A buzz—and a boisterous buzz it is—permeates the talk of digital transformation in financial services. But what this phrase actually means versus what it entails, especially in digital banking, is enough to turn the buzz into noise. Not long ago, technology implementations represented one-time projects and once completed, the work was done. But today, this blueprint is as obsolete as a green-screen computer. The imperative? Institutions must make their digital transformation an ongoing priority to succeed in the current banking landscape.
Done correctly, a digital transformation outlines, implements and secures buy-in around a comprehensive, long-term strategy a bank can navigate in changing times. This boils down to much more than a single technology decision; rather, it requires a persisting initiative to refresh and realign a bank’s culture, structure, hierarchy and branding.
Short-term fixes, long-term problems
It’s tempting for banks to focus on short-term tactics and rely on band-aid fixes instead of developing a broad, future-looking digital strategy. That’s understandable. The current financial services milieu increasingly requires banks to do more with less—all while meeting regulatory, business and customer-driven demands. Yet a nearsighted vision raises lasting issues.
Banks today often stack minor features and functions atop their digital platforms to meet current customer demand without thoroughly assessing if and how these capabilities fit long-term plans. For instance, adding the person-to-person solution that most easily integrates with your digital banking platform may sound like a good idea. After all, what’s wrong with providing convenience? The answer is perhaps plenty, if it fails to mesh with the bank’s bigger picture.
Banks often succumb to another common quick fix by enhancing the front-end interface without updating back-end technology. This inevitably creates more work down the line. While the necessity of a seamless, intuitive experience and interface deserves attention, a pretty front end is useless unless the back office brandishes power and sophistication.
Scalability’s significance
Effective long-term digital strategies must scalable. Technology’s rapid pace means a bank’s platform must smoothly grow without cumbersome, costly bandwidth limitations or issues. If the digital banking system stunts growth it creates major problems.
A flexible, adaptive banking platform withstands significant growth, whether organic or through M&A activity, which has been especially active lately. A recent analysis by EY found that the value of mergers and acquisitions in the U.S. financial services sector more than doubled to $196.5 billion in 2018. That’s up from $82.3 billion in 2017 and the trend is only expected to continue, with numerous high-profile M&As making headlines in 2019.
Without platform scalability, issues such as outages will more likely occur when more users join. And an influx of calls to the contact center can lead to a code fracture, which only exacerbates the issue. In the age of social media and “always on” connectivity, customers will far less tolerate such service disruptions.
Foster a digital-first culture
The most successful banks grasp that digital must cross the adoption thresholds of all divisions, including consumer, business, treasury and lending. Those banks where everyone owns and executes an overarching digital strategy, and realize how it impacts customer service, will more likely thrive. Banks should also leverage the same technology platform institution-wide to ensure that customer and employee experiences remain consistent. This approach also promotes brand unity and can even create economies of scale. If a bank’s entire organization isn’t on board with the strategy, innovation will lag and the transformation will fall short in reaching its potential.
In the most successful promotions of digital across the institution, banks designate a digital executive: someone with decision-making power and whose sole focus is to own the bank’s strategy. Placing this in the hands of someone with competing priorities raises the grave possibility of relegating all ambitious plans to the back burner.
Ideally, digital executives should weigh potential technology choices and partnerships. This will foster an intuitive customer experience, even as it mines and leverages meaningful user data. This person should plan beyond the next year or two—and ideally for the next five to ten. A true digital advocate within the bank will solidify this as a priority.
Determine the desired level of digital control
Banks that that succeed at transform often maintain a distinct control level. Too often, they get stuck at the mercy of their technology providers—forced to wait days or weeks for simple app updates, let alone the addition of major features. A flexible platform and modern tech wrinkles such as application program interfaces (APIs) and software development kits give banks greater control over when and how they add new capabilities, improve time to market and captain their own change velocity. This will prove especially important as banks dive into interactive channels such as voice and the Internet of Things.
To win at digital transformation, banks must view it as an ongoing project instead of a one-off tech choice. Important factors such as scalability and control will better position banks to establish the right long-term strategies that best propel them into the future. All that’s needed to start is a commitment, as Steve Jobs famously said, to “think different”: a transformation in how to approach transformation.
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Eric Brandt is senior market analyst, D3 Banking Technology.
