Digital business transformation demystified for financial institutions

Organizations of all hues know the importance of becoming a digital business, however the progress on this front is tepid. The saga of once fancied brands going out of business is very well chronicled. Market participants pretty well know that lack of focus on reading consumer trends and innovative approaches to fine-tune business model led to the demise of once top of the mind companies like Blockbuster and Kodak. What is also well known is that the digital transformation is more than just investing in new technologies rather it is about reimagining the business to meet the market needs. However, number of companies are still happy to be a bystander and think that fast following the successful model will take them home. Financial institutions especially need to take guard since the continuous blurring of industry boundaries will put them head on with the digital native players. The enviable scale that resulted in sustained profitability for financial institutions for decades is facing increasing pressure from new competition emerging from left right and centre. The market will only reward players who are agile, flexible, proactive and above all have a holistic rather than piecemeal approach to digital transformation.

It’s important to debunk the myths surrounding clear action plans concerning business transformation enabled through digital

Myth 1: Business is already profitable

Companies might have a robust business model in place but how long it will hold good in the wake of wide ranging disruptions is anybody’s guess. Brands do talk about challenging the status quo, however very few match actions with words. Undoubtedly, some of the legacy ways of working like integrity, transparency and customer focus will always prove beneficial, however new digital age skills viz agility, proactiveness and responsiveness will prove far more vital. Legacy processes built over decades of being in operations will eventually slowdown the progress. Effecting cultural changes from top to bottom will be among the most vital step on the road to digital transformation. Financial institutions, for example need to envision themselves as a trusted advisor rather than sales focussed setup. Banks can make good use of data available with them to provide contextual recommendations to consumers to build trust and effect loyalty

Myth 2: Shortage of digital talent

While genuine but not an insurmountable issue. There are plethora of alternative options available in the market to take an organization on the path to digital transformation. Solution provider are converging to offer best in class solutions to help companies irrespective of size transform digitally. Additionally, the solution providers have highly specialized staff across coding, analytics and strategy that can complement the teams already in place with the financial institutions. Importantly, some of the technology solutions can also be integrated with the legacy systems to bring down the lead time for technology upgrades. Finally, partnership with the evergrowing fintech community can help legacy institutions bring the much needed innovative offerings to the marketplace

Myth 3: Consumers seem happy

Often times the management deludes itself into thinking that customers are happy as they are not complaining much. Most of the financial institutions very effectively meet the transactional needs of the consumers, however consumers have a number of latent expectations. The digital consumer is fickle and unless offered substantial value proposition will slowly shift to the alternative service provider. Financial institutions are already facing the onslaught of digital native competitors in core business areas like peer to peer money transfer, lending and bill payments. The great amount of convenience offered by new entrants in the financial services space is drawing increasing number of consumers to their fold. The cost of acquisition and serving consumers is much lower through digital channels therefore instead of watching the nimble tech players acquiring financial services consumers, the banks can strengthen their digital prowess

Myth 4: Data security risks

Some companies feel discouraged to go for digital transformation on account of increasing threats of data theft which can prove cataclysmic given the heightened regulatory scrutiny and consumer backlash. As a matter of fact, a number of digital transformation efforts originated to handle risk and compliance issues in a better way. A combination of data, analytics and artificial intelligence have tremendously helped financial organizations to counter security and privacy issues. Elimination of paper and manual processes is much more desirable to lessen risk and increase efficiency. The data security will only get better with the adoption of new technologies like biometrics and blockchain which make data fudging almost impossible

Myth 5: High costs and time to see returns

Undoubtedly, digital transformation is a multi-year effort spread over a number of sprints with huge cost outlay; however the benefits far outweigh the costs over the longer run and frankly it’s a fait accompli. In fact few components of digital transformation such as artificial intelligence and robotic process automation can save costs very fast by eliminating duplication and taking control of routine processes. Also going digital means becoming a data driven organization — a foremost need for organization of any size. Advanced analytics will help make better decisions for resource allocation internally and reach out to consumers in a contextually relevant manner. Some of the positive results might be intangible initially but pay off over a long period of time by improving regulatory compliance, ensuring customer loyalty, rationalizing costs, and optimizing staff strength

All the organizations operating in banking, insurance and asset management need to have in place digital acceleration plans. All the core businesses need to be reimagined, ideally with the help of digital consultancies to meet and exceed consumer expectations. The single most important change to be effected concerns the cultural aspects of the organization. Resistance to changes need to make way for agile thinking to stay relevant. Teams across the organization need to be aligned to the new reality of improved customer experience as a competitive differentiation. Though funding the digital transformation is a real challenge, however it can’t be delayed for long if financial organizations want to prevent the Kodak moment