The latest earnings reports show that while banks are performing well, they are struggling to grow. Consumer expectations are set by platform businesses like Amazon and Apple, yet banks are still selling the same products and wondering how to grow revenue. 

Banks need to transform using new technology and the rich customer data they have to power services that people would pay for. They can build it themselves or partner up, as Goldman Sachs did with the Apple Card. 

To thrive, banks first need to get out of debt. Not in the balance sheet, but three types of debt that banks have built up over decades:

1.   Product debt: Selling products banks think their clients want, instead of finding out what clients actually need.

2.   Organizational debt: A culture, processes and organizational structure constructed in service of the traditional business model, and not conducive to new services.

3.   Technology debt: Aging tech that slows down the bank’s ability to compete and grow.

If a bank considers itself a bank three years from now, it has failed to transform. Banks must evolve their business model. To thrive, they will need to break out of the portfolio of traditional services and create new businesses, such as in energy, telephony, even unexpected categories—where the bank becomes an ecosystem for asset acquisition. Banks have a huge advantage with their capital and their ingenuity, but the data is often still locked within a legacy infrastructure.

Hear more about the challenges faced by banks in overcoming product, tech and organizational debt from David Donovan, EVP of Financial Services for North America on Nasdaq’s ‘Trade Talks.’