Digital transformation: A financial services industry scorecard
FIVE years ago, digital transformation was a buzzword; today, it’s the norm.
Most organizations now understand what digital transformation is and why it’s important for them to invest in upgrading their digital capabilities. Whether or not they’re able to take action based on that understanding is a different story altogether.
According to a recent study by global accounting and tax advisory firm BDO and their partner Rabin Research, digital transformation remains a hard nut to crack for businesses around the world. For financial services firms, the climb to digital maturity is steeper.
Their survey reveals that while 68 percent of all financial services firms have developed a digital transformation strategy, only 14 percent are actually in the process of implementing it.
The important thing to remember, however, is that digital transformation for banks isn’t always as smooth sailing as it seems in the boardroom.
TSB, one of the top banks in the UK, serves as a good example when it comes to showcasing how challenging it might be for banks to upgrade their digital infrastructure.
In their case, it led to a massive IT failure that locked out about 1.9 million account holders, ousted CEO Paul Pester, attracted unnecessary scrutiny from the government, and lost the company almost GBP 200 million (US$260 million).
Our second panel today on the service disruption at TSB is with Paul Pester, chief executive of TSB, Richard Meddings, chairman of TSB, and Miquel Montes, chief operating office of Sabadell. Watch it live from 3.30pm here: https://t.co/0mYzbGfZMT pic.twitter.com/QlCNUUst6u
— Treasury Committee (@CommonsTreasury) June 6, 2018
However, TSB isn’t alone. Over the years, many banks have had trouble upgrading their technology. Be it RBS Bank, HDFC Bank, or TD Bank — the reality is, being cautious is key to successful digital transformations in the financial services industry.
While there are a few risk that firms face when climbing the digital maturity curve, doing it successfully is incredibly rewarding for those in the financial services industry.
According to BDO’s study, only 51 percent of organizations (across industries) saw revenues grow by up to 9 percent in the past 12 months as a result of their technology investments.
In contrast, 62 percent of financial services companies said revenues increased by up to 9 percent as a direct result of investing in digital technologies.
For both groups, about 20 percent said technology investments helped push revenues by more than 10 percent in the past 12 months.
As a result of the proven and promising gains, financial services companies are making significant digital investments.
BDO’s study suggests that 65 percent of all financial services organizations plan to increase spending by 10 percent or more in the next 12 months.
Customer and employee experience drives digital transformation
In today’s day and age, banks understand the importance of customer experience (CX).
In many parts of the world, especially in the UK and the APAC, many traditional banks are losing customers to fintech companies, challenger banks, and neo-banks, all of whom are digital natives and provide a seamless experience that delights the user.
To beat that trend and win back customers, many banks are increasing their expenditure on things that improve the CX they provide — and the best way to do that is to upgrade the organization’s digital infrastructure.
According to BDO, improving CX is the top long-term business goal for 83 percent of financial services executives and one of their top three short-term goals (74 percent).
In fact, more than 28 percent of those in the financial service industry feel poor CX is their biggest digital threat.
However, while leaders in the financial services space grapple with the CX challenge, they understand that employees also need more digital support because ultimately, they are the ones driving customer engagement.
The study found that 73 percent of financial services professionals cite a lack of skills or insufficient training as the biggest challenge to moving forward with a new digital initiative.
“Digital transformation is less about revolutionary technology than it is about changing the way companies work,” pointed out the BDO study.
“It’s a mindset shift that hinges not on digital capabilities but on the adoption of those digital capabilities by the end users— employees and customers— and business enablement.”
Accordingly, 81 percent of financial services businesses said they’re implementing training to upskill current employees, 75 percent said they will establish a digital transformation office, and 70 percent said they will be developing a formal change management strategy to drive the transformation from within.
Interestingly, 58 percent of financial services organizations are also considering partnering with an external consultancy/advisory firm to help accelerate their digital transformation while mitigating the risks that they might face as a direct consequence of upgrading and adopting new technologies.
Whether driving change from within or with help from consultants and advisors, financial services firms need to realize that time is running out and that they need to act quickly if they want to hold on to their market share — and make a successful debut in new markets and geographies.
It’s important to remember that the study is primarily characterizing mid-sized firms in the financial services space, which means, the results lean more towards broking firms, insurance agencies, and mortgage providers than banks per se. However, the reality is, the state of banks in the world isn’t much different.
The bottom line is, digital transformation can create great rewards for those who successfully upgrade their systems and deliver on customer expectations.
- The next wave of digital transformation needs leaders not managers
- Why do some recruiters struggle to leverage technology?
- 3 ways technology can help your brand build a loyal following
- Customers love brands that are omnichannel says new report
- Global spending on digital transformation to equal Australia GDP