As is customary Forbes published 2019’s seven digital transformation trends that January. Not many believed that an antagonist unseen to the naked eye, was plotting to transform world economies in ways unseen to the mind. A year later, WHO declared the public emergency. The world as we knew it, changed overnight.
But the Forbes-predicted trends – mobile banking, mobile pay, mobile apps, blockchain, big data, automated wealth managers, backend optimization –all proved right on the money. Adoption of those digital technologies not only accelerated overnight but also is changing the face of financial services. While a recent study elaborates on impacts specific to mortgages, banks, insurance, and worker compensations; future transformations in financial services undeniably lie at the sweet spot of tech. innovation, talent availability, hybrid work models, and platform modernization.
Before we unscramble 2022’s top digital transformation trends for banks, it is profitable to see what the key imperatives for leaders in the financial services are.
Three key Imperatives for financial services
- Rigorously chase revenue opportunities by drawing closer to the digital customer. How? By employing advanced analytics that pre-empts post-pandemic customer expectations and facilitates value extraction via non-traditional collaborations.
- Redesign operations built on regionalized resilience and transitioning to end-to-end digitization that reduces costs and increases flexibility. Also critical is to embrace a work force now acclimated to hybrid productivity models.
- While these two levers boost competitive advantage, it’s the third – reimagining with digital – which if executed in quick time will be 2022’s game changer. And what does that imply for banks? Literally, the sky. But primarily it means to use Data, IoT, and AI, in ways that allows for real-time decision making to confidently execute on and monetize the reimagined (disruptive) business models.
Digital Transformation – The size of it all.
Global economy is on course to embrace its digital destiny. 65% of world’s GDP is scheduled to digitalize by 2022. Direct digital transformation investments will top $6.8 Trillion between 2020 – 2023.
But as a recent BCG study shows among 80% of companies that embark on transformation projects, 70% came up short. So, what will decide the winners? The quick answer is, not only ones that make the mindset shift to embrace digital but also, the ones that sidestep common judgement errors, as these trends highlight.
Digital Transformation trends for the Banking Sector
Number of ‘cohesive’ banks will increase (a.k.a. true AI-first financial services)
More data-centric financial services companies will map their digital journeys so equal attention is placed on both people (consumers, employees, clients) and data sciences (the mined meaningful insights) to orchestrate decisions. Once people, practices and cultures ‘cohere’ to the new reality; actions of the ‘cohesive company’ will be felt on ROI’s and other key metrices. But how do banks know they have reached the important point of no-return? Simply, when, in their daily decision making, data begins to take precedence over intuition.
In strategic terms, what do cohesive companies do next? Slew of initiatives, or the ‘flip’.
More cohesive banks will master the ‘flip’
The three ‘flip’ levers – banks re-platforming to the cloud, switching their IT spending from operations and maintenance to innovation, and thirdly, taking on non-traditional, non-financial business goals – will decide 2022’s digital value champions. A related study shows how a few organizations treated the economic downturns and depressed market conditions as crucibles for innovation. The flip, as results show, encourages innovating with new technology at scale, as opposed to retrenchment.
The reason why mastering the flip becomes important is the new wave of digital disruption that is adding to the banks’ vulnerability. Before Amazon, Facebook, Google start acting like full service financial institutions, banks must go fully digital. And fast.
Like never before, the way to a consumer’s wallet will pass through the heart
Even so, that digital adoption took off in Europe and US in six months leading up to mid-2021, it was faster in India, Mexico and Brazil. As this McKinsey survey study points out, 44 percent of digital consumers don’t fully trust digital services and will use less of digital services post-pandemic (more true for industries as travel, banking, telecom, and entertainment).
Premier financial services institutions, with significant technology investments, will be wary of this customer churn. Although, in a way, this clarifies the immediate challenge. What, then, will be the ‘highest peak’ for banks in 2022?
In two words – Win Trust. The supporting strategy will of course include re-engineering processes that provide enhanced data security, beef up cyber-resilience, compensate in case of errors, and frictionless payment processes.
How does all of this add up?
As the cofounder of Singularity University, Peter Diamandis says, in the next decade, we will experience more progress than in the past 100 years.
The question then is: How prepared will the banks and financial services company be?