By : Glenn A. Tom
April 27, 2017 12:00 PM
Digital transformation has been one of the defining global trends of the 21st century so far. The digitization of communications, consumer behaviors
And there's no reason to think it will slow down anytime soon. For financial institutions (FIs), and indeed all businesses, it's now a case of getting onboard with digital transformation or getting left behind.
It's a big challenge, with a multitude of factors to consider and targets to aim for. Here are a few concepts to keep in mind as your business looks to get ahead in the digital race.
The banking industry is becoming increasingly dynamic and competitive. Countries like the UK and Australia are seeking to improve competition by promoting open banking, while the growth of the
Rather than viewing these trends as a threat to the traditional way of doing things, established FIs need to look at change as an opportunity.
In a new e-book, titled 'Transformation: Delivering and sustaining breakthrough performance', the Boston Consulting Group (BCG) noted that digital disruption is "reaching beyond technology to engulf a variety of industries". In order to seize the opportunities within this wave of change, the firm said businesses must commit to "embracing fast-moving change, creating multiple low-cost tech initiatives, killing lagging projects quickly, and committing to 'always on' transformation".
Utilizing new technologies
Like most industries, banking has come to rely on technological innovation for efficiency, cost savings
As far as future tech trends are concerned, it has been predicted that application programming interfaces (APIs), the Internet of Things (IoT) and machine learning will all have a big impact on the banking industry in 2017.
IoT is a technology that will impact on all parts of the economy, and in the financial sector, it has a range of applications that take advantage of real-time data. These include beacons that can send personalized offers to users smartphones when they enter a branch, sensors that use biometrics to identify customers when they use an ATM or video teller, and many more.
Open APIs will prove increasingly significant as banks come under more pressure to provide greater access to their systems and data. One particularly notable example is Europe's new PSD2 payment legislation, which has a compliance deadline of January 2018. PSD2's emphasis on a more open, inclusive payments market is expected to hasten the rollout of open APIs.
Machine learning looks set to play a bigger role in the financial services industry in 2017 and in future years. For banks, this technology offers great potential in areas like fraud detection and data analysis.
A December 2016 whitepaper published by Gemalto and Juniper Research concluded that there are four main success factors for digital transformation in banking. These are: 'being there' for the customer and delivering an 'immersive' experience; building trust around security; leveraging innovation to increase digital transactions
As far as the customer experience goes, the report authors argued that banks must place a strong focus on consumer challenges and pain points. "Never has managing customer relationships been more complex. In this digital age, success will only come by constantly evolving customer experiences," they wrote.
It's important to aim for success, of course, but it's just as important not to be afraid of failure. Lars Faeste, a senior partner at BCG, said the most effective businesses are those that are "comfortable making decisions amid uncertainty".
"They launch projects even when they don't know what the outcome is going to be," he said. "They embrace the concept of 'fail fast and fail cheap', focusing on quick pilot tests and prototypes that they can roll out and evaluate quickly and then scale up or shut down."
There's no guaranteed recipe for success in any sector, let alone one as complex and challenging as financial services. But those firms that are tuned in to the latest digital trends and ready to move with the times will be the best placed to seize opportunities in our fast-evolving industry.