Five Digital Transformation Hurdles In Financial Services And How To Avoid Them

Seventy-three percent of digital transformations fail to produce sustained ROI. At least, that’s what a 2018 study found. It’s an astounding figure considering that at the same time, companies are investing more in upgrading their digital offerings. According to a survey of over 2,500 organizations, 97% of company heads said the pandemic accelerated their digital transformation. By 2025, it is estimated that digital transformation will be worth over $1 trillion, up from $470 billion in 2020.

So, with the interest in digital transformation increasing, how can businesses avoid the hurdles of digital transformation and aim for success?

Five Hurdles To Digital Transformation In Financial Services

• No. 1: Not knowing precisely what you want to achieve: 

Digital transformation is about details. Without proper attention to them, you might get your budget stretched in many areas, while not achieving your overall goals. For example, financial businesses know about the benefits of data analysis, AI and mobile apps. However, trying to implement all of these at once can spell bad news. Instead, focusing on achieving concrete goals, such as increasing customer retention via a quick-reply chatbot can create tangible results. A singular objective followed by actionable steps is the key.

• No. 2: Failing to take account of the bigger picture: 

To let digital transformation work, it has to be an integral part of the overall business strategy. When making it so, you need to address both internal and external blockers in a smart way. For example, the pandemic forced many financial service providers to introduce omnichannel and remote interaction with customers. If you are a traditional financial provider, you are likely to strive for upgrading accessibility to services to compete in the ever-expanding market. Focus on transforming your business in a company-wide way moving step-by-step.

• No. 3: When your expectations don’t match reality: 

Being clear about your expectations allows your team to plan ahead and focus on the reality of what can be achieved. Conversely, setting unrealistic expectations can lead to dissatisfaction, demotivation and a massive waste of funds.

For example, many banking and fintech leaders approach digital transformation from a purely business perspective. While this has exceptional benefits in solving business issues, it’s often the case where the technology available either isn’t at that point of development or the solution doesn’t work as expected. For example, AI credit scoring can be a powerful tool for predicting creditworthiness. However, it requires sufficient historical data for it to work. That’s why when employing such tools, it’s important to remember both their strengths and their limits.

• No. 4: Challenges getting the team on board: 

Successfully implementing digital transformation requires a company-wide approach. However, opposition to digital transformation often occurs from the top down. For example, a customer retention department might suggest onboarding new smart chatbots to help keep customers satisfied. This may be met with pushback from management who see only the short-term cost, not the potential long-term benefits. This requires starting at the top and creating a workable, financially viable plan about why your business needs digital transformation. Additionally, you may need to find a unique approach for each department and make the digital transformation relevant to them. Getting the team on board usually requires additional training, meetings, events or tutorials, but those are worth the investment.

• No. 5: Lack of tech know-how: 

Your bank or financial institution may already have a tech department, and it may be perfectly well equipped to handle its current workload. However, digital transformation may require specific technical knowledge that not every team is well versed in. In such cases, it often makes sense to outsource development of new technology and retrain staff in maintaining the technology longer term. A well-planned hiring process at the beginning is likely to be a valuable investment in your digital transformation process.

Three Steps To Take For Digital Transformation Success 

• Plan strategically. Go in-depth and create a plan with aims, objectives, stakeholders, participants and risks, at a minimum. Before starting financial software development, it’s recommended to undertake a business analysis to fully develop your digital transformation strategy and establish which, if any, solutions will work for you. A business analysis can reduce costs in the long run as it helps you avoid many common pitfalls.

• Get your team in place. For banks and fintechs, digital transformation means getting an extra team on board at the start. This may be a group of in-house specialists, a fully outsourced team or a hybrid model. For example, you could outsource your business analysis and development needs, while keeping management in-house.

• Prioritize with a project management checklist and matrix. Many managers find the Eisenhower decision matrix helpful. It helps to work with the digital transformation wish list by splitting the activities into four levels of urgency. For example, when implementing a new technology as part of your digital transformation, you’ll want to identify the following:

1. Top priority. This is a do-it-now feature that is both important and urgent for your company to include in the minimum viable product.

2. Next on the list. Schedule a future date for this feature, and add it to the backlog.

3. Number three. Plan for this later. If a feature is urgent, but not essential, check if you can complete it without interfering with the overall work.

4. Next time. If your feature is not urgent or essential, it’s time to hold it until the next time.

The Bottom Line

Digital transformation hurdles are inevitable. But with the help of well-informed decisions, a detailed strategic plan with actionable recommendations and a well-formed team, you can successfully overcome any hurdle.