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The need for Digital Transformation in Financial Services.

The need for Digital Transformation in Financial Services.

There are 250 digital banks worldwide, including 20 percent in Asia-Pacific. 70% of these banks were established between the years 2016 – 2020. It is a telling statistic that makes a strong case for legacy banks to embrace digital transformation. Few learnings from the digital banks are already profitable – AiBank, MyBank, WeBank (China), Jibun, Rakuten, Sony (Japan), Kakaobank (Korea), and Paytm Bank (India).

Learning from the new-age banking institutions 

While companies with diverse domain expertise support most digital banks share a few commonalities – strong brand recognition, established customer base, scalable technology, data-driven cultures, agile governance mechanisms, and a product sequencing approach that balances incomes with costs.

 

Need for digital transformation in Financial Services

Value Structure

As the demographic shifts globally with more digital natives joining the workforce and earning incomes, incumbent banks are discovering newer ways to define “value” and revamp engagement structures that capture and harness it. With the mainstream popularity of omnichannel banking growing, incumbent banks are experimenting with various business models and ecosystem partnerships. However, the path to ramping up digital transformation is long-drawn. It comes with specifics – from deciding the product build (front) and technology stack that supports (back end), agreeing on operating models, establishing risk management processes, and mobilizing a go-to-market.

Technology Enablers

To stay competitive in the industry, financial institutions continually question the viability of their core and supplemental technologies. Crystal gazing for the future includes mapping the emergent tech. (AI, ML, 5G, IoT) and how these new-age disruptors fit into the bank’s longer-term strategy. As the dynamics of migrating digital assets and data to new platforms is a recurring feature at most banks, so is the need to firm up their digital transformation mandates. The considerations of flexibility and sustainability will always present themselves as banks formalize how their end-state enterprise architecture will look like. Whether technology is understood or embraced, digital transformation in financial services is a constantly changing and high-stakes endeavor.

Increased competition

A few years ago, when Netflix jumped into the business of developing original content, they said, “for us the aim is to become HBO faster than HBO can become us .”Similarly, today’s banks have to embrace digital transformation at never-before-seen speeds. For digital giants with a strong advantage across customer access, brand recognition, scale, network effect, and formidable customer trust, the finance industry presents a juicy opportunity – a sizable revenue pool, high returns on equity, and capital-intensive approaches. Told another way, hyper-competition in the finance industry is expected only to grow. Ergo, digital transformation is not about “if” but “when.”

Drive to Scale 

Size in today’s business world is hugely coveted. Look at the top companies – Walmart, Amazon, Apple, Apple – their employees, market cap, and geographic presence. Understandably, everything is about scale. Operating at lower unit costs, investing more prominent in technology and marketing, and expanding their customer databases are all edges that come with sheer size. Digital transformation in the financial industry, likewise, is about scale. Here is a proof point. Considering pre-COVID numbers, about the world’s top two banks. With an $11B technology budget, JPMorgan spends 50% of it on disruptive technology, and Bank of America, with a $10B tech overlay, consumes 30% on new tech initiatives.

End-to-end Customer Journey

Most banking customers (wholesale, corporate lending, or retail) are wary of friction-heavy transaction processes. This challenge comes from various corners – legal & risk architecture, P&L requirements, and legacy IT systems. Eliminating pain points prompts banks to start mapping end-to-end digital journeys. Subsequently, routine tasks (like onboarding scenarios, KYC requirements, account opening, document management, and loan processing workflows) are simplified as financial institutions leverage the mountains of customer data that lie unharnessed in their existing systems. The need to accelerate digital transformation will only rise as banks make customer pain point elimination their top agenda.

Conclusion

Post-Pandemic, the renewed waves of economic recovery are coinciding with macro forces – increased smart device usage, faster connectivity, and high demand for top-notch user experiences. As the number of digital-only banks grows, along with BaaS (banking as a service), more traditional financial institutions will step up their digital transformation initiatives.

 

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7 Goals Your Business can Achieve Through Digital Transformation

7 Goals Your Business can Achieve Through Digital Transformation

Let’s assess a few of the current techno-business trends – 5G influx, growth of intelligent cars-cities-homes, rise in hybrid cloud adoptions, boost in ‘everything-as-a-service,’ metaverse, and NFTs. Given these shifts, how do you think the winds of change blow after the pandemic?

A slew of new businesses (or new growth plays by older heavyweights) leveraging customer experience born out of immediacy and personalization offers the easy answer. Come to think of it – even Museums are turning to gamification, NFTs, and the metaverse.

But how do companies get quicker to the market and nearer to the customer? Digital Transformation.

Digital transformation – focusing on optimization or transformation as an end goal – encompasses familiar themes: interoperability with other businesses or systems, predictive analytics and business intelligence, security, remote work possibilities, data privacy, scalability, device, and platform management capabilities.

