Banks and financial services firms today are compelled to go digital. While restraint by some is understandable, the change is both necessary and worthwhile
It has been a little over a year since digital transformation topped agendas in the financial sector, around the globe. Banks and traditional financial services companies have often been slow to adapt to the digital revolution, but Deloitte has pointed out in a report that digital transformation can provide a significant advantage. Financial services companies refrain from adoption because new technologies add complexity and challenges to their core services; however, they can innovate to capitalise on the latest advancements and deliver new forms of value to their customers. Most importantly, digital transformation is not just advantageous for banks but also necessary. With the rise of the digital economy, digitally native consumers expect digital banking, for which digital transformation has become a strategic imperative.
The need behind the transformation
The operational efficiency of an organisation is directly related to its technological maturity. Efficiency is the hallmark of digitally mature organisations, and it lets them maintain low overheads. On the other hand, organisations that continue to use legacy systems tend to be underperformers. The reason is clear – and here’s the proof: A Boston Consulting Group (BCG) survey suggested that digital initiatives can help financial institutions cut costs by as much as 80% with proper execution.
These digital initiatives lead to benefits such as convenience and ease of use for consumers, who have no interest in back-end performance improvements (which drive technology adoption in many organisations). According to a survey by American Bankers Association, mobile payments, online budgeting, video approvals, etc. are features for which customers would switch banks. Some of the advantages of digitisation can allay safety concerns too, such as contactless payments and e-services.
Understanding the deterrents
Transformation of any kind comes with challenges – more so when it pertains to digital, as it threatens the way of working of so many people. In addition to these regular ones, financial institutions must find a way to overhaul their complex business models and legacy systems. The entrenched way of working in a financial institution also makes it difficult to understand the potential of digital transformation.
While innovators and early adopters iterate at exponential rates, leading to products and services that are disruptive, not all people in the financial sector operate at the leading edge of innovation – they are more concerned about the rules and regulations and adhere to them, for good reasons. The safety created by this environment makes it difficult to fully grasp the significance of new technology trends, and institutions must find a way to disrupt while staying grounded.
Custom(er)ising the banking journey
Consumers demand an easy, seamless, and fully customised experience. For them, both grocery shopping and banking are transactions – if they can take care of the former from an app, they expect the latter to provide similar convenience. Four out of five financial institutions agree to this trend, according to BCG, and yet 43% of them haven’t developed a digital strategy.
The solution to this starts with data. Banks accumulate details and information about their customers on a huge scale, which can be utilised to create bespoke user journeys that are intuitive and simple. Data analytics can provide extremely valuable insights to help banks understand and serve consumers better in a non-invasive but a pre-emptive and personalised way.
Embracing open banking
The financial landscape has changed drastically over the last decade: banks are not just competing with banks but also with finance-related apps that make basic banking processes look rigid. Opening up an avenue where information is shared securely through APIs with third parties, after getting the consent of consumers, can pave the way ahead. The data can be used by various mobile and app services to help consumers find the easiest way of accomplishing their goals, thereby simplifying their banking experience.
Succeeding at trial-by-transformation
Despite the challenges ahead, leaders in the financial sector have an incredible opportunity to redefine the customer experience. The effects of digital transformation through experience engineering can permeate all levels of a consumer’s life, considering how banking is the backbone of almost all economic activities. Banks that are most digitally enabled can set new standards at an accelerated pace for the industry while making life easier for both their employees and customers.
Originally published on Dataquest India
