Digital Transformation In Banking: How To Make The Change
Digital transformation has remained an important trend in banking in 2021. Similar to its impact on other business domains, technology is gradually reshaping the financial services industry in every aspect. However, the industry has a long way to go, and banks are still dipping their toes in the digital water, with 27% only launching a digital transformation strategy in 2021.
Meanwhile, customers have changed too. Gen-Z and Millennials expect traditional financial organizations to act in a technology-driven way, like Google or Apple do. As a result, traditional players feel the urge to introduce innovative and competitive digital solutions to ensure long-term market survival.
What Is Digital Transformation?
Digital transformation in banking is a cultural, organizational and operational change through technologies. In its most basic sense, digital transformation is the transition to digital customer services via the internet. In a broader sense, digital transformation means improvements in a wide range of areas related to offerings, process automation, customer experience, data integration, organizational flexibility and sales.
This technological trend determines the direction the industry is taking, and banks need to consider technological advances in their strategies. The pandemic-driven crisis is only increasing the urgency. According to Gartner, 69% of boards of directors say the pandemic and the economic crisis are accelerating their digital initiatives.
So how do you start the clock on your digital journey? First, it’s important to determine what effect you expect from digitization. It’s not enough to hope for “good things” to happen. Let’s get specific: Digital transformation in banking means introducing customer-centricity, integration and inclusivity. With technology, the customer journey gets personal, automated and cohesive within a single ecosystem.
The ultimate goal of digital transformation is to understand and fulfill customers’ needs — e.g., a mobile application becomes a universal tool whether clients need to pay their bills, transfer money online, apply for a loan or receive information at the touch of a button.
This level of convenience helps banks maintain a reliable customer retention strategy, reduce costs associated with attracting new customers, facilitate onboarding and thus increase revenue.
Secondly, you have to be aware of the volume of investments required to achieve the desired results. As said earlier, technology plays a critical role in all business operations. However, their effectiveness depends on how the business uses these technologies. That is why coming up with a clearly articulated strategy is crucial to digital transformation success.
Businesses must correctly assess and manage the risks associated with digital transformation, most notably possible data leakage, unauthorized access to data and other cybersecurity-related risks. Therefore, before drawing up a step-by-step plan for digital transformation, it is necessary to revise current business processes and IT infrastructure across the board.
Departmental managers have to analyze the security gaps at the company level and find out how they can be eliminated using digital solutions.
But don’t get me wrong: digital transformation is not solely about the technology itself. While developing and improving customer experience, financial institutions also establish a culture of innovation for employees. Work processes automation implies radical shifts in employee behavior, so the training of employees should be at the top of the digital agenda.
Digital transformation initiatives won’t come cheap. The customer-centric mindset requires constant improvement of technologies. But is there a price tag on innovation? After all, you invest in your organization’s future via robust IT platforms. If you aspire to provide first-rate financial services and outperform competitors, giving a green light is a costly yet necessary decision.
Here are the results you can expect from digital transformation. First, the unprecedented level of convenience, when clients have easy access to easy-to-use mobile applications and services. Second, the connectivity that lets users stay in touch with their bank 24/7. Finally, the innovation that helps bank institutions keep up with digital trends.
The sector’s transformation means that banks are beginning to offer fully digital services, minimize direct interaction with clients and introduce powerful and agile banking IT products and systems. This means bank institutions are becoming technology companies in their own right. The synergy of IT and marketing departments within a bank creates the opportunity to deliver digital products internally and externally.
This level of technological agility, with flexible services, new business models and faster time-to-market is the essence of digital transformation.
Ultimately, digital strategy initiatives by banks result in:
• Elimination of paperwork.
• Less time spent servicing clients, conducting transactions and settlements.
• Increased productivity.
• Organizational transparency.
• Effective teamwork.
• Lower operational costs.
• Risk reduction in core activities.
• More revenue.
As tech-savvy fintechs enter the market, big banks are beginning to reap the benefits of adopting technology. For instance, Bank of America now receives more deposits via mobile than its brick-and-mortar branches. Banks must use technology to transform products, attract customers, empower employees and optimize operations. Technologies can shape the future only when they permeate all internal and external levels of a bank’s activities.
Contrary to common misconceptions, the digital transformation won’t make traditional banking institutions go extinct. Instead, it is an opportunity to reimagine financial services, making banks customer-centric, innovation-driven and future-ready.
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