Digital Transformation in banking has accelerated greatly in the recent past. The industry has seen an immense technological intervention and is empowered with the latest to provide the modern-day customer with the ideal, integrated experience.
But it still has a long way to go before it can reap the benefits of complete tech transformation.
A sector as big as banking would take time to shift its Digital Transformation efforts to meet current norms. Just the sheer number of banks that exist dictates that for change to occur at the micro level is a herculean task. And the digital infrastructure needed to manage employees remotely or otherwise is no easy feat, either! Which means, it will be a while before the industry undergoes transformation.
In this article, we will be discussing the three pillars for successful Digital Transformation in the banking industry. But before that, let’s take a quick look at the basics.
What is Digital Transformation in Banking?
Digital Transformation in banking is about how financial institutions interact with their customers and shift their view from product-centric to customer-centric.
It begins by understanding the requirements, aspirations, behaviors, choices, likes, dislikes of both employees and customers.
Since we know Digital Transformation is a complex process and even more so for a monolithic sector like banking, here are 3 factors that must be considered to enable Digital Transformation in banking and make most of it:
Digital transformation examples in banking
The most common digital transformation examples in banking are listed below:
a. Artificial Intelligence (AI)
The use of AI-powered tools can often provide significant improvements in the efficiency of banking operations by streamlining a wide variety of processes like customer support, and when combined with technologies like big data analytics, this can often help support decision-making thereby leading to better lending decisions and risk management.
b. Robotic process automation (RPA)
With the use of technologies like Robotic Process Automation (RPA), banks can use customer service bots to deal with low-priority inquiries from customers like payment queries, account balance checks, etc. thereby helping them to improve customer satisfaction with quick services, as well as lower operational costs and the probability of errors.
Other transformation examples in banking include cloud computing, big data, blockchain and more. Each organization must prioritize transformation activities based on its own business objectives as part of the strategic planning process. The integration of data, advanced analytics, and digital technology into all sections of a financial institution, changing the way work is done, priorities are defined, and services are delivered
Benefits of digital transformation in banking
Digital transformation in banking industry is extremely beneficial, not only to the customer but also to the bank employee. It makes banking extremely efficient and easy, to allow the banker to focus on their work and helping the client with their needs.
Digital transformation in banking sector will reduce the number of mistakes made by bankers because the results will be more accurate with digitization. It may seem expensive at first to shift towards digitization, but the cost-effectiveness over time will be significant.
The following are common benefits of digital transformation in banking:
- Reduced customer waiting time
- Increased transparency and trust
- Improved customer engagement
- Personalized customer experience and
- Improved customer satisfaction and retention
Importance of digital transformation in banking
Digital transformation in the banking industry is necessary because it is what allows financial institutions to better learn about, interact with, and satisfy customers’ needs. For instance, the implementation of cloud computing in banking helps to promote safe online payments, digital money transfers, etc.
Moreover, by leveraging cloud-based services, financial institutions are also able to effectively save on capital expenditure as well as operating expenditure, all while ensuring customer data protection.
With digitization, companies can collect helpful insights to help them understand what people want. As such, they can tailor their services to meet customer needs rather than relying on guesswork. The technologies can also improve customer experience, improving engagement and communication.
3 Pillars for a Successful Digital Transformation in Banking
1. Digital Transformation to Enhance Customer Experience
The e-commerce space is rapidly moving towards frictionless experience and so is the telecom industry. But unfortunately, the banking industry is lagging. If the banking sector wants to get the same level of success with their customers, they should focus on replicating the user experience model of the retail sector.
One of the digital transformation challenges in banking is to create a cohesive experience as there are a variety of functions that a bank performs, across different departments for a variety of customer segments.
According to our in-house Digital Transformation Consultant, Joseph Christopher, “ The future of banking depends on how effectively the Digital Transformation is planned and how those efforts facilitate omni-channel experience to their consumers.”
The trend is changing at a steady pace as people are comfortable using technology for their financial transactions.
Even though services like opening and closing bank accounts, reporting online fraud is done through branches, the shift towards the online medium is unavoidable.
Let’s try to understand the trend.
55% of the customers would be comfortable using a technology company like Apple, Google for a variety of financial transactions.
