For the better part of two decades, the dominant critique leveled at incumbent banks was not that they lacked capital, regulatory standing, or distribution reach — they had all three in abundance. The more damning charge was subtler: that they lacked a genuine product mindset. According to Sara Khairi, Managing Editor at Tearsheet, that structural cultural failing has defined the industry's sluggishness, but there are emerging signals that the sector may finally be confronting it honestly.
The distinction matters enormously. A product mindset — in the tradition of technology companies that have redefined financial services from the outside — means organizing an institution around the continuous, iterative improvement of customer-facing solutions, letting user behavior and unmet need drive development rather than internal compliance timelines or legacy architecture constraints. It means asking not "what can our system support?" but "what does the customer actually need?" Banks, historically, have been far more fluent in the former question than the latter.
The roots of this problem are not difficult to trace. Retail and commercial banking evolved for most of the twentieth century inside a tightly regulated, oligopolistic structure in which product differentiation was neither required nor particularly rewarded. A savings account was a savings account. A mortgage was a mortgage. Customers had limited alternatives, switching costs were high, and the competitive incentive to rethink how a product actually served its end user was correspondingly low. Compliance, risk management, and balance-sheet discipline dominated the institutional psychology — all critical functions, but functions that crowd out the experimental, user-centric thinking that produces genuinely better products.
When the first wave of fintech challengers arrived — companies like Revolut and Wise in Europe, and a constellation of neobanks and lending platforms across North America and Asia — they exposed the gap with uncomfortable clarity. These entrants did not, in most cases, hold banking licenses at launch. What they held instead was a product philosophy: start with a friction point the customer actually experiences, build the simplest possible solution to it, instrument everything, and iterate fast. That approach, borrowed wholesale from consumer technology, produced experiences that incumbent banks struggled to replicate even when they had far greater resources at their disposal.
The reason incumbents struggled is precisely what Khairi identifies as the core problem. A product mindset cannot be bolted onto an organization built around a different set of priorities. It requires structural changes — in hiring, in incentive design, in governance, and in the relationship between technology teams and business lines. Banks that attempted to adopt fintech aesthetics without adopting fintech operating culture produced what became known derisively in the industry as "innovation theater": glossy mobile interfaces layered over unchanged back-end processes, digital onboarding flows that still required a branch visit to complete, and chatbots that routed customers back to phone queues. The form changed; the substance did not.
What Khairi's analysis suggests, however, is that something more substantive may now be shifting. The observation is carefully qualified — "might be starting to get better" is the operative framing — but in a sector where institutional inertia is the default, even the earliest signs of genuine cultural change deserve analytical attention. Several forces are converging to make that change more urgent and more achievable simultaneously. Regulatory modernization in key markets, including open banking mandates under frameworks such as PSD2 in Europe and equivalent initiatives elsewhere, has forced banks to expose their infrastructure to third parties — a structural pressure that also creates an internal discipline around thinking in terms of data, interfaces, and services rather than monolithic products. Meanwhile, a decade of fintech competition has produced a generation of bank executives who have watched market share and customer engagement erode and who understand, viscerally, that the old model of product development is no longer sufficient.
There is also a talent dynamic at play. Senior product leaders who built their careers inside technology companies — or inside fintech challengers that have since matured into regulated institutions — are increasingly crossing into traditional banking, bringing with them not just individual capability but a different set of professional norms about how product decisions should be made, how customer research should feed strategy, and how quickly a team should be willing to abandon something that is not working. Culture is ultimately a function of who is in the room and what they have been rewarded for doing. The composition of those rooms in major financial institutions is changing, even if the pace remains frustratingly slow by the standards of other industries.
What This Means for the Industry
Khairi's framing of banking's product mindset problem as a known diagnosis with an uncertain prognosis is the intellectually honest position. The banking sector does not transform quickly — its systemic importance, its regulatory architecture, and its deep operational complexity all act as brakes on rapid change. But the direction of travel matters as much as the speed. If the leading institutions are genuinely internalizing a product-first philosophy rather than simulating one, the downstream effects for customers — in the form of more intuitive services, faster innovation cycles, and products designed around actual financial lives rather than institutional convenience — could be substantial. The coming years will test whether the cultural shift Khairi identifies is durable or merely the latest iteration of a pattern the industry has repeated before: embracing the language of transformation while protecting the structures that resist it.
Written by the editorial team — independent journalism powered by Codego Press.