With digital transformation creating an industry-wide shakeup, the financial sector has been no exception to this extreme disruption. Digital transformation needs a seismic shift in organizational culture and leadership focus, supported by necessary funding, and openness to new agile ways of working, and a willingness to take risks
Increasing usage of smart devices, better connectivity, and demand for high end-user experience are some of the key aspects driving the digital transformation trend. According to Research and Markets, the digital transformation market is expected to grow at a CAGR of 23% from 2019 to $3.3 trillion by 2025.
Most CFOs agree that a digital banking transformation strategy should leverage technology and improved processes to deliver an exceptional user experience. The end-users should include both customers and employees, with the interests of both internal and external constituencies being considered in the development of the digital banking transformation roadmap.
Nanda Kumar, Founder & CEO, SunTec, says, “Banks are forecast to spend more on technology in 2021, with enterprise software spend growing by as much as 11.4%. Digital operations platforms (DOP), which combine back-office business tools into a single product, were popular in 2020 and will continue to be viewed as a replacement for legacy enterprise resource planning (ERP) software. New DOP offerings will become AI-based and ecosystem-oriented, tailored to the industry and even micro-vertical use cases and requirements.
Digital Banking Maturity
What most financial institutions often do not understand is that digital banking transformation does not have an endpoint since the process keeps evolving, with new processes, technologies, competition, and consumer expectations impacting what is required to succeed.
Many banks and other financial institutions have not been able to embrace the true potential of digital banking transformation. Even after many institutions introduced new digital banking capabilities as a result of the COVID-19 pandemic, fewer organizations rated themselves as mature in digital banking transformation.
To achieve digital maturity, organizations need to focus on the crucial components of digital transformation success. The foundation of this success is an executive leadership commitment and a culture that impacts and changes the way an organization thinks, works, and manages when it comes to new digital trends in the banking ecosystem.
Data and Analytics Leadership
To unlock the full potential of digital transformation in the banking space, there needs to be optimal usage of data, analytics, and AI to deliver an exceptional customer experience. Moreover, organizations that inject analytics and big data into their operations have a competitive edge in terms of both productivity and profitability.
Organizations will be able to achieve success in using AI, machine learning, and advanced analytics when it is deployed beyond security and risk and to reduce costs. It will be when organizations use these tools to create new products and services and enhance customer experiences.
Reskill the Workforce
Most financial institutions do not have the necessary skills to achieve digital transformation success, making talent management and employee reskilling crucial. While some of the new skills needed can be solved through hiring, financial institutions can also consider a long-term approach to grow their talent base by reskilling and training the existing employees.
Nanda Kumar says, “As banks digitally transform and if it’s to be a success, there has to be agreement at all levels, starting at the top. The risk of showing a lack of commitment to such a gigantic transition would equal pouring investments down the drain while customers experience suffers.”
“There’s no doubt that the foundation of any digital transformation journey must be on data, analytics, and technology, but the human element cannot be ignored. As more and more banks adopt digital, legacy skillsets will have to be replaced with fresh skills, and the time has come for us to bid adieu to the legacy culture”, he adds.
Leverage Modern Technologies
Organizations can leverage digital technology to create new business models, which include insight-based service extensions, expanded platform ecosystems, and digital enhancements to current offerings.
Financial institutions must deploy new technologies into all areas of the business, changing the way organizations operate and deliver value to customers. The playing field in the banking space has changed because of new competitors and a greater awareness by consumers of what is possible.