According to the 2021 World Retail Banking Report, 42% of bank executives polled said that they were not sure how to integrate and streamline mid-, back- and front-office functions effectively, and 46% said they are unsure how to embrace open banking, orchestrate the ecosystem or become a truly data-driven organization.
While most bank leaders understand that digital transformation is essential for long term success and sustainability, many find themselves stuck using banking solutions that were created using outdated concepts and legacy frameworks. To keep up with this quickly evolving digital market, banks must adapt their operating models and place a greater focus on user experience.
Why Embrace Digital Transformation?
In today’s fast-paced, digital world, consumers value time and engagement more than ever. Community banks that invest in technology and digital transformation are better positioned to keep up with customer’s growing expectations and create a more accessible, efficient, and personalized customer experience. Data-driven analytics provide real-time recommendations, creating better, newer engagement methods and shifting the bank’s focus onto consumers rather than products. Digital innovations allow financial institutions to seamlessly integrate their services into the customer’s daily life and needs.
Hesitancy to embrace digital transformation and update bank systems can result in difficulty with new customer acquisition, in addition to low customer retention, as clients leave to work with more tech-savvy competitors.
Reduction Of New Loan Applications And Accounts
The lack of options for online loan applications or account opening capabilities is a primary driving factor behind the decline in new customers. As society is becoming increasingly accustomed to digital options, competitors that offer online banking with a full suite of services stay ahead of the pack. The adoption of the most modern and robust digital frameworks by large institutions creates higher expectations from customers for financial institutions across the board to do the same thing.
Concerns Arising From Data Security Leading To Customers Unwilling To Share Data
Many consumers have historically been reluctant to share their personal data digitally due to security-related concerns. Given that data breaches and events involving hacking or data leaks seem to grace the news regularly, their concern is understandable. However, financial institutions that upgrade to sophisticated and secure applications simultaneously reduce their vulnerability to risk and address consumers’ security concerns, resulting in customers who choose them over the competition.
Inability To Provide Product Recommendations Due To Siloed Data and Inferior Analysis Tools
Many traditional financial institutions cannot keep up with customers’ demand for efficiency and productivity. They still rely on isolated and siloed organizational structures, as well as out-of-date analytical tools – all of which contribute to rising service costs, marginalizing customers’ needs and reducing both the speed and efficacy with which a firm can respond to problems. As a result, banks that have not upgraded their systems still offer products that cannot compete with non-traditional institutions and earn the reputation of being obsolete or outdated.
Why Do Digital Transformations Fail in the Financial Sector?
Financial institutions that pursue comprehensive digital transformation do so to create competitive advantage and attract more customers. Before embarking on this journey, there are major factors to consider in order to be successful.
Review The Underpinnings Of Traditional Banking Organizations
Banks that don’t update their systems will find their disadvantages far more numerous than banks that do. Traditional banks often identify challenges in the form of high operating costs, outdated core systems, difficult and inefficient back-office operations, and legacy leadership and culture. Transformation can fail if these core inefficiencies are not properly identified and resolved before selecting and implementing new technology; otherwise, the new upgrade may not function any better than the sum of its weakest unresolved elements.
Cost Cutting: A Short-Term Solution With A Long-Term Impact
Some banks may wish to take a more cost-efficient route and spend less money on technology while simultaneously updating their systems. While this may seem like a viable short-term solution, the consequences are too long-term for this to be a wise course of action.
One example of this strategy has appeared repeatedly in recent attempts across the industry to modernize while cutting costs. Firms fail by pursuing mergers and acquisitions and other growth strategies without supporting the infrastructure to scale appropriately and support the growth.
Learn More About The Benefits Of Embracing Digital Transformation
Transforming a bank to adopt a more digital, tech-focused strategy is not easy or inexpensive. The experts at Hartman Executive Advisors are experienced in helping community banks and financial institutions embrace digital transformation, ensuring that the money spent results in measurable outcomes. Reach out to learn more or to schedule an appointment to get started.