Consumer expectations for financial institutions have begun to shift drastically in the last few years. The increasing ubiquity of on-demand digital services, such as streaming platforms and e-commerce marketplaces, has created a culture that prioritizes accessibility and convenience above all. The rise of fintechs and challenger banks, which are usually built to thrive in a digital-first world, has accelerated this culture’s spread into the financial sector. These tech-savvy new competitors are generally equipped to meet and even exceed changing consumer expectations in ways traditional banks still struggle to do.
Large financial institutions are well aware that they need to innovate to remain competitive. However, they also remain deeply entrenched in an industry that is notoriously averse to change and the risks that accompany it. While banks might thus recognize the need for digital banking transformation, the steps they need to take to get there remain nebulous for many.
Below are four impactful steps that a traditional bank can take to achieve a successful digital transformation:
Make Innovation a Major Priority
Digital transformation involves much more than just investing haphazardly in whatever new hardware and software solutions are currently available. If banks want to maximize the benefits contemporary technology has to offer, they need to embrace and foster a culture of innovation throughout the entire institution. For most banks, especially those still running on the same antiquated legacy systems they’ve been using for decades, committing to such a cultural shift seems like a radical decision.
Legacy banks may thus need to bring in new leadership with substantial innovation experience to spearhead their digital transformation journeys. These leaders must be willing to take calculated risks and shoulder short-term challenges in pursuit of progress. It’s especially important for bank leaders to focus on meaningful structural changes that will help banks build and retain their competitive edge in the long run.
Work on Becoming More Agile
To meet customer demands for fast, user-friendly, always-on banking services, banks need to implement workflows and technological infrastructure that will make their operations more flexible. Adopting digital solutions that can extensively automate basic tasks and processes, for instance, is a logical first step. This will help minimize manual labor and paper-based procedures, which are historically time-consuming, resource-intensive, and highly vulnerable to human error.
Processing transactions, reconciling data, and onboarding customers are all examples of tasks that can be automated with little to no friction. With the help of technologies like artificial intelligence and machine learning, banks can cut the amount of time needed for these tasks from multiple days to just a few hours. At the same time, automating basic processes also frees up bank employees to focus on more complex, value-adding work. Bank staff can put their time and skills to better use handling more involved customer service cases or attending to challenging back-end work, such as forecasting and analytics.
Adopting cloud-enabled software is another significant way that banks can become more agile. For one, access to the cloud allows bank employees to work from a wider range of locations and devices, which can drive operational efficiency upwards. For another, cloud-based software solutions also allow banks to collect and analyze customer and market data in real time. These capabilities ensure that banks have a timely, detailed, and comprehensive store of information on which to base their strategic decisions.
Establish More Integrated Systems
Legacy banking systems tend to work with discrete data silos, which can make it difficult for different departments in the same bank to communicate and share information. These silos also usually can’t be accessed outside of the company. Not only does this fragmented approach tend to hamper internal productivity, but it also makes liaising smoothly with external partners difficult if not impossible.
Modern customers, however, don’t just expect the privilege of accessing their money anytime, anywhere. They also want to be able to access their bank accounts from third-party services like e-commerce apps and digital wallets. Customers want banks to nurture strong links with other service providers to facilitate easier payments and money transfers, and in many cases they’re willing to withdraw their support from banks that don’t offer this high level of connectivity.
Establishing healthy working relationships with partner firms can only be to a bank’s advantage in today’s increasingly interconnected business environment. Banks should also invest in centralized, fully integrated core banking systems, which allow them to consolidate their data and procedures on a single secure platform. From this unified system, banks can generate more nuanced business insights, build more innovative products, and communicate with partners more efficiently.
Recruit Top IT Talent
It doesn’t make sense for banks to invest in cutting-edge technology if they don’t also bring in the talent required to use it to the fullest. To craft the elevated banking experiences their customers expect, banks need to bring skilled software engineers, designers, and product managers onboard. These team members will likely be the pillars of a more progressive, innovation-focused company culture that will carry banks successfully into a more digital future.
Banks that successfully navigate their digital transformation journeys will come out stronger and more profitable than they’ve ever been. By investing in the right people and resources and welcoming innovation as a continuous process, banks will gain the capacity to survive and thrive in the ever-evolving financial sector of today.
