Exemplary Measures & Key Takeaways for Banks in the Context of Launching a Digital Assets Offering
The first part of this two-part blog post outlined challenges for a bank launching a digital asset offering. As a starting point, a financial institution was outlined which, in a first step, would like to enable wealthy private clients to trade selected digital assets (e.g. Bitcoin and Ethereum) in cooperation with an external partner.
In the second part, selected measures are presented, success factors are described and key takeaways for the launch of such an offering are highlighted. The contents are based on experiences from projects and discussions with experts.
Field of Action “Concept & Operational Implementation
One challenge in the conception and implementation of a digital asset offering is to ensure the relevant know-how. Ideally, the company can rely on existing employees. One advantage is that existing processes, good working methods and responsibilities are already in place. Another advantage over hiring new employees or external support is that recruitment and onboarding are not necessary and project work can start much more quickly. In this context, the identification of employees with the appropriate prior knowledge plays an important role. Such employees can be found, for example, in external training courses or innovation departments:
- External training for employees is often supported by employers, as is the case for blockchain- or digital asset-related training programs. Here, the HR department or line managers can support in the identification process
- Innovation departments often carry out assessments of new technologies or services as part of trend management. The topic of DLT & blockchain should already have been dealt with by most innovation departments and basic knowledge should be available.
Another way is the targeted recruitment of employees with the appropriate expertise for a project manager role. As described in the first part, however, the bank is competing with a large number of other employers from the traditional financial sector and the blockchain industry . This way of acquiring the initial know-how is therefore very time-consuming, relatively uncertain and already ties up budget at the beginning. An alternative in this phase is to call in external service providers who provide the initial know-how and ensure the build-up of know-how in the bank.
In the course of implementation, other specialist departments are involved in the development of the offering and the question very quickly arises as to what skills and resources they require to operate the offering. During the conception phase, a target operating model (TOM) is usually developed, which comprises the future operationalization of the target setup in various degrees of detail, e.g. by identifying and describing cross-departmental and cross-company processes for service provision or important roles and activities in more detail. The TOM shows which departments perform which roles and activities in operations (e.g. who is responsible for on-chain due diligence (OCDD)) and what expertise they require:
- Specialist know-how on blockchain & digital assets: Selected specialist departments tend to require a deeper understanding of the blockchain, depending on the selected target model and the scope of the offer. As an example, the inbound & outbound delivery of digital assets may require an on-chain due diligence (OCDD) review on the part of compliance[a]. With regard to the further development of the offering, it is advisable to address all the necessary capabilities and resources for this at the outset. In this way, possible future success factors can be identified and addressed at an early stage.
- Software support: As described above, relevant processes, cross-company activities and roles are derived from the TOM. Software support is suitable for individual activities, e.g. for the OCDD by the compliance department.
A TOM thus provides a comprehensive overview of the capabilities and resources relevant to the digital asset offering, on the basis of which appropriate measures can be derived.
Field of Action “Change of Working Method from Ctb to Rtb”
With the start of implementation, the first tests in production are planned. This is accompanied by a change in the mode of operation from a project mode (Change the Bank, CtB) to an operational mode (Run the Bank, RtB). With the transition to RtB mode, responsibilities change (away from the project team to one or more organizational units or departments) and know-how becomes relevant in departments that are later responsible for operating the offering or communicating with customers or other external stakeholders. Experience shows that the following two factors, among others, are decisive for a successful change:
- Organizational allocation of responsibilities: The allocation of responsibilities for the digital assets offering is ideally defined before the handover to the specialist department. In the context of digital assets, two areas of responsibility can be identified: “operation of the current offering” and “market monitoring & further development”. In terms of banking, the former is very close to often established specialist departments such as Product Management Investments. This department is usually responsible for the entire life cycle of a product and supports customer-related departments (e.g. segment management) in sales. Due to the existing know-how, digital assets can be managed as a supplement to the existing activities. Particularly relevant in this context are the necessary skills and resources required for the bank to provide active advice to its clients in the future; in this context, experience from the existing investment business can be valuable in expanding the offering in the context of digital assets, e.g. when it comes to the question of which elements a research publication must contain or which regulatory requirements clients must meet for the bank to provide active advice.
For the task area “market monitoring & further development”, on the other hand, technical understanding, product-specific knowledge and knowledge of the blockchain industry are required above all. For the classification of relevant events as well as the assessment of impacts on the bank, a certain understanding of the blockchain industry is helpful. For example, the insolvency of crypto exchange FTX.com and its related entities may affect counterparties of the bank. Counterparties, such as brokers or exchanges, are essential to trading because banks trade the asset being traded through them on behalf of their customers. Banks often deposit an amount of money with the counterparty for this purpose, and in the event of the counterparty’s insolvency, the deposited amount may be at risk. Similarly, forks[b] of an offered digital asset can trigger corporate actions. The blockchain industry has developed rapidly in recent years and new use cases, technical solutions or companies have emerged in record time. Developments in the industry may be relevant to the evolution of the offering, such as Ethereum’s recent shift from Proof-of-Work (PoW) to Proof-of-Stake (PoS), which offers new product opportunities, such as Ethereum staking. Similarly, existing products can be extended to digital assets and hybrid solutions can be offered, e.g. a digital assets savings plan or securities based on digital assets (e.g. exchange-traded funds, etc.).
