“The banking industry, if left by itself, would conclude that the opportunity is too difficult to go after. The problem that they`ve got is that operating structure prevents them from getting to a cost point where it economically makes sense.”
—-Likhit Wagle, Global Leader – Banking and Financial Markets Industries
Digitalization has fashioned a scenario up full of opportunities for all industries, generating a radical sway in many sectors, as in the case of banking, which has been one of the first to initiate a profound process of digital transformation. Digital transformation in the banking sector opens up a whole world full of possibilities both for the institutions themselves and for their millennial consumers. The digital transformation is a process of constant technological evolution, where banks should be up to date in the tools available for the improvement and efficiency of processes to achieve greater profitability, which is the bottom line as far as the investors are concerned.
The reality is that; digital transformation can be a bumpy road for banks as many financial institutions attempt to go digital. A number of factors are at play but what really makes or breaks any digital transformation process is understanding customer needs. The problem is that many banks still believe that digital transformation is about systems and workflows rather than customers. But if they want to achieve the desired results, it’s time they changed this attitude to enable banks deal with the ghost of digitalization that continues to haunt them. Many of the under listed reasons account for the struggles:
- Traditional banks still operate “hard-to-transform legacy systems”. These make both changing the existing IT architecture and implementing new systems painful, slow and expensive. Legacy systems don’t necessarily have to be replaced but they should never dictate how workflows are carried out and banks shouldn’t need to adjust processes to them. Banks grapple with challenges of digitalization largely due to this.
- Many financial institutions simply lack dexterity to make far-reaching changes in their culture or their operations. This is in spite of the fact that cultural adaptation is largely expected to be the step zero of digital transformation. Being agile does not only mean adopting a new method, but also adopting the right mindset. That’s why cultural adaptation often remains incomplete: financial institutions keep using outdated patterns and business models to serve customers.
- Improving customer interactions is also of the essence. Financial institutions should use the wealth of data they have to better serve their clients’ needs, instead of pushing products that customers ignore. Big tech companies already offer services tailored to user needs based on customer data and behavioural insights. Digital transformation projects should help banks to follow in their footsteps and start interacting with customers better.
- Innovation might have been everyone’s favourite catchword for quite some time now, but financial institutions often fail to encourage entrepreneurship within their organization. Banks should have dedicated units or groups of experts to find new solutions and keep their products competitive. It’s also key to assign these teams responsibility for their innovation projects. With division of labour and specialization at the core of banking, specialized unit should be tasked with responsibilities of ensuring execution of such projects within stipulated time frames.
- Financial institutions tend to be risk-averse when selecting IT vendors. Banks should be open to new approaches as there are plenty of new players in the startup arena who could help them make digital transformation easier. The crucial thing is for banks to carry out research on vendors and come up with the right one to help redefining their digitalization process.
- Financial institutions try to concentrate on few areas to digitalize. To keep it simple, it is the integration of digitalization into every area of banking that leads to fundamental changes in how the financial institutes operate and deliver value to their customers. Banks which undertake this transformation can expect reduced costs and streamlined processes. This integration also helps to provide a more hassle-free and engaging customer experience.
“We are living in very dynamic times in which the appearance of new technologies such as Big Data, Block chain and Artificial Intelligence will drastically modify the relationship between banks and their clients. In this sense, digitalization plays a vital role, being the necessary lever to achieve more efficient internal processes and to obtain and retain as many customers as possible. The financial entities that do not adapt to these times, will have a great challenge ahead”
—— Rafael Conde del Pozo, Director of Digital & Innovation of Vector ITC.
Digital transformation in the banking sector is no more a luxury but a necessity. The coronavirus pandemic effect on operations has been well documented and therefore makes it imperative for banks to speed up their digital transformation without room for any delays. Digital transformation allows financial institutions to know what the people actually want. They can formulate their financial services and offer according to customer requirements rather than guesswork. New innovative technological developments allow banks to strengthen customer engagement with personalized offerings.
Nowadays, people choose their banks depending on how they perceive the institution. Their perception shaped by the way a financial institution positions itself online. People are influenced by social media platforms, through websites and advertisements. If banks are able to do some good online marketing, it will help them build trust in people’s eyes. Banks require customers just as much as customers require banks. Therefore, financial institutions can no longer be passive about the way they attract consumers of financial services. The good news is, there is a cheaper and easier way to attract these customers towards you. The Internet provides great platforms to reach out directly to these potential consumers, right on their devices. This makes influencing them easier, which in turn leads to an increase in the possibility of them coming to do business with your institution.
Digital Transformation equips banking institutions to act upon technology and market trends and scale these efforts with gradual successes. Only if an institution is able to upgrade itself, will it be able to cater for the demands of the millennial customers. Sophisticated digital technologies have transformed the traditional way that banking was done. The emergence of shopping portals, social channels, and integrated mobile apps have opened a lot of doors for banks to reach out to their customers. Banking institutions need to embrace this new world of digital by moving towards a digital transformation. Banks should ensure they do not lag behind by exorcising the ghost of digital transformation. The time to digitalize is now.
About the Writer:
Ebenezer ASUMANG, CGIA worked extensively in mainstream Banking & NBFIs. He is a Chartered member of the CGIA Institute, USA, a Google Certified Digital Marketer and an Author.
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