Five Key Factors for Digital Transformation in the Banking Industry

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The banking industry is undergoing significant disruption, driven by consumer demand for new products combined with new competition from challenger banks and non-financial institutions. Most banks have embarked on digital transformation initiatives in their quest for innovation, shorter new product development cycles, and reduced costs. Smart adoptions of agile practices are an imperative for such digital transformation. Here are five key success factors.

  • Put customers at the core. Today’s customers are demanding. They want seamless experiences across every channel; highly personalized products and services that address their specific lifestyles, preferences, and goals; robust security; business transparency; and, importantly, competitive pricing. To achieve customer-centricity as an enterprise goal, product teams must abandon the traditional inward focus (“What’s best for the bank?”) and focus on customer wants and needs. For example, an Asian bank that serves some of the world’s fastest-growing mobile markets saw an opportunity to create a bank that was truly digital right down to its core. It envisioned a branchless, mobile-only bank that would offer all the functionalities of a physical bank, while making every process paperless and seamless – the result is a bank that both impresses the digital generation and simplifies banking for millions of people.
  • Accelerate time-to-value. Somewhat like Moore’s Law, which predicts the doubling of transistors in an integrated circuit every two years, consumers expect their banks to double down on their value proposition within 18 months or less. This means that banks need a smooth innovation delivery pipeline based on agile practices – one that tracks market trends, tests innovative products, and then uses fast feedback mechanisms to iterate products for continuous improvement. Such an agile, on-demand innovation pipeline will help banks reduce customer churn. To accelerate time to market, leading banks have a structured innovation process of generating ideas, running “hackathons,” and investing in winning ideas through in-house incubators.
  • Modernize legacy systems to keep pace with digital. While digital technologies such as cloud, big data, and analytics can improve efficiency within firms, they still depend on data that resides on-premise and information flows across legacy systems. A crucial aspect of digital transformation is modernizing these core systems using microservices, APIs, and DevOps processes for continuous integration and delivery, leading to shorter release cycles.
  • Leverage the potential of minimum viable products (MVPs). A recent PwC report showed that while 61% of respondents from financial services and FinTech firms feel they are good at generating ideas, only 41% feel they are good at developing MVPs. The use of the above-mentioned microservices and APIs can help banks roll out much-needed MVPs across digital channels and avoid becoming obsolete. One global telecommunications company was able to overcome the same obstacles that banks face with MVPs – inflexible legacy systems and a strict regulatory environment – and achieve a dramatic 66% reduction in cycle time from idea to feature release to production.
  • Upskill the workforce. According to the World Economic Forum’s 2018 Future of Jobs Report, 56% of the financial services industry workforce will require new skills, and 29% will be employed in new roles by 2022. As automation replaces routine tasks, companies must manage concerns around “automation anxiety.” This can be done by organizing hackathons and “ideathons,” infusing entrepreneurial thinking in the workforce, investing in cross-functional teams, and reskilling employees to create a culture of learning, which will be vital for banks to thrive.

Enterprise agility and the ability to innovate, adapt, and respond quickly is no longer a choice but the cornerstone of successful digital transformation for banks if they are to meet the evolving needs of consumers, and fend off new digitally based competitors.

Copyright © 2019 IDG Communications, Inc.