Like functional areas, the catalysts for Digital transformation, too, show similar grouping. Organizations were either pushed because of a business need or the market or competition pressured them.

No matter the motivations – reduce operational efficiencies, replace legacy, or create new revenue streams – when it comes to digital transformation, there are some irreplaceable business goals (and unspoken hazards to learn from).

  1. Using the correct data and data infrastructure: While the pandemic rocketed digital adoption, most faltering companies that accelerated their pilot programs into production realized that getting the accurate data to the right place (across clouds, devices, and machines) was more straightforward than done. The idea is to embed the data strategy at the outset of any digital transformation initiative.
  2. Technologies exist; the people resist: Even if the leadership aligns, management layers and functional silos aren’t enrolled or empowered before the new technology rolls out. The poor cultural energies (stall and blame games) show up quickly in the initial poor outcomes – costs, NPS, productivity. The learning: adopt change management frameworks and create change agents.
  3. At heart, it is ‘always’ CX: The ‘shiny’ new tech glitters, but the gold is only found when customers’ needs and motivations are met. Use advanced data analytics to meet where your future customers will be and create the experiences they will compare you with. Repeat this over – successful digital transformations start and end with people.
  4. Learn about and embrace risk: Amongst all the goodies (greater productivity, improved CX), there is one inevitable black box that digital transformation throws up – Risk. Innovative companies decide (and communicate) their definitive stance on managing risk, whether they arise from the fear of the unknown, failure, or pressure to deliver.
  5. Focus wide, go deep: While traditional embraces begin with IT, the more significant gains happen when marketing, operations, customer service, and others are included in the DX mandate. Most successful journeys are company-wide efforts with formal steering committees, significant learning investments, and a laser focus on goal measurement.
  6. Maximize Marketing: From the auditing of platform strengths (owned, paid, earned) to accurately mapping customer journeys and beefing up AI-enabled or traditional marketing automation, digital transformation exercises have necessary dependencies on an organization’s marketing communications and collaboration.
  7. Method to the madness: Once the courage to go up the DX value chain has been worked out, it is necessary to spend time across the distinct three stages: choosing – incubating – and scaling. Across people, processes, and culture are required due diligence (and specific mindsets) for these fundamental organizational rhythms.

Conclusion

Digital done right means continuously identifying customers’ pain points, building an end-to-end experience, starting with a shared vision and growth strategy, and being fussy about graduating to a new culture that supports it.

 

 

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Role of Digital Transformation in the Banking Sector with its Importance, Future, and Benefits

Role of Digital Transformation in the Banking Sector with its Importance, Future, and Benefits

In an increasing technology and data-driven landscape, banking faces a profound period of delivering differentiated client experience basis advanced digital technologies that eliminate pain points, provide new client values (like highly tailored predictive insights), and add value translated from the human relationship fabric.

Tectonic shifts accentuate Post-Covid, the importance of digital transformation in banking. The accelerating digital transformation is also surfacing new risks, and two, the continued market uncertainty shakes up forecasting, severely testing banking models and providers’ reputations. There is more by way of competition and the emerging market dynamics.

Competitive Landscape – The plot thickens

As the industry fragments and delayers (challenger banks bring in neo-normal, and big techs chip away at the value chain), banks must earnestly contend with market share and revenue leakages by shaping new business models finding radically new collaboration partners, and committing to purpose-filled innovation.

The role of digital transformation will be to factor in the following dynamics impacting ROI.

  • Client experience and the strong dependency on wallet share.
  • Institutional productivity that directly impacts bottom-line performance.
  • Talking a language of marketing and innovation that drives finer brand differentiation.

The future – Looking beyond 2022

Digital transformation in banking accelerates as declining branch traffic meets the rising consumer expectations are on the rise, competition from non-traditional players like Amazon and Google ramps, and escalating regulatory pressures compress margins. It is no surprise when the reputed financial company JP Morgan Chase spent $9B on its technology budget, employed 40,000 technologists, and its CFO declared they were a technology company.

After all, adopting digital ecosystems in Banks brings in faster team alignment, savvier customer service, and deeper transparency with speedier problem resolutions.

The Importance of Digital Transformation and its drivers 

While turning digital hinges on the imperatives of innovation and hence being collaborative, data-driven, and therefore becoming customer-centric, cloud-based, and thus turning adaptive; for profitability purposes, banks must clearly articulate their strategic priorities, prepare their culture for nimbler ways of working, and most importantly, be willing to take risks.

Begin by supplying the vision and empowering teams with learning programs, and investing in digital collaboration tools is part of a solid beginning. Still, actual gains accrue as new operating and business models are positioned to seize advantages of emerging tech (like IoT, AI, and ML).

