Banks Seek Tech Productivity Boost to Drive Innovation

Financial institutions are focusing on increasing the productivity of their engineering teams to boost technological innovation without expanding IT budgets, a new report from McKinsey says.

Global management consulting firm McKinsey reveals that banks are adopting strategies from digital-native software companies to maximise their technology workforce's efficiency. The report states that top-performing banks can achieve 50% more technology capacity than average institutions with the same budget.

McKinsey's research indicates that leading banks are implementing scorecards to measure the speed and productivity of engineering teams. This approach allows institutions to identify areas where engineering speed and accuracy can be improved.

The report says: "By helping their engineering teams work smarter, leading institutions significantly increase their technology capacity compared with average institutions, with no increase in budget."

Streamlining Software Development Processes

One major bank discovered that its software development process was hindered by manual efforts and multiple approvals. McKinsey reports that the bank conducted an "X-ray" of each engineering team to understand existing practices and performance. This data-driven approach enabled management to identify cross-cutting initiatives that would deliver the most significant productivity increases.

The report reveals: "The company overhauled its engineering tools, automated its security controls, and created a coaching team to train frontline engineers in the new approach."

As a result, the bank created 30% more capacity in its existing technology team without increasing its budget. The report's authors emphasise the importance of establishing a culture of continuous improvement, similar to lean manufacturing operations.

Leveraging Generative AI in Product Development

McKinsey's report highlights the potential of generative artificial intelligence (AI) tools to save time for engineering teams. However, it notes that many organisations face challenges in scaling these tools safely and effectively.

The report states: "Banks tend to treat these pilots as a tooling effort and underestimate the change management required."

Leading institutions are taking a different approach by providing generative AI tools to everyone involved in the software development process, not just coders. This includes product owners, managers, data analysts, and user experience designers. McKinsey reports that banks implementing this strategy can see a 20-30% uplift in development team productivity.

Integrating Technology and Business Teams

The report emphasises the importance of changing how engineering and business teams work together.

McKinsey reveals that some top-performing banks have created joint teams of product managers and engineers, operating as mini-businesses. This approach reduces the need for time-consuming handoff tasks and enables greater responsiveness to customer needs.

One large bank that adopted this model realised capacity improvements of 20-30%.

The report's authors say: "Leaders replaced the annual IT investment allocation processes with quarterly business review cycles.

"They embarked on extensive coaching for everyone from executives to frontline developers and created a capability-building program for product managers."

Attracting High-Proficiency Talent

McKinsey's report highlights the need for banks to attract and retain highly proficient engineers. These professionals are critical for leveraging new AI-enabled development tools and creating a virtuous circle where top engineers attract their peers.

The report describes how one bank overhauled its employee value proposition for technology roles: "IT and HR leaders created dedicated career paths where engineers would be automatically promoted when they were ready, rather than having to apply for a new role."

The report's authors conclude: "Every bank we speak with is in some stage of adopting these four principles; the alternative of remaining a technology laggard is simply not an option."
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