Digital Transformation in Banking & the Need to Modernize
For decades, lending and deposits have played a fundamental role in the success of retail & commercial banking. The problem is these activities haven’t changed much as the majority still happen on slow, old-fashioned legacy platforms. Because it’s difficult for banks to innovate fast, respond to increasing customer demand, and develop customized experiences, the pressure to become more transparent has maximized the need for Digital Banking nevertheless. On top of everything, FinTechs and neobanks like Revolut, Transferwise, and N26 are threatening to interfere with conventional business models.
Deciding whether to re-factor, augment, replace, or re-platform can be a complex and rather challenging process. On the one hand, every bank has its own systems meaning that there is no solution to accommodate them all. On the other, it involves people that may not be comfortable with changing the dynamic, infrastructure, and organizational capabilities.
Re-platforming & Re-factoring – A Necessity in Today’s Digital Banking Age
Following the decision to change, banks must assess if innovation involves developing new Digital Banking offers, or simply modernizing existing platforms via re-platforming or re-factoring. Whether the existing platform only needs minor adjustments without changing major functionalities or it has to undergo codebase updates, the end result of the two approaches mentioned is to improve accessibility.
Although re-platforming or re-factoring are excellent approaches to integrating current-generation technology into legacy systems, they won’t change the core capabilities. Deciding on the best strategy for modernization is a strategic decision that demands bank leaders to first perform an assessment of existing capabilities, operational risk, customer needs, and market trends.
A comprehensive data management strategy
Digital transformation in banking goes beyond modernization. Banks seeking to get a competitive advantage and truly stand above the crowd will have to consider implementing a data management strategy. This way, they can be sure that the migration of the data – as well as future integrations – happens smoothly across multiple channels, businesses, and products.
Data management is vital because it gives a better perspective on operational accuracy and efficiency. Furthermore, it paves the way for creating new opportunities for customers. Exceeding expectations matters because it leads to improved cross-selling opportunities and diverse monetization streams. In addition, settling on a well-defined digital banking strategy will enable banks to include advanced analytics tools in their IT, allowing them to gain insights in real-time and make better decisions.
Revamping operational models
With the rise of the Digital Banking world, modern consumers have become increasingly savvier. Apart from demanding a customized experience, they also want convenience and speed when collaborating with a bank. Mortgages and investments are complex activities, and as a consequence, a hybrid approach that combines self-service, digital, and human interaction functionalities increases satisfaction on the client-side and ROI on the organizational side.
According to the Boston Consulting Group, credit unions and banks that choose to go Digital Banking may attain an increase in revenue of up to 20%, as well as a decrease in expenses of up to 30%. The challenges are numerous, and yet, the best time to get a headstart is now when the market is hot and digital-only banks are fighting for monopoly.
Truth be told, digital transformation in banking has had a rough start. Implementation is slow because digital initiatives are difficult to scale. Regardless, it is an opportunity that shouldn’t be missed. Change is painful and digitalization is complex in every way, but the bottom line may prove incredibly satisfactory if the initiatives are carefully thought over and strategically deployed.
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