Jumpstarting Digital Transformation in Banking
Digital Transformation (DT) has permeated into quite a few sectors and consumers have been enjoying the perks for a while now. But there has been a slow-down of implementation of Digital Transformation in process-oriented industries. In fact, banking is among those segments that has been slow on the take. Understanding the need for DT, charting out where to make a beginning, figuring out the pace of implementation, along with infrastructure needed, can be quite a challenge for multiple management teams that make up the average banking sector.
This does not mean that the sector is not working towards DT. A study by Mckinsey on Strategic Choices for Banks in the Digital Age says that in the next five years, digital sales will most likely account for nearly 40% if not more of new inflow revenue. Digital disruption in banking will reach an inflection point and it is projected that the US will have 42% of its revenue from digital services, UK 57%, Western Europe 51%, Easter and Southern Europe at 29%.
The approaches to digitization of a bank can be three main categories as a study by AT Kearney – Going Digital: The Banking Transformation Road Map outlines:
- Banks can go digital as a project: This means that they take up activities on a project-by-project basis. There will be pilots that are developed and then deployed on a gradual basis. It also involves long term planning, based on goals to be achieved and means to get there.
- Going Digital as a business strategy: This is an approach where a bird’s eye view of all mobile banking and DT needs are taken into consideration. There is a clear focus and vision that is being worked towards. Multiple management teams will work in conjunction with one another. All approaches and options will be tested simultaneously and deployed when ready. There is a great deal of agility in this approach and a lot depends on internal communication being seamless.
- Approaching DT as a pure business model: This is where the banking system uses DT as a digital only model and employs all subsidiaries to accelerate digital growth. There is a clear cut dissemination of the DT process across the company, the culture and innovation involved.
With these as broad approaches to the digital transformation of a bank, let’s now take a look at some implementable strategies.
Consider Launching a Digital Brand: A bank can consider launching an independent digital brand. There are two ways this can be done. The first is to project this digital brand as a completely new offering. And the second is to create a set of digital processes that will enable the physical bank to compete smartly with the new digital launch. The new digital works as a great platform to test out new strategies that are completely different from the regular banking approaches and each one can then be positioned accordingly. Questions that can drive the activity include
- How do these processes work with the main marketing strategies of the bank and its brand?
- How many different customer bases does it work with?
- How many different digital experiences can be evolved out of this activity effectively, without disturbing current functioning?
Going Digital with Processes: If going the digital brand way is not a workable option for a bank, digitizing processes definitely can be. Processes in a bank can be customer-facing or enterprise-user facing. These are the primary processes that you can consider for digitization. Here are some of the goals you can consider achieving with digitization of your processes.
- Go paperless – from starting an account to verification to tracking details of one’s transactions, move everything to a digitized platform.
- Interactions with relationship managers can be digitized to be on mobiles and tablets, making for smoother interaction systems.
- Move the tracking of multiple banking services – from tracking loans to credit cards, payment services, stock exchange movements and the like to a digital platform for better interaction and seamless availability across devices.
Bringing the Digital Experience Up to Speed: This third strategy is about modernizing the kind of digital experiences that a bank offers. Most banking experiences, if currently evaluated, will come up as being dated. What needs to be done is bring things to be in sync with what other digital brands are offering – such as HTML5, a design that is responsive, the ability to retrace steps and make corrections and the ability to support mobile devices, enable the Internet of Things (IoT) integration when it happens and also to work with open API services where needed.
Launching a new digital capability: Now this can be an approach for banks that are looking to work on something independently and offer their customers a whole new set of experiences as well as services and capabilities. These new services can always be provided as add-ons.
Digitizing of the Physical Bank: This is another approach and involves working on digitizing a brick and mortar bank. There is nothing that can compete with direct contact between customers and the bank. But there is a huge gap in this right now. With the digitization of a bank, its capabilities increase, as does its ability to interact with customers, opening up a whole new avenue of DT in Banking.
Any one of these approaches can work towards jumpstarting the digital transformation of banking. Once you are sure of the kind of approach you would like to take, then creating the internal support structure for it becomes easier.