Quite a bit of the above exhortation is like preaching to the choir. After all, a global Fujitsu study points out that finance companies are the most advanced when it comes to digitalization. Compared to the industry average of 67%, 89% of finance companies have started their digital journeys, and 29% deliver outcomes compared to the 24% industry average.

Benefits of Digital Transformation. 

Undoubtedly, the pandemic has accelerated digital transformation and brought in millions of additionally willing customers; the banking services have been preparing to diversify their offerings for years. Consider the following domains where banking functions continue to evolve dizzy.

From engagement banking (integrating services into people’s lives) to platform banking (plug-and-play functional services) to social banking (embedded banking that creates intermediary-free services) to High-Technology banking (capitalizing on the power of IoT, 5G, AI, and Robotics).

Digital Transformation in Banking – The accurate measures of success

Beyond technological upgrades, digital transformation must provoke cultural change that challenges conventional mindsets, nurtures innovation, and reshapes organizational stances around risk and reward.

Flowing from the top annual strategic goals, when these cultural rhythms permeate a Bank’s daily workflows, the actual benefits begin to emerge – compared to its competition, the banks start its leadership journey in the data and analytics space, customer experience, and NPS scores move northwards, and innovations in omnichannel offerings create more frequent customer aha’s.

Conclusion.

As more banks embrace digital transformation initiatives, driving differentiation will become essential. The focus would then shift to the different stages of customer interaction and how integrating digital services across—adoption, consideration, application, onboarding, and servicing—will make or break holistic customer engagement.

 

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Five Reasons why Digital Transformation is Essential for Business Growth

Five Reasons why Digital Transformation is Essential for Business Growth

Since early 2020, organizations and industries have been dealt with a Hobson’s choice (a free choice where only one thing is offered). They had to embrace digital as overnight transactions and interactions went online.

Most executives concur that their companies experienced accelerated digitization of their internal operations and customer and supply-chain interactions by two to four years. As the uncertainty reduces, new growth is a business imperative two years on. An HBR study classifies four distinct approaches for companies to roar out of recession – prevention, promotion, pragmatic, and progressive. Regardless of the response organizations chose for the slowdown, their future rebound can be rebooted through digital transformation. Here are five reasons – urgent and essential.

  1. Clear trends that reflect digital maturity: Most companies across sectors list customer-facing initiatives (for instance, digital marketing) among their top goals. This is a perspective C-Suite leaders have nurtured over months now, primarily because they believe digital technologies are fundamentally disruptive to their (or their competitors’) business models. The behavior can be seen in two pieces of evidence: More business functions (rather than CIO or CTO organizations) are sponsoring transformation budgets, and secondly, the rapid appointments of Chief Digital Officers. Finally, there is the associated mindset shift – Digital transformations today are more about revenue generation and increasing customer intimacy than the traditional focus on cost-cutting. For example, Frito-Lay ramped its digital and data-driven programs during the pandemic, fast-tracking five years of digital plans into six months.
  2. Correlation between digital transformation and revenue growth: An influential survey of 1400 companies worldwide elaborates on how digital influences financials. Companies that report 70% completion also show twice the revenue growth compared to ones just getting started. Led by firms in Healthcare, Aerospace, Financial institutions, High Tech., and Communications, companies across North and Latin America are ahead of the rest of the world. Another layer of insights can be gleaned from the top three motivations: increasing market share and accelerating speed to market, improving brand reputation, and boosting employee retention and productivity. When it comes to departments closer to transformation journeys, the order works out as IT, Marketing & Sales, Product and Services Innovation, Customer service, and Operations.
  3. Digital is the new way of responding to customers: More than thinking of it as implementing technology, digital transformation should be seen as a response to how technology changes the business landscape amid the shifting customer expectations. Consider how the innovators – Amazon and Netflix, for instance – seized the megatrends on the horizon (mobiles, social media, IoT, and cloud computing) to reinvent business models (eCommerce and electronic delivery) and optimize processes (supply chain and new features). Admittedly, digital transformations dare to go where no one else does. From automating processes to creating a disruption-moat, or even enabling friction-less access to new features – digital – after all, is an organization’s way to catch up to the ever-escalating customer expectations.
  4. Workforce Virtualization: As hybrid models and work from home (or anywhere) become a permanent option across companies, not to talk of ‘the great resignation,’ companies have to rely urgently on digital capabilities to select, hire, train, and manage talent. Most sectors tread carefully as their economic recovery models primarily depend on how quickly remote working can be scaled, made more seamless, and replicate the face-to-face texture essential to collaboration and innovation. With virtual learning, businesses contend with an overnight shift – a ‘great digital divide.’ 76% of workers, as per a global report, do not feel ready to perform in a digital-first world. Most gaps showed up in preparedness, access to learning resources, skill levels, and training participation. Organizations are girding up significant digital learning investments to close this hole, which will only grow if left unattended.
  5. Every company must become a technology company: The COVID-19 has undoubtedly been a great leveler. Countries across borders have been affected equally, but the eye-opening lessons are also being felt with equal force. One insight that stares right back at the business community is that, regardless of a company’s distinctive products, services, or operations, every one of them must think (and behave) like a technology company. The reasons are not far to find. Evaluating various companies across industries on basic performance parameters (like creating new revenue streams, improving existing streams, and reducing costs) highlights the considerable edge technology brings through automation, scale, agility, and flexibility. So, be it digitizing end-user experience, modernizing IT infrastructure, scaling data and analytics, or redesigning the delivery model, companies can learn from the number one rule in the tech playbook: A tech-forward business strategy must integrate business and technology management across strategy and execution.

