The high-velocity change in financial services is picking up. It has redrawn the competitive landscape with unprecedented force and led to the emergence of fintech providers that rise to meet ever-increasing customer expectations. Top executives agree that going digital is essential for survival—while consumers worldwide want to manage their money the same way they now shop, communicate, and learn. That requires a range of digital tools, social media and mobile apps that financial services incumbents need to embrace. Much is at stake and no one wants to be disintermediated or regulated to low margin roles. For most industry executives, the question is no longer whether a digital transformation is under way, but how they can keep from getting left behind.
The pace of this change is astonishing. Last year’s Cisco and ESI Thoughtlab’s study showed only “24 percent of CEOs said that digital transformation was unimportant or slightly important,” But this year’s study showed significant change, as “96 percent of CEOs across all sub-sectors and locations view digital transformation as central to their businesses.” While this points to a great mindset shift for most financial service firms, about a quarter still find themselves in the infancy of this journey. The cost of moving too slowly can cost financial services firms nearly $80 million per $1 billion in revenue. Meanwhile firms already in an advanced digital stage report an 8.6 percent increase in revenue, an 11.3 percent jump in productivity and a 6.3 percent improvement in market share.
Financial services firms face serious strategic, organizational and operational implications as they brave this transition. To become digital leaders, they must invest in the right technologies and solutions and make smart strategic bets on investment services and business models to ensure future success. At the same time, they must reinvent their organizations, cultures and skill sets to drive their digital futures—yet not disrupt distribution channels, cannibalize existing businesses and expose themselves to new risks. CEOs and their teams should see digital transformation as a pathway to:
- improve performance
- boost revenue growth
- enhance decision-making
- attract customers
- drive cost efficiencies
From active path to action plan
Getting on the path to digital means taking these seven specific actions:
1. Create a digital vision and business case
Bridging the gap between business and technology is crucial to develop a digital vision. Build a strong business case for the organization—and revisit it as customer expectations evolve and business priorities change. Many businesses create a matrix tool to assess investment opportunities and grade them based on customer value, organizational value and business value. The durability of the investment and the need for new people, capabilities and business processes also come into play. This can provide an objective, quantitative score that determines whether the investment adds value—and that you can update as the market evolves.
2. Map a clear path to digital transformation
Financial service firms should first determine their place on the digital maturity spectrum and then target where they want to be. This leads to a plan that should appraise their firm’s strengths and weaknesses in meeting customer expectations. This can delineate the ease with which they can incorporate capabilities from outside partners and fintechs, along with their foundational architectures and what’s needed to build a surrounding ecosystem.
3. Nurture an innovation culture
As technology shifts at hyper speed, digital training at all management levels is essential. As the FAANG companies (Facebook, Amazon, Apple, Netflix and Google) set the pace, financial services providers need to emulate Silicon Valley by continuously reinventing products and business models.
4. Build a seamless, omnichannel customer experience
Digital engagement plus a personal approach equals delivery of the best possible client experience. Firms must reverse their thinking from a personal-first to a digital-first perspective. Even when reconsidering traditional brick-and-mortar locations, consider the type of customer and services the location offers. Then, better integrate the experience with the digital channels.
5. Stay ahead of the technology curve
As most legacy systems no longer fit their purpose, the best solution is often to migrate to a more agile and cost-efficient hybrid, cloud-based environment. This new environment should simplify your architecture, provide end-to-end security and scale throughout your organization, ultimately driving greater innovation and potential profits.
6. Develop digital talent to drive your future
If you lack a strong digital team, then other pathways to digital leadership won’t work. Conduct a formal digital skills assessment to determine whether your organization possesses the human resources to deliver on your digital strategy. Start by defining the core digital skills needed to support your strategy for the next five years.
7. Make your cybersecurity airtight
Companies need to prepare themselves for near perfection in cybersecurity, whereas the bad guys need only hack away at a company a few times to succeed. Once they understand their risk tolerances, companies should start to think about technology.
Putting it all together: Your relationship has come in
While important to know the current and future capabilities you want to enable—and the end use cases you hope to deliver—remember the importance of your core technologies and foundational architectures. Only by creating more intelligence, openness and agility in these bedrock elements can you catch the speed you need to move forward.
As for the human side: To fully enable these enhanced experiences for your employees and customers, you must seamlessly orchestrate of a broad set of ecosystem partners. Make sure you identify the right partners now. Build the right relationships with them. And then get moving, as the breakneck pace of change around you—and all of us—has a good head start.
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Jason Bettinger is Cisco’s global director of consumer industries, Industry Solutions Group,
Danny Vicente is a global marketing manager and financial services industry lead at Cisco.