Top 7 Reasons Why Financial Companies Fail at Digital Transformation

According to Statista, global investments in digital transformation reached $1.18 trillion in 2019 and $1.31 trillion in 2020. However, a significant percentage of these investments does not pay off. 

The BCG survey results make for an interesting read: only 30% of companies succeeded in digital development. The remaining 70% of companies failed at digital transformation and received almost no return on their investments.

But, what are the reasons for these failures and, more importantly, how can they be avoided? And why does a single platform, such as loan management software, play an essential role in the effective digitization of financial organizations?

In this article, we identify the top 7 reasons why companies fail at digital transformation to help you learn how to avoid these pitfalls when implementing digital transformation in your business.

Reason 1. Lack of strategy for digital business transformation 

Digital transformation is more than a technology upgrade. It is the creation of new processes at all levels of the business framework. It is important to have a clear plan to prevent digital transformation projects from failing.

The pathway to making digital changes the right way might look like this:

• searching for a digital direction that is profitable for the company in the long term;

• setting realistic objectives and tasks;

• analyzing information assets for project implementation: what is available and what needs to be purchased/created;

• assessing existing technologies, processes, and staff in terms of readiness to change.

Lack of strategy creates inconsistency in the company and prevents the long-term benefits of digital transformation.

Reason 2. Leadership’s fear of digital business transformation

Financial companies often lose their direction when it comes to digital development. When faced with the need to revise the business model and organizational structure, this can be a challenge. Managing big changes is not easy, so the first problems often arise at this stage. 

According to Andrew Thorburn, former CEO of National Australia Bank, a clear leadership vision is the starting point for success. This acceptance at the highest levels is vital for the plan to work effectively.

Unwillingness to adapt to changes in business management and introduce new requirements at all structural levels is one of the main reasons why so many high-profile digital transformations fail.

Reason 3. Lack of a single platform for digital transformation initiatives 

Without a digital platform, such as loan management software that unites business processes, technologies, and a team, all the company's efforts come to naught. Consequently, the investment in technologies does not pay off, and it becomes another important reason why digital transformations fail at the company-wide level.

But it doesn’t have to be this way. Planning ahead and deciding on the best-suited platform in advance can help the digital transformation process go a lot smoother.

Reason 4. Skill shortages for digital transformation in banking

According to PWC, 80% of financial firms believe that skill shortages seriously lower their ability to innovate.

This sentiment is especially true of the lack of IT professionals who can effectively implement the right technologies in the right business processes, adapting these innovations to the needs of the business.

That’s why getting the right specialists onboard at the right time is essential. Not having the right team on hand increases the risk of failure and runs up costs in the long term.

Reason 5. Reliance on IT in digital business transformation

Lack of IT skills, in turn, creates dependence of banks on IT specialists. This complicates the entire development process, from changing strategies to deploying analytics. 

As a result, the business cannot quickly move from understanding to action and lags in digital development. Instead, a complex approach is needed to create innovation at all levels.

Reason 6. Communication problems that cause digital transformations fail in banking

Another reason why digital transformations fail is communication problems within the team. According to CNBC, projects for GE, Ford, and Procter & Gamble have failed due to communication problems. Management couldn't declare its goals and views to employees in a clear enough way.

“People aren't the problem; it's the organization's failure to communicate effectively with its people that sets them up for digital transformation trouble from the start. " —CNBC

Communicate, communicate, communicate: express your thoughts clearly and concisely, ask for opinions, personalize your communication, analyze the progress of each team member, and check for understanding. It's simple, but it's so effective.

This allows financial organizations to make smarter, faster, more profitable solutions on a centralized basis throughout the entire transformation process and at every stage of the enterprise lifecycle.

Reason 7. Using outdated technologies for digital transformation

According to Forbes experts, one of the important reasons why companies fail at digital transformation is using an outdated technology stack to achieve transformation goals.

Many challenges arise when a financial company tries to integrate innovation with existing business processes, hoping to reduce transformation costs.

Incomplete transition to advanced technology leads to inconsistency between departments and difficulties in decision-making processes. This creates serious barriers to further digital development. 

That’s why it’s essential that when going into digital transformation, the process is viewed as an investment, not just a one-off purchase.

Conclusion

Do you want to join 30% of companies with a high digital transformation success rate?

Then keep reading our main tips: 

• Act step by step and at the level of the entire enterprise.

• Learn by analyzing the successes and failures of your competitors. 

• Don't stop when facing difficulties but learn from them. 

• Never stop asking: where do we go next, and how can we become even more successful?