- Ensuring the transfer of know-how: The project team built up explicit and implicit know-how during the project, e.g. relevant regulations for a digital asset offering were identified (explicit know-how) and internal responsibilities and contact persons for specific issues in the company were located (implicit know-how). This know-how must be passed on to the specialist departments or the new people responsible for operating the offering. Measures can be, for example, the integration of employees from the future responsible departments into the (still) existing project team, recording the explicit know-how in the project documentation or a buddy system in which individual project employees pass on their knowledge to one person in a targeted and structured manner.
Regardless of the measures chosen, available resources and clear and transparent communication of future responsibilities have a positive influence on the chances of success.
Field of Action “Anchoring in the Corporate Culture”
Employees must be involved in the broad anchoring of digital assets in the corporate culture. This creates trust among employees, among other things through transparency regarding the objectives of the offering. Selected success factors here are:
- Internal communication: The large number of employees can be informed via existing internal communication channels, e.g. intranet, mailings or on-site events. The timing should be chosen wisely so that employees can understand the informal information circulating internally about the work of the project team, new responsibilities and competencies. In terms of content, senior management can share the background to the digital assets offering, highlight its contribution to the company’s strategy and answer questions about how the launch of the offering will impact day-to-day operations. The expectations of employees can also be influenced by means of internal communication, e.g. by explaining what opportunities employees have to participate in the further development of the offering or what the next steps on the roadmap are. Ideally, employees are informed at an early stage and asked not to mention the offering to customers until a defined point in time, so that new processes and ways of working can be internalized and thus credibility can be maintained in customer contact. In operating mode, internal communication channels can be used to classify current events (e.g. media reports, market entry of competitors with a comparable offering, etc.) and to inform employees about the bank’s position in this context.
- Internal training measures: Targeted training measures for employees are planned and carried out during implementation. These can be, for example, training sessions for client advisors regarding the scope of advisory services in the context of digital assets or business-oriented introductions to the topic of blockchain & digital assets that focus less on technical details and more on use cases and provide an overview of the market. Training formats can range from face-to-face events to digital seminars or self-study. Internal employee events can combine technical input with a practical component, such as downloading your own wallet for your own company token or paying for food using digital assets. This creates direct touch points and makes digital assets more tangible. For self-study, accompanying documents such as factsheets, work instructions or learning videos have proven successful. Ideally, HR is supported here by the project team as well as the specialist departments responsible for the RtB. It is important to note that the training measures need to be periodically updated and that refresher courses on existing and new content need to be implemented. As shown, the blockchain industry is developing rapidly and adjustments to the range of digital assets offered by the bank (e.g. expansion of the range of digital assets, further services, etc.) must be reflected in the training courses. Periodic training and continuous education can credibly demonstrate to customers that the bank has mastered the topic of digital assets and is a trustworthy partner.
- Allowing input & feedback & taking it seriously: In the course of the launch of the offering, it is very likely that questions will arise and feedback will be submitted to the responsible organizational unit as employees engage and become familiar with the offering. The questions and feedback should be allowed and taken seriously. Feedback from employees often reveals blind spots, e.g. by addressing an issue that rarely occurs but is nevertheless relevant to the offering. Operationally, the feedback is recorded by the organizational unit responsible for digital assets and checked for implications and possible adjustments to the offering within the framework of periodic learning cycles. Through this measure, employees are directly involved in the process and the quality of the offer or service provision is further increased through the collective knowledge.
- Integration into periodic performance appraisals: Goals set for the digital asset offering can be incorporated into periodic performance appraisals, thereby creating commitment. It is advisable to prioritize training-oriented criteria (e.g. completion of basic training on digital assets within a certain period of time, etc.) in the introductory phase of the new offering over sales-oriented criteria (e.g. newly invested customer funds in digital assets, etc.). By setting priorities, employees are introduced to the topic and uncertainties are not increased by a direct sales focus. This is to the benefit of customers and employees.
- Accompanying measures: In order to anchor the topic of digital assets in a sustainable manner, “digital asset champions” can be appointed in various organizational units. These employees have more know-how about digital assets and are the first point of contact for questions in these organizational units. In addition, digital asset champions are responsible for aggregating and forwarding relevant feedback on processes, customer needs or suggestions for improvement to those responsible for operations. This role can be used in the sense of job enrichment to promote digitally savvy employees and retain them in the long term, or as a targeted measure to develop talent.
