Banking On Digital Transformation: Why The Time Is Now

There is no doubt that almost every industry is embarking on the journey of digital transformation. Whether it is the need to create new and enhanced user experiences or foster innovation at technical and cultural levels, companies and businesses have adopted innumerable practices to embrace the digital world and provide transformed services and customers.

Out of the major impacted industries, the banking sector has stolen the limelight for itself. From digital banking to remote account access, several examples can define how this sector is on the path of a successful digital transformation.

What is digital transformation in banking?

To put in simple words, digital transformation in banking refers to the approach of embracing new digital technologies and implementing improved strategies by companies in the financial industry. The main goals of adopting the new culture or domain is to provide enhanced user experience, improve the overall operational performance and efficiency, and adapt to the dynamically changing market landscape.

What is the transformation process in banking?

The transformational journey in the banking sector involves seven phases, each defining a new set of goals for the companies. In this below section, we have briefly explained these phases for your better understanding.

Establish Objectives

First, you need to understand your business goals and the current scenario. This will help you analyze the gaps between the expectations and the real-time outcomes. Based on this, you need to establish the business objectives you have to meet through technology adoption and strategic planning.

Contrast your products against competitors

As you are offering an array of products pertaining to the banking sector, it is imperative to compare them with your competitors. For instance, if you offer online banking services, check if the roadmap followed at your company is at par with your competitors. If not, you might need to improve the strategy and change the process, like integrating cloud technology to allow your customers access their accounts from remote locations.

Evaluate your technology and processes

Next you have to analyze the existing workflows implemented in handling banking products and services. Based on that, you can determine the loopholes to be fulfilled through the digital transformation roadmap. For instance, if you already have an operational banking website, you need to analyze if its architecture is scalable and modular or not.

If not, you might need to shift from monolith to microservice-based wireframe to enhance the functionality and make ways for future scalability. If you want to reduce the stress on your customer service desk, integrating AI chatbot in the banking app or website will be a great option. Furthermore, it will help you to streamline the communication with your customers and enhance the user engagement level.

Assess your culture

Cultural transformation is one of the major types of digital transformation and it involves changes in leadership, defining new management goals, introduction of better and improved employee policies, and many more. Assessing the current company culture will let you know about the drawbacks and loopholes that you have to deal with through digital transformation.

Define customer needs via data and analysis

You also need to analyze and define the customer needs and expectations based on the results of data analysis. This will help you orchestrate an appropriate roadmap for digital transformation in banking and ensure the transformed products and services can meet the consumer expectations with ease.

Prioritize resources

You also need to prioritize resources available so that utilizing them won’t be a problem. For instance, understanding employee needs and transforming your company policies accordingly is a major step to be included in the digital transformation roadmap for your banking company.
Examples of digital transformation in banking

Digital account opening

One of the major examples of digital transformation services many companies are offering in the BFSI domain is digital account opening. Customers can open different types of accounts from the banking website or mobile application without having to visit the bank in person. All the required documents for the same can be uploaded online without any hassle.

Digital banking

Digital banking involves conducting all types of services through online platform, from applying for a loan to checking the account balance or initiating fund transfers to international accounts. It also includes making the banking products available at the online platform to ensure customers can use them from anywhere and anytime. 24X7 availability of the banking server is one of the key aspects of digital banking.

Mobile banking

Another major example of digital transformation in the banking sector is mobile banking where customers can access the bank’s platform from their mobiles only. A highly secured application is deployed for real-time usage with intuitive features and services that can meet the modern-day needs of the target consumers.

Technologies that drive digital transformation in banking

AI and ML

Artificial intelligence has enabled companies in the banking sector to provide real-time, virtual assistance to their customers through online chatbots and AI assistants. From answering the customer questions to enhancing their journeys, these applications have changed the way banking companies used to provide services in traditional processes.

Furthermore, combining machine learning with artificial intelligence allows early fraud detection, timely response and preventive actions, accurate customer data analysis, and advanced reporting and forecasting.