The final analysis that digital transformations are a lever to a robust economic recovery is not in doubt. The focus, therefore, has to be on an approach that combines leadership commitment up top to a clear, integrated strategy built on a business-led tech. And data platform

 

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Digital Transformation: How to make the change in the Banking Industry

Digital Transformation: How to make the change in the Banking Industry

When we talk about digital, it is easy for banks to lose their way in the thicket of buzzwords, fads, and corporate-speak. Digital transformation isn’t about moving traditional banking operations to a new digital home. Instead, it begins by suspending prior opinions about the customer and approaching to know their world in a wholly different way. Walt Disney, Amazon, Google, and Starbucks all ride on great products underlying technologies. They are usually the first to embrace new risks and unveil innovations.

The reason these game-changing companies have been doing that across decades (even before digital technologies were born, or at least the way we know them today) is their legendary focus on customer-centricity.

When it comes to banks – an influential report points out that the top five customer needs – reward me for my business, give me any time anyplace access to my balance, see me not as a data point but a human, educate me on wealth-building knowledge, by analyzing my spends help me save money. Banking leaders can use similar research and first-hand insights, must first work out their vision of customer-centricity and then bring in the power of digital transformation to execute.

Seen either way – the timing is immaculate (or dire)

The inflection point for the banking industry is at hand. For one, 69% of boards of directors think that the pandemic and the economic crisis have already accelerated digital business initiatives. Combine that with large-scale workforce virtualization, a drop in customer cash usage, increased cost optimization initiatives, and heightened pressure on banks to boost responsibility for financial inclusivity worldwide.

Making changes with digital transformation

Once the leadership commits to rethink the entire customer experience, the next area of focus will be automating and personalizing user journeys and actioning friction-less touchpoints; before that, however, a pragmatic step would be to make deep dives into operational and risk processes (front, middle, and back end) and map out possible efficiency and effectivity improvements.

Along with the inward-focused initiatives, digital transformation starts to return rich dividends when banking leaders begin to explore outside-in opportunities. Outside-in thinking can be done in multiple ways – partnering with technology giants as this survey suggests or co-marketing with FinTech’s to collaborate with academia and industry bodies. There is still another way, a daring way through – brainstorming with the competition across the concern areas of – interest rate environment, weak loan demands, dropping credit quality, high customer churn, cost of funds, regulatory burden, and attracting new-age banking – all – are fertile start points for digital transformation strategies.

Sociology and Technology. 

Another talking point for digital transformation is that nothing changes until people’s behavior changes. So, while financial organizations invest millions in profound banking technologies, there must be an equal war-like effort to ensure customers understand the right tools and know-how to use them. Delving deeper into digital literacy patterns will offer bankers valuable insights that will seep into their products and services. A case in point is how DBS bank gained visibility by remaining invisible.

Systematically reinforcing customer behavior changes by employing mass-scale data analytics is one way how the banking industry already is and will create quantum value.

Physical branches gave way to ATMs. Client-server architectures replaced mainframes. Decentralization gained prominence, as did ERP and CRM systems. Cloud and SaaS followed. And now, AI and ML run through data mountains tracing patterns, predicting actions, and offering the next-best offers. If one examines closely, all instances are responses to shifting customer behaviors, societal and value system changes, and the growth of science and technology in our lives. It is the same with digital transformation.

Invert the organization, Exponentialize the value

As the number of inverted firms grows, the way digital transformation creates value changes. Inverting means moving from the value the firm alone makes to the value it helps orchestrate. The most obvious examples are Google, FB, Amazon, Microsoft. Nurturing successful platforms means providing the tools and the market to grow as partners compared to using digital transformation only to improve the efficiency of current operations. A close example of this in the banking industry is platform banking, which is a digital marketplace that provides both banking and non-banking services.

Make the change, but before that, believe in it.

Given their governance mandates, societal function, and cultural perceptions for years now, the banking industry has stayed insulated from the raging digital tsunami.

But if today’s reality is any evidence (banks are embracing AI, Robotic automation, and Advanced Data Analytics), then it is safe to say that the mindset – that’s how things always have been – is finally changing.

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