- External communication: External communication is used to inform customers, the media and competitors about the new offering. From this point on, it can be expected that inquiries on this topic will increase at the bank. Customers can be introduced to the topic of blockchain & digital assets in the context of customer events. These events not only offer the opportunity for direct customer contact, but can also help to demonstrate the bank’s expertise in this area.
The central topic in this field of action is communication with employees and relevant stakeholders. Especially when launching a new offer, employees should be encouraged to take an interest in it and to represent it positively to customers. Senior management plays a key role here. Through the actions and communication of senior management, connections with strategic objectives and expectations regarding the relevance of the offering in the bank or vis-à-vis competitors become tangible. For this reason, it is beneficial for the launch if the topic is anchored at senior management or executive management and board level.
In summary, it can be said that the early involvement of employees, the integration of the new offering into the context of the corporate strategy by senior management, the anchoring in the performance appraisal as well as accompanying measures have a positive influence on the anchoring in the corporate culture. Combined with external communication measures and customer events, these measures form a promising basis for the launch of the digital assets offering.
The following key takeaways can be summarized across the three exemplary fields of action “conception & operational implementation”, “change of working method from CtB to RtB” and “anchoring in the corporate culture”:
- Knowhow: The relevant knowhow at the right time in the right place and in the relevant form is crucial for success. The know-how is relevant in various departments throughout the company, e.g. customer advisors, compliance, treasury or risk management. The build-up of know-how starts with conception and implementation and continues with the structured transfer of know-how in the context of the handover to the RtB mode and the training and further education of employees. Suitable measures must be planned and implemented at an early stage in the three fields of action.
- Clear competencies & responsibilities: The clear assignment of competencies and responsibilities within the company supports the development and expansion of know-how and ensures communication in various organizational units and departments.
- Transparency & tangibility: The integration of digital assets into existing processes supports the operational anchoring. Transparent communication, integration into the corporate strategy and making digital assets tangible through internal events support the anchoring in the corporate culture.
The support of the management and board of directors in the conception, implementation and launch of the offering as well as the anchoring in the corporate strategy and culture form the basis for a successful launch of digital assets. Combined with appropriate measures in the three fields of action, the likelihood that the launch of the digital assets offering will be successful can be positively influenced.
[a] «During OCDD, the transaction history of the digital assets concerned is examined, in particular via which wallets these specific digital assets were transferred in the past. Due to the high transparency of a public blockchain, transactions on the blockchain can be traced back to the first block created.» (Opportunities & Challenges for Banks in the Context of Decentralized Finance (Jocham, 2022); https://ccecosystems.news/chancen-herausforderungen-fuer-banken-im-kontext-von-decentralized-finance/)
[b] A fork is the process of splitting a blockchain. If it is a hard fork, only one of the two chains continues to be supported by the community or is tradable on crypto exchanges. To protect customers with the corresponding digital asset at the bank, proactive measures such as information letters are useful (e.g., that the bank suspends trading, no longer supports the asset, etc.).
 E.g. Auf der Suche nach Krypto-Talenten (swissinfo, 2022); Abgerufen am 13.12.2022, von https://www.swissinfo.ch/ger/wirtschaft/bitcoin-krypto-schweiz_auf-der-suche-nach-krypto-talenten/47532926
 Target Operating Model: Strategische Anforderungen an eine Organisation verständlich formulieren (Nasca, 2019); Abgerufen am 14.12.2022, von https://www.haufe.de/controlling/controllerpraxis/target-operating-model-vision-und-strategie-greifbar-machen_112_486924.html
 Die Zusammenführung (Ethereum.org, 2022); Abgerufen am 24.11.2022, von https://ethereum.org/de/upgrades/merge/
 E.g. Implizites Wissen (WCG, 2022); Abgerufen am 13.12.2022, von https://www.wcg.de/glossar/implizites-wissen/
 Knowhow-Transfer – Erklären reicht nicht (Zühlke, 2018); Abgerufen am 13.12.2022, von https://www.zuehlke.com/de/insights/knowhow-transfer-erklaeren-allein-reicht-nicht
 Verkanntes Führungsinstrument: Einbezug von Mitarbeitenden (HR Praxis.ch, 2019); Abgerufen am 13.12.2022, von https://www.hrpraxis.ch/2019/07/verkanntes-top-fuhrungsinstrumen.html
 Lean Change Management (PMI.org, 2022) ; Abgerufen am 13.12.2022, von https://www.pmi.org/disciplined-agile/wow/leanchange
 Die Top-Down-Kommunikation als strategischer Faktor im Transformationsprozess (Transformation Consulting International, 2022); Abgerufen am 13.12.2022, von https://tci-partners.com/die-top-down-kommunikation-als-strategischer-faktor-im-transformationsprozess/
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