How digital transformation can empower the banking industry

How is the banking industry coping with the digital transformation wave?

How is the banking industry coping with the digital transformation wave?
Author : Suyash Deo   Posted :

Hello Everyone,

It’s our pleasure to have a conversation with Alex Jimenez on the impact of digital transformation of the banking industry.

Alex is the Chief Strategy Officer at Extractable, a digital strategy, design and data analytics consultancy that is building the future of financial services. His other recent experience includes leading technology strategic planning for the office of the CIO, at Zions Bancorporation and managing digital banking and payments strategy and innovation at Rockland Trust.

Also, he has served as the Chair of the Consumer Bankers Association’s Digital Channel Committee, where he worked with digital banking leaders in the industry and visited Capitol Hill to meet with the Senate’s Banking Committee staff. Recently, he became a member of the American Bankers Association’s Fintech Committee.

Alex is among the several industry influencer lists in the areas of FinTech, RegTech, Blockchain, InsurTech, Innovation and Digital Marketing. His articles have been published by The Financial Brand, Finovate, CFO Outlook, CIO Insights and the Irish Tech news. He regularly speaks at industry events.

Question 1 : What does the term ‘digital transformation’ actually mean?

Answer : In my opinion, digital transformation (DT) is not merely about the digitization of processes instead, it’s about concentrating on putting forward a strategic cultural change. Many organizations have mistaken DT as adapting digital technologies and that’s when they fail. Organizations need to recognize that technology is just a facilitating factor that begins with an absolute commitment of prioritizing customer experience and that isn’t limited to what’s on the screen of your customer.

Digital Transformation demands a shift in how organizations go about change management. On a serious note – it can’t be achieved without a change in your business strategy. It requires moving from discreet projects to adapting agile approaches that are not limited to the methodology. Organizations should prioritize customer experience first and thereafter, align their products and business processes to accommodate customer journeys. Therefore, the best way for organizations is to start by evaluating the current business strategy and then investing in digital technologies to execute that strategy.

Question 2 : How is the banking industry coping with the digital transformation wave?

Answer : I would say the banking industry is not coping with it. I have seen many organizations repeating the same old thing when it comes to strategic transformations like adapting Six Sigma or Lean. Mostly, they appoint innovation experts such as ‘Chief Digital Officer’ and they assume it’s done. And this is a wrong approach. Hiring a digital officer does not mean an organization has worked on achieving its customer-centric business model.

In reality, digital transformation demands the involvement of the board members as well as the C-level executives. Selected numbers of organizations have begun to realize the real meaning behind delivering a customer experience. And the only way you get closer is by talking to customers and not just conducting surveys.

Question 3 : What will happen to businesses that can’t or won’t transform digitally?

Answer : Inertia is the best friend of the legacy banker. On a short-term basis, organizations might survive without transforming, but in the longer-term, they will realize that it’s necessary to transform digitally. The time will come when most organizations will commit to digital transformation. Perhaps the arrival of COVID-19 has already brought the time forward.

Organizations might struggle to meet their business objectives and may need a merger or acquisition or even sell their business. In the United States, there are about ten thousand banks and credit unions. Ten years down the road, I expect to witness a significantly lower number.

Question 4 : What sort of advantages can the banking industry look towards with digital transformation?

Answer : Firstly, there’s no doubt that the needs of the customers will be easily met. And secondly, increased operational efficiencies would ultimately bring next-level of customer experiences.

Question 5 : What are the influential technologies for digital transformation in the banking sector?

Answer : I don’t agree with technologies being a driving force of DT because eventually, that’s how most organizations get distracted. They miss out on putting more efforts on creating customer experiences on a wider aspect. But if we set that aside, machine learning (ML) and other artificial intelligence-related disciplines are sure to have a large impact on the banking industry. That, of course, requires considerable improvement in data handling and analytics. However, the banking industry is yet to embrace that fully. Improvements in mobile technology will also be leading drivers of networking, such as 5G, cloud computing. On the lighter side, I don’t think blockchain would have as much effect as we thought a couple of years ago.

Question 6 : What challenges and roadblocks is the banking industry facing to transform digitally?

Answer : I have already discussed some of the major ones. But I would still add that most banking executives say it’s the legacy systems and lack of resources. However, I feel it’s the inability of strategic thinking and leadership that is acting as a roadblock for the banking industry.

Organizations that are moving forward have great leaders that are willing to take risks. It’s not always Brian Moynihan’s (CEO of Bank of America) of the world. In community banks and credit unions, some great leaders drive digital transformation as well.

Question 7 : What are the most effective techniques to drive the digital transformation journey for banking organizations?

Answer : As a strategist, I would say it starts with a strategy. For many organizations, their digital transformation efforts succeed but for most, they fail. That’s because most digital technologies provide possibilities for efficiency gains that build customer journeys. However, it only works if leaders have the right mindset to change. So, my suggestion is to figure out your business strategy before you invest in any technology and begin to equip the right design and methodologies to build a strong foundation that can deliver great customer experience. Execution should happen under the influence of strategic leadership with visionary goals to drive effective digital transformation.

Question 8 : How can digital transformation in banking enhance customer experience, especially during the COVID-19 crisis and the new normal?

Answer : After the arrival of the COVID-19 crisis, I have witnessed some organizations empathize with their customers like never before. It means we have an improved focus on the customer experience.

I also believe financial institutions can be agile. For instance, many financial institutions introduced paycheck protection program (PPP) in the first few days of the pandemic breakthrough. This is a great example of how awareness impacts the way organizations approach change management. Hopefully, we will also see how it impacts customer experiences throughout the crisis. Besides, many financial institutions partnered with financial technology firms just as quickly, that should also drive some improvements.

Question 9 : What is the ROI for digital transformation?

Answer : I’m always surrounded by this interesting question. My response is to do the work that actually defines the ROI. Although bankers may use this question as an excuse not to pursue transformation but the economics demand for a leap of faith. For instance, what is the ROI of having an entire account opening process? I see organizations limiting their investments in building a digital account process because they look at the cheapest vendor, back into a break-even to come up with an assumed lift and that is how they sell the change to the executives. The result is that they are managing to a low target with a subpar customer experience. Executives no longer want to sign up for an increase that will require a concerted effort. And that indicates the lack of leadership and strategic thinking.

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