Blockchain

Despite the blockchain technology initially associated with cryptocurrencies, it is now widely accepted in the finance and banking sector. Capable of driving digital transformation in banking, it allows companies to store datasets on a decentralized ledger, ensuring no single user can have absolute control over the records. Furthermore, it enhances transparency and ensures fraud and security issues can be prevented with ease.

Internet of Things (IoT)

Internet of Things is one of the latest technologies facilitating digital transformation in the BFSI domain. For instance, IoT-based biometric sensors allow companies to track the users accessing the assets and ensure complete security and privacy with ease. Similarly, this technology has facilitated contactless payment where customers can scan their debit or credit cards and the funds can be transferred through WiFi.

Cloud computing

Migrating from the onsite server to the cloud network allows banking companies to scale the operations and introduce a higher level of flexibility. It further allows employees to access the banking website or application from remote areas without depending on any geographical and demographical conditions.

API

APIs or Application Programming Interfaces allow developers to integrate new plugins and reach new customers by exposing the overall services and products through the online banking platform. Apart from this, the APIs allow implementing microservices and improve the operational speed of the entire application framework.

RPA

With Robotic Process Automation, it is now possible for banking companies to automate several processes, reduce dependencies on human employees, and eliminate risks and errors with ease. Furthermore, it also reduces the overall operational expenses and allows companies to analyze complex datasets with more accuracy and precision.

Big data analysis

Lastly, big data analysis is also facilitating digital transformation in banking sector by allowing companies to analyze the trends and changes in customer data. With accurate reports, it is now possible to scale the processes, orchestrate appropriate strategies, and take right decisions on time for user experience enhancement, innovation, and better customer journey.

How to begin a digital transformation?

Even though digital transformation sounds to be quite exciting, beginning with this journey is never easy for the banking companies. From acknowledging the objectives to understanding the customers and unearthing hidden information from datasets, there are numerous aspects you need to consider before embarking on this path.

Define objectives and values

Identifying and acknowledging the business objectives to be fulfilled via the digital transformational journey is the first step every professional needs to work on. It can be done by analyzing the existing systems and processes as this will assist in underlying the loopholes to be overcome and new features to be included.

Do you need a simple banking website where your users can open different types of accounts, apply for loans, manage online funds, and perform other activities related to the banking sector? Do you want to develop a mobile application through which users can access the online stock market and manage their invested funds directly? Answering these simple questions will help you realize the objectives to be fulfilled and lay down the foundation of your digital transformation strategy.

Set KPIs

KPIs or Key Performance Indicators are quantitative metrics that allow organizations to measure the success rates in achieving the set objectives and values. Once you have decided the objectives that the digital transformation journey will fulfill, set the KPIs for measurement. This will help you to understand the progress level, make changes to the transformational strategy, and take further actions as and when required.

Following the SMART formula will help you further to set the KPIs properly.

Specific: Your goals should be specific and aligned with the objectives to be achieved through digital transformation.
Measurable: Ensure to choose a key performance indicator that can be tracked and easy to evaluate in the long run.
Achievable: Your goals should be realistic and easy to achieve. Do not commit anything that you cannot provide in the long run.
Relevant: All your goals and key performance indicators must be related to your objectives. Discrepancy in the alignment will introduce further problems in measuring the success rate.
Timely: Lastly, you should decide the timeline to achieve and measure the KPIs for better productivity and efficiency.

Evaluate your culture

Cultural transformation is a key component of every digital transformation journey in the banking sector. Your employees will have to work with digital components and products once the transformational strategies are put in place. This will demand a major shift from the conventional processes and fast adaptation of the new cultural dynamics. For instance, your employees will have to learn about answering customer queries through online chats, process and verify online transactions, and enhance alertness and caution while handling digital bank accounts or vaults.

Since adopting the shift from conventional to digital culture won’t be easy for your employees, you should analyze the impact of cultural transformation from the beginning. This will help you determine the areas to work on, the ways through which you can train the employees for the cultural changes, and perform other necessary activities.

