BANKS NEED TO CHANGE THEIR BUSINESS MODEL IN A NEW DIGITAL JOURNEY

A single case study for Eigen Technologies with the VSD model

Humanities division

Ernst Jan Stokvis, Vrije Universiteit Amsterdam

What is the problem and why should people care?

The financial industry is going through a fundamental change. Banks will only

survive if they understand the digital journey and change their business model. It is a

challenge but also a great opportunity for the new business models. The financial industry is

transforming quickly, and banks are already claiming that they want to become a technology

driven firm with a banking license. This is the first step, and a very critical one (Yoo, Boland,

Lyytinen, & Majchrzak, 2012); (Brynjolfsson & McAfee, 2017) highlight that platforms

should be carefully engineered and positioned to take full advantage for the strategic

importance. Technology giants like Google, Microsoft and Facebook are a big risk to the

traditional banking model. More so as the banks already have a banking license (and the

giants do not have the banking license) and want to become a digital firm like these giants

and act like Spotify and Netflix. But what does this really mean to be digital for a bank?

The technical infrastructure for a bank is its own ecosystem and its extremely fragile

and complex. For Spotify and Netflix, the internet is the infrastructure. Big steps need to be

taken to become more data driven and generate new revenue from these digital services.

Figure 1 Tikkie application ABN AMRO

Tikkie is a great example where a bank is testing new business models whereby users

can transfer money to other tikkie users (including web-shops), regardless if they are a

banking customer of ABN AMRO.

Blockchain or distributed ledger technology (DLT) is another perfect example that

will fundamentally change the exchange of value. It contains a database that is shared across

a network of computers and makes constant checks that provides trust where no bank has to

be involved. Some use cases are developed by banks to explore the real value (also fear of

missing out). Most banks have the knowledge and it is already emerging, but this needs to be

transformed into a digital service offering.

Figure 2 Blockchain explained

But this is changing where banks need to differentiate themselves and add value to its

stakeholders. Also, because the disintermediation is changing business models and the need

to even own assets like cars in the “Uber model” or houses in the “Airbnb model”.

Do banks even need assets on the balance sheet or in an open banking model. This is

key and the biggest challenge for the new strategic visions that is happening in this

intermediation era. Well run firms should have technology in place that uses responsible

artificial intelligence, this helps them to transform into this new digital journey.

Approach and results

The challenges across the financial services industry are the same as for this use case

that we present to you. The challenge is: (1) unlocking business value form the unstructured

documents (such as text from legal documentation), that is not in a traditional “row-column

database”. (2) transformed to be classified “structured” (meaning stored in fields in the

database), which can be (3) analysed to (4) be adapted and build trust in the business

decisions.

Figure 3 Unstructured data Figure 4 Structured data

For this Eigen technologies is selected as the tool extracts words, short phrases and

sections from diverse text whereby it turns documents into data that can be used in larger data

sets (see fig 3 & 4). The bank has a proof of concept which fits the profile of the innovative

solutions that Eigen offers. Additionally, the bank needs a solution to automate a number of

heavily manual and expensive processes.

For this single use case we use desk research, open and (un) structured interviews,

meetings on the subject with the product owner (project leader). Additionally, all project

documentation (Proof of concepts, PowerPoints and other project presentations) are studied

on the subject. Eigen Technologies mentioned that they are also available for questions.

We focus on social and moral values that are central to the design and development of

new technology. This originated at Stanford in the 1970s, where it was a central subject of

study in Computer Science. It has now been adopted by many research groups and is often

referred to as Value-Sensitive Design (Friedman, 1996). In this single case study, I

investigate how financial institutions look at the key values for all stakeholders involved

(directly or indirectly) that use the Eigen technologies platform.

The challenge inside VSD is to focus on the participating stakeholders in this new

business model design. This should be done by mapping (1) design trade-offs, (2) value

conflicts, and (3) value tensions—a question of design thinking (Friedman & Hendry, 2019,

49). I draw on the VSD theory and methodology to proactively include moral and ethical

value for Artificial Intelligence used in financial organizations. VSD is still an emerging

concept offered to others to improve (Borning & Muller, 2012) and that is exactly what I am

going to do.

Reference:

Borning, A., & Muller, M. (2012). Next steps for Value Sensitive Design. Conference on

Human Factors in Computing Systems – Proceedings, 1125–1134.

https://doi.org/10.1145/2207676.2208560

Brynjolfsson, E., & McAfee, A. (2017). Machine, platform, crowd : Harnessing our digital

future. Retrieved 7 October 2019, from http://ide.mit.edu/books/machine-platform-

crowd-harnessing-our-digital-future

Friedman, B. (1996). VSD. ACM Interactions, 3(6), 17–23.

Friedman, B., & Hendry, D. (2019). Value sensitive design: shaping technology with moral

imagination. Retrieved from https://mitpress.mit.edu/books/value-sensitive-design

Yoo, Y., Boland, R. J., Lyytinen, K., & Majchrzak, A. (2012). Organizing for innovation in

the digitized world. Organization Science, 23(5), 1398–1408.

https://doi.org/10.1287/orsc.1120.0771