The financial sector is undergoing a major push for digital transformation, with organizations large and small investing in overhauling their current offerings. Digital transformation has proven to lead to increased revenue, with newfound insights being leveraged to connect with new clients and improve customer satisfaction.
Digital transformation is in major demand in the banking sub-sector, specifically through technologies that allow creating a flexible, integrated ecosystem for its customers. As essential as it may be however, a digital overhaul can pose several challenges and risks to an organization.
Challenges of Digital Transformation
Regulation and compliance
For credit unions and traditional banks, innovation is not as simple as making changes based on customer demand. Financial institutions must be cognizant of how digital changes to their solution will impact their compliance status.
Regulations and compliance hurdles can significantly impact the scope of a project, yet it’s essential to consider this in the earliest stages. Many businesses run into issues in their digital transformation when attempting to account for this later in the timeline.
Impact of change on current customers
If a financial institution wishes to launch a new mobile banking app while currently serving 700,000 clients with its present solution, shifting and modifying becomes much more difficult. This could impact current customers who have adapted to the existing service.
Availability of skilled professionals
39 percent of organizations have reported the lack of suitably skilled staff as amongst the top five hurdles to digital transformation.
Overcoming these challenges
The financial services industry has many hurdles and hoops to jump through when attempting to meet growing demand for digital services. Meeting existing SLAs and maintaining an existing solution is a must, while being forced to adhere to regulatory frameworks and strict technology standards during the pursuit of digital transformation. These challenges can be difficult for teams to overcome when initiating this process.
Mistakes Made During Digital Transformation
Choosing vendors, not partners
Organizations frequently want a single provider solution in the digital transformation process. The unfortunate truth is that there can be wide variability in expertise and solutions required. A digital overhaul requires time and commitment, and it’s crucial to have a trusted partner that’s a subject matter expert along the way.
Where vendors may be helpful for short-term projects or solutions, trusted partners are essential for ongoing transformations with multiple components and timelines.
Hiring for skill sets rather than strategy
Finding software engineers that know specific languages or frameworks can be difficult, costly, and inefficient. As an organization it’s important to know your plan and have a roadmap for your technology stack before making important hiring decisions, helping you determine where it’s appropriate to find contractors or outsourced development for short-term, specialized projects. This will help you move strategically and proactively instead of scrambling to find engineers in a reactionary movement.
Believing digital transformation is a one-time process
A common misconception about digital transformation is that it is a one-time event with long-term effects. Clients should constantly be looking for ways to provide enhanced value for their clients, otherwise they risk losing market share to competitors.
Not following industry best practices
The biggest mistake we see when working with clients is not following industry best practices. When projects get rushed, code quality typically follows with an increase in the number of bugs introduced.
Five Lessons Learned from Digital Transformation
Extensive coordination associated with digital transformation requires strong governance and executive leadership
API governance is the process of enforcing uniform API standards and security regulations on your APIs. Strong API governance ensures your enterprise is compliant with governmental regulations and organizational standards. However, even with solid API governance in place, executive leadership still needs to keep tabs on how digital transformation is being executed. It is important for the executive leadership team to be closely involved in digital transformation in conjunction with strong governance.
Digital adoption by customers doesn’t happen overnight
One of the most prominent digital transformation lessons learned is the understanding it is a lengthy process that doesn’t happen overnight, where customer adoption only adds to the challenge. Digital adoption isn't only about showing consumers how they'll benefit; it's also about making them feel like they were involved in the decision-making process. When scoping out any digitization project, it's critical to obtain feedback from key users who can shed light on present issues as well as the best procedures and workflows to solve them.
Document processing and data ingestion is real-time
To ensure the digital transformation's impact on an organization is most effective, it is imperative to understand how to extract the most value from digital documents and assets. This can include converting unstructured material into data that is actionable and may lead to concrete business results.
Mobile channels are a must
As an increasing number of consumers are going solely mobile, it is essential for digital transformation in financial services to accommodate mobile users. A 2018 study by Bankrate found that 63% of smartphone users have at least one mobile banking app, and a 2019 Blue Corona study shows that up to 70% of web traffic originates from mobile devices.
Consumers expect a positive user experience when visiting a mobile application, and for many customers the only interaction with businesses are through mobile channels.
Plan your API strategy like it's a new business
Aligning business goals with your API strategy is fundamental, as is determining the best use of technology and supporting architectures. It is imperative that any supporting technology that can assist an API be identified. A KPI, for example, quantifies the success rate of an API development program. Engaging the ecosystem is key, whether for external API users or internal API developers.
Final tip for digital transformation
Project managers are a key piece of the digital transformation process. They help the project get started on the right track, maintain communication with the key stakeholders, and validate the project requirements are met. Clients who want to save money by not including project managers, have found that scope and budget increase as a direct result.
Beginning Your Digital Transformation
A digital transformation isn’t simply a technology project. It’s an organizational initiative that can alter the path of the business for years to come. For more information, check out our eBook about setting up your Digital Transformation for success.
Interested in learning more on the topics covered in this article? Check out our future blogs for a deeper dive!