Digital Transformation in banking

Though the last couple of years, including the pandemic, have forced banks to 'embark upon a digital transformation journey,' we still find many gaps here.

During the pandemic, banks realized their services needed to reach customers even during lockdown. 

Many banks have moved to the cloud, and for them, moving to the cloud has become a digital transformation. 

Ensuring their channel banking platform remains up 24/7 became the priority for others. 

Some others tried juggling with other channels like Phone or WhatsApp banking. 

Unfortunately, though all these are needed, these activities alone can't complete a bank's digital transformation. 

It was more like missing the forest in search of the woods. 

What is Digital Transformation?

In simple terms, digital transformation is using technology to innovate and create different ways to do business to drive growth revenue and enhance customer experience by offering each customer a personalized service—hyper-personalization at scale.

At the core, digital transformation is about adapting to new, futuristic, and innovative concepts and ideas to bring value to customers and employees rather than enhancing or improving traditional methods.

What banks are missing 

In this fast-changing world, where almost every year comes with new technology, it's tough for a bank to transform unless they have crystal clarity of what they want to do. 

We have seen years when Blockchain, CLOUD, Metaverse, or GEN AI have become the latest buzzwords. Often, these shining objects blur an organization's vision as the fear of missing out sets in. 

Banks need to do business transformation to provide a Digital experience to the customer. 

A significant change has happened regarding the 'What and How' of doing business. 

Our 'What' part has remained the same. 

For example, we read books, watch movies, and order groceries.

But the vital point to note here is that the 'HOW part has changed. 

Now, we order groceries through Amazon, watch movies on Netflix, and read books on Kindle. 

So now MAAAN (Meta, Amazon, Apple, Alphabet, and Netflix) provide us with actual digital experience. You can consume these services (watching a movie, etc.) at any time, any place, anywhere. Also, they provide personalized experience.

I call this 'Digital Experience.'

Digital transformation contains four parts : 

1. One needs to understand the true meaning of digital experience & apply it in his context.

2. On similar lines, one needs to understand the cultural mindset & ground realities of one's organization. 

Banks need to understand why digital transformation at other banks has failed or could not achieve its objective. 

There are WISE problems that one needs to solve.

W- Know your WHY. Why your bank exists & which core problem it wanted to solve. If you wish to solve a community's financial challenges or help students pay their fees and complete the course, or you want to help the MSME segment. Are you listening to them or just providing some loans only? 

I – Integration with the external ecosystem. In this age, you can't provide a complete solution to the customer alone. You can do anything but should not do everything; otherwise, you can lose your unique competitive edge. 

S – Silos in the organization. Your bank must have grown over the years with many legacy systems. Don't worry, you are not alone. Almost every bank faces the same challenge.

In the race to become the 'most profitable group' in the bank, several internal groups often start competing or, in some cases, don't even talk with each other. Many times, the CEO acts as an aggregator here.  

E – Environment & Cultural aspect. Are you encouraging your team members to take risks and try new things? The catch is that your customers will not pay for your failures.

So, you must ensure that you fail fast, learn fast & scale quickly.

You also need to recognize & understand the needs of GENz. For many of us, we have seen physical branches & later, we saw Internet banking.

But GENz started with mobile & internet only. They compare your website with other social media giants & expect everything that others are providing. 

3. One needs to understand new technologies & use them to transform their business. Technology is an enabler only. Stay away from each shiny object. You need to understand which technology to use and why correctly.

According to me, banks need to focus on ABCD here.

A – Artificial Intelligence, B-  Blockchain, C – Cloud, D- Data  

4. Digital transformation involves cultural transformation, and banks can use Digital Anthropology's help here. Digital Anthropology helps understand the mindset and subconscious mind of your team members and customers. 

First, we see what we like; later, we start liking whatever is shown.

Digital Anthropology can help you in future-proofing your digital transformation. 

Benefits of Digital Transformation

The advantages of digital transformation are many. Here are some of the significant points –

1. Improving Customer Experience

As stated earlier, the core of digital transformation is improving customer experience. Banks need to provide personalization at scale. 

This means understanding each & every customer (customer's gender, preferences, unique challenges, if any, customer's deep-rooted fear, hobbies, constraints …).

After that, they must develop products that meet those customers' needs. Really N=1. 

Here, Big data and Artificial Intelligence can help you a lot. 

2. Agility and Innovation

With DevOps, banks have the potential to reshape the market faster with improved agility and innovation than any other. 

We are living in both challenging & exciting times. There are new geo-political challenges, supply chain constraints, and different interest rate scenarios ( some countries are raising interest rates, some are maintaining the status quo, while others are decreasing interest rates). 

With GEN AI, you can get a summary of all the data that is relevant to you. And yes, that GEN AI engine can listen, monitor, work & ingest data worldwide, 24/7. 

3. Room For Collaboration Across All Departments

Teamwork is the keyword for running a successful business. When the entire team of people collaborates and improves the work for your customers, the outcome will genuinely earn success. Technology can be the glue that binds all your team members to a greater goal.

Banks need digital transformation to transition from outdated processes and use technology to offer better service. The growing need for current businesses to adopt agile principles and improve efficiency with technology is felt significantly.

There's more to digital transformation than we can imagine. 

In the coming years, banks willing to adopt and transform digitally will experience better advantages and revenue than the ones still stuck with outdated business methods.