Understand customer needs

Will your customer love the new banking mobile app? Does the new app help your users track their expenses and maintain savings balance? Will your customers rely on the loan portal of your banking website you want to introduce through digital transformation? It is crucial for you to answer these questions as your business is completely dependent on the audience. Understand the segment of the market audience which will respond positively to the changes introduced in your products, services, and the overall business through digital transformation.

Based on that, you can run a segment analysis to know more about the psychology of the targeted audience, physical demographics, and other such variables. This way you can strategize targeted marketing and achieve optimal success in providing optimal user experience across all channels.

Prioritize and map your resources

Segmentalize the digital transformational journey into smaller sprints that can be delivered without any delay or compromise in the quality. Once you have completed the segregation, work on making strategies to utilize the available resources to the fullest. This way you neither have to worry about going overboard with the budget nor you will fall short in delegating employees to perform the related tasks.

Bring your people on board

It is crucial for you to ensure all the business stakeholders are on the board before starting the digital transformation journey. From discussing the loopholes in the existing processes to organizing meetings about the new technologies to be adopted, you have to maintain transparency at all levels. Ensure communication siloes are reduced so that all the stakeholders are aware of the changes to be introduced within the company for a successful digital transformation journey.

Benefits of digital transformation in banking

Digitization of investment banking

Traditional investment banks used to conduct their businesses individually, creating a decentralized platform. Customers found it quite difficult to collaborate with the banks and avail their products or services. This is where digital transformation companies come into the play as they help the investment banks to provide short-term investment plans through collaboration from a centralized platform.

Advanced business innovation

One of the major benefits of adopting digital transformation in the banking sector is fostering innovation for advanced business processes. For instance, you can implement new technologies to deploy an intuitive mobile banking software so that your target customers can avail the products and services from their devices only without depending on the bank’s physical infrastructure. Similarly, integrating shopping channels can help your customers access various ecommerce websites directly from the banking platform and carry out the transactions in no time.

Easier customer acquisition

Digital transformation will help you to reach out to more customers through business model or domain transformation. From reducing the overall customer acquisition cost to generating better leads, there are several ways in which you can acquire more customers and retain them throughout the journey.

Personalized banking

Another benefit of embracing digital transformation is personalized banking. You can optimize the existing services and products your company has to offer to the customers based on data analytical reports. Offering personalized products and services will help you meet the consumer demands and ensure they will stay with your company for a longer time.

How does a digital transformation strategy apply to banking?

With the digital revolution, businesses can now provide improved products and services to their customers without changing the operations at the core. For instance, customers can perform all the activities from the mobile banking application instead of visiting the bank in person. Similarly, banking organizations can manage assets virtually stored on the cloud server while ensuring optimal security and transparency.

Challenges to achieving digital transformation in the banking sector

While digital transformation can help banking companies to foster innovation and enhance the overall customer experience, you must remain alert about the challenges. These hurdles can appear as the deathblow to your business, disrupting the operations and causing a significant decline in user response. So, to help you realize the probable challenges in the digital transformation journey for your banking organization, we have briefly explained them in this section below.

Tackling security obstacles at scale

One of the major challenges banking companies can face while offering digital transformation services is regarding the security and privacy attributes. With digital integration, your banking platform and customer data will be exposed to numerous cybercrimes and online threats. Managing all these obstacles can prove to be overwhelming if you do not pay attention to the existing security protocols, expected vulnerabilities, and so on.

Opting for digital, bricks-and-mortar, or a combination

Another major obstacle you can face in the digital transformation journey for your business is while opting for the digital or a combination of brick-and-mortar and digital system. Migrating from the traditional banking platform to the digital one can prove to be more challenging if proper workflow is not orchestrated from the very beginning.

Moving away from legacy systems

Most banks depend on legacy systems and applications, which is why several processes are obsolete when compared with the dynamically changing market landscape. Besides, these applications are mainly based on monolithic architecture, which not only restricts scalable modifications but also prevents developers from deploying changes without impacting any other process service. This is considered as one of the major obstacles in the digital transformation journey for banking sector as migrating from the legacy system to a modular, microservice-based, and scalable platform requires intensive planning, large-scale development schedule, and so on.