30% of the retail bank clients have a digital-only account which indicates that people are familiar with tech and prefer to receive service online.
Just providing internet users with an online experience is not enough to create an unforgettable experience. Rather, banks must focus on creating a consistent experience across online and offline channels, and across all devices and branches.
The infrastructure to process consumer data and understand their needs plays a vital role in creating a personalized experience. 75% of the consumers appreciate if a company can provide them with a personalized experience, based on their past purchase, transaction history, and most important of all, their name.
In short, to realize successful Digital Transformation, banks must focus on omni-channel, personalized, and cross-platform experience for their customers, and to do that their employees must be prepared with the tech that they handle.
You might find this article helpful – Practical guide for CIO to initiate Digital Transformation
2. Digital Transformation needs an inside-out approach
Digital Transformation may sound like something technical and way more complicated than it is. One of the biggest digital transformation challenges in banking is to cultivate a mindset that welcomes change.
To execute the transformation successfully, companies need leaders who believe in innovation and also the entire organization’s buy-in. Technology is equally available for all; but what sets apart the leaders from laggards is the will to change.
First, enable change within the organization by bringing in new technology and processes that your employees can leverage to execute their job efficiently. Don’t go all guns blazing in one go; rather test the waters first and start with a business function that is important but not critical.
With time if you are able to see success, then gradually enhance your Digital Transformation efforts. Moreover, this approach must be opted to improve the business process, tech stack, and customer, experience with each wave of Digital Transformation within the organization.
It also helps you test multiple iterations in different test groups to find the perfect fit for the organization. Once you are comfortable with the initial execution of your Digital Transformation efforts, you could easily scale your transformation initiatives for your consumers as well.
Further, your employees would be in a better place to manage the change that impacts the customers and guide them through it.
Digital Transformation is a long process that can be improved, and optimized on a trial-and-error basis.
You may find this eBook interesting: The insights of top 11 Digital Transformation influencers
3. Modern Tech Stack is required to Enable Digital Transformation
Investing in the latest tech stack is a must to stay ahead of the competition, exceed customer expectations and set new trends for the industry.
New technologies must be leveraged by the big banks and financial institutions to compete with smaller institutions who are far more agile in leveraging latest tech solutions to make the life of the customers simpler and better.
The same approach must be adopted by big financial institutions as well. The added advantage that the big banks have is the trust factor that smaller companies lack.
The technologies that enable Digital Transformation in the banking sector are:
- Blockchain: It is much more than cryptocurrency. Today, blockchain is utilized as a distributed ledger tech which is used for creating contracts, loans, and also for the simplification of transactions.
- Internet of Things: IoT in banking will help to enable the transaction between two inter-connected devices that communicate for payment and more.
- 5G: Today, customer experience is at the core of all businesses and so is their time. The advent of 5G will ensure that online transactions happen at a lightning speed and enable functions that were previously not possible to execute with 4G.
- Mobile Apps: Mobile apps enable users to enjoy the product and services of the bank from anywhere. From transferring money to applying for a loan, most things can be executed using mobile. Banks will have to combine the power of 5G and mobile to provide a simple yet holistic user experience.
- AI: AI helps banks to understand their customers and predict their financial strength, based on the current flow of money within the savings account and the past loan history of the client. Based on these and other data points, the AI decides whether any new loan can be sanctioned to the customer or any new investment fund can be recommended.
- Automation: It helps to provide answers to the regular customer queries which usually need minimal human intervention. Both AI and Automation help banking professionals to invest their time in more productive tasks.
- Digital Adoption Platform: Training employees on new technology could be difficult and more importantly time-consuming. To counter this problem, modern technology like Digital Adoption Platform can be used which helps your employees learn and use any web-based application from day 1. It guides each user group contextually from one step to another to help them accomplish their tasks without any prior training.
Wrapping It Up!
The journey of Digital Transformation in banking is quite long. While other sectors leverage latest technologies to create an incredible customer experience, the banking sector still lags. It is time to adopt new technologies and focus on a more people-centric approach to make your digital transformation initiatives effective.
Find out how investing in a cutting-edge like Apty Digital Adoption Platform can help you to realize value out of your efforts in no time at all.