The pandemic has been a catalyst for interconnecting the world and pushing the boundaries of work to become ever more remote. It’s unclear how long COVID-19 will last and the inability to adapt to change has pushed many organizations to miss their marketing and sales targets, and production plans have been delayed or even canceled. However, what would have taken years, has now been accomplished in months; we are more interconnected than ever, with a seamless flow and vague boundaries between work and personal life. The future is collaborative, cloud-based, mobile, continuous, data-driven, client-centric, innovative, and fast. In the same way that social media became omnipresent and the same goes for our financial transactions, where users need a quick, simple, and easy way to interact with their bank or financial institution.
Digital transformation in banking has banks and financial institutions searching to adopt new technologies and services; in essence, it encapsulates the shift to offering online and digital services, as well as the back-office changes and infrastructure required to support this transformation. Some terms like Blockchain Technology, utilization of Artificial Intelligence (AI), and collection and management of Client Data are trendy. However, the lack of consistency or support across new digital applications and the lack of internal agility, are the main risks hindering their successful implementation.
For instance, taking on a plethora of seemingly connected but in essence separate digital initiatives will result in a non-coordinated approach to embellish one’s services and lack business continuity. Senior leadership buy-in and a top-down approach, interconnecting digital platforms, customer experience, mobile apps, and infrastructure (including the bank stores processes) will provide a seamless personalized experience, enabling users to feel the value addition while they conduct their financial transactions in the same way and on apps, online platform or the store. This will definitely increase user engagement.
Especially within the EU market, banks overall have not been able to earn their cost of equity, thus cost efficiency is one of the factors contributing to structural underperformance. 84 percent of banks regularly and systematically look at customer behavior, innovations, and new technologies. However, only about a third (31 percent) look for an exchange of experiences beyond the financial industry. The lack of focus and prioritization also acts as a stumbling block for participants that have already defined a need for action for the next 3–5 years with concrete goals, measures, and responsibilities or for participants that have already defined challenges and fields of action in most areas. Other obstacles to the free provision of services across borders include ranging from cultural differences and different levels of financial literacy to divergences in national legal requirements and insufficient regulatory harmonization at the European level.
The rise of digital solutions in banking can result in increased data transparency and integrity, elimination of intermediates in the process, fewer errors, increased efficiency, and alternative methods to access financial and intellectual data, which finally will result in a lower cost of the operations and make transactions easier and faster.
While legislation, security concerns, and customer data privacy are the main hurdles any financial institution has to overcome, digital-native banking solutions and financial apps are outpacing traditional banking in terms of growth and customer acquisition. So, adapting policies to meet changing consumer demand, quickly adapting to new technologies, and promptly responding to the market changes are essential to digital transformation in banking. At the same time, while improving customer satisfaction, the staff is freed up for value-added activities such as relationship building.
This article is the first part of a two-part series. In the next part of the article, we will be diving into the financial organizations’ Cloud transformation IT strategy and the roadmap.