Building a social media presence

With digitalization, several banking companies are struggling with building a positive and responsive presence on various social media channels. Even though providing an omnichannel user experience across all touchpoints is the primary goal of every type of digital transformation in banking, establishing a firm presence on social media is not easy.

What are the current trends in digital banking and finance?

Evaluation of payment forms

One of the major digital transformation trends emerging in the banking sector is evolution in the payment forms. People are migrating from cash payments to card and online transactions at almost every touchpoint. Besides, with other businesses offering online services, banks have to ensure their payment forms can be integrated with the websites or mobile applications for hassle-free monetary transactions.

Innovative marketing

Instead of relying on conventional marketing strategies, you can adopt new and innovative approaches to reach out to a greater audience platform and acquire more customers with ease. From automated email marketing to building a strong and reliable social media presence, there are numerous strategies you can include in your marketing funnel for a successful digital transformation journey in the banking sector.

Increased cooperation

Long gone are the days when banking institutes could survive in the market while operating in an isolated manner. As per the current market landscape, collaboration and cooperation are on the rise. In other words, several small and medium scale banking companies are collaborating together to explore new market domains, acquire more customers, provide centralized services and products, and develop a firm brand image with ease.

Better design

From developing intuitive user interfaces to improving the operational speed and performance, banking organizations are focusing on creating better designs for the online websites and applications. Making the applications feature-rich while focusing on user interface will help you to improve the user journey and provide them an optimal experience. For instance, creating a device responsive mobile banking application will help the customers access your services and products from any device without having to deal with any obstacle.

Data usage improvements

Another trend observed in the banking sector as a part of digital transformation is improvements in data usage and analysis. For instance, you can acquire more datasets from various sources and evaluate the same to understand psychological characteristics of your customers, decipher the previous financial actions, and recognize the current market trends on the social media platforms.

What is the future of digital banking?

Since the banking sector is evolving rapidly, it is expected to see new trends and practices emerging in the coming years. Below we have discussed some of the key trends that will revolutionize the entire banking and finance sector and also play a crucial role in adopting a successful digital transformation journey.

Analytics & data integrity

Exposing data to third-party vendors will have a significant impact on privacy and security protocols. So, banking organizations will have to implement different security protocols and encryption algorithms that can enhance the overall data integrity and prevent any malicious user from using these datasets for fraud and other types of cybercrimes.

Security using CyFi

It won’t be possible for banking organizations to keep the customer datasets secured with traditional methods. Since data will be more vulnerable on the digital platform, it is imperative for businesses to implement new strategies and security measures. For instance, using machine learning algorithms can help you analyze and detect fraudulent activities, falsified customer accounts, and other types of cybercrimes. As a result, modifying the security layers on time will become much easier.

Researching new technologies

Another key trend that will emerge in the coming years is in the technological sector. Banking organizations will adopt new and advanced technologies, like IoT, artificial intelligence, edge computing, blockchain, and many more for an enhanced user experience, innovative services and products, and so on.

Going digital and embracing new technologies

More banking organizations are expected to adopt digital transformation and deploy digital platforms like websites and mobile applications. Apart from this, companies with digital presence will embrace new technologies to reduce the rigidity of the applications and integrate advanced concepts like microservices, decoupled application architecture, API-based communication, and many more.

Promoting an agile culture

Also, companies are expected to promote an agile work culture to speed up the operations, reduce customer dissatisfaction, resolve bugs detected on the real-time platform at the earliest, and improve on the fly with continuous feedback.

Conclusion

In this article, we have explained the ways digital transformation in banking can prove to be beneficial for your organization in the coming years. With this detailed guide, you now need to start analyzing the drawbacks and loopholes present in the existing technologies and processes. Once done, you can begin with workflow orchestration for digital transformation and analyze the outcomes for better user experience, reduced operational costs, and embracing new horizons in the industry.