Investment banking Consumer banking
MORE FROM AMERICAN BANKER