This is an excerpt from Finextra’s report, 'The Future of Digital Banking in the UK 2022'.
Technology is not a silver bullet for digital transformation. Investing in technology is of paramount importance but placing too much importance on the performance of technology in digital transformation will become a barrier to success. Digital transformation
is not the end goal; digital evolution is a continuous process.
As defined by Gartner, digital transformation “can refer to anything from IT modernization (for example, cloud computing), to digital optimization, to the invention of new digital business models. The term is widely used in publicsector organizations to
refer to modest initiatives such as putting services online or legacy modernization. Thus, the term is more like “digitization” than “digital business transformation.”’
While it is evident that digital transformation covers a plethora of initiatives within the financial services industry, further to this, in Finextra’s ‘The Future of Digital Banking in the UK’ 2021 report, it explored how “successful digital transformation
means many different things to different banks.
“The ability to integrate, to neatly embed, to turbo charge product rollout, perfect customer service and smooth out client onboarding all make an appearance in various definitions of digital transformation, but there is one true theme which weaves through
all financial institutions’ quest to transform: ease of change.”
The 2021 report also included a statement from Mel Meshkat, head of digital at first direct, who elaborated on this point and said that embedding digital by harnessing data to create propositions and adding value to customers for true differentiation is
“a natural progression.”
first direct’s view remains mostly unchanged in 2022. This year, Meshkat highlighted that: “There’s no specific thing that comes ‘after’ digital transformation because, for us, digital transformation has no end point: we’re continually evolving to meet the
needs of our customers.
“Caring for our customers is the top priority for our bank and we want to make sure that we give the best experience to our customers digitally by making their lives easier. We always consider the feedback we get from different channels – such as payments,
portfolio management, self-servicing, messaging - for our digital journeys.” After all, customer expectations are not determined by their entire relationship with their bank, it is based on their last digital experience. And one bad experience can result in
customer attrition.
A spokesperson from Lloyds agreed with this sentiment. “While we have taken some big steps in digital transformation, we recognise that this is an ongoing journey and we need to continually evolve in response to increasing customer and societal expectations,
new technologies and a rapidly changing competitive environment. Now our priorities are in continuing this digital transformation in an accessible and personalised way through:
- Deepening customer trust and engagement through personalised digital features
- Becoming the primary partner for customers supporting their broader financial lives and future needs
- Providing a complete and compelling digital self-service offering
- Evolving digital design to help customers access content and features most relevant to them
The Lloyds spokesperson continued to say that an example of this is how they have established open banking APIs and guard rails initiatives. “The opportunity is now for us to further use those for the benefit of customers and for the business, as was seen
when we launched the ability to pay off Credit Cards via PISP launched in 2021.”
In addition to this, as discussed in the 2021 Finextra report, digital natives like OakNorth have always been faced with less of a dramatic change. Last year, Sean Hunter, OakNorth’s former chief information officer explained that after the initial acceptance
of digital transformation, a “clean up” is expected. He added that: “Once this normalisation is complete, the most important thing is the analysis – using the data to better understand your customers and their world, so you are able to tailor products and
serve them better.”
This year, Alexander Richards, head of corporate strategy, OakNorth, expanded on this and said that “‘digital’ is less about stages of transformation, and more about moving from the old world to the new.
“Whether you are a large or traditional bank looking to transform and embed tech in your operations, or a fintech start-up looking to revolutionise an ‘analogue’ area of the industry – once you’ve decided to take a digital-first approach, it becomes a constant
way of life. It is a race with no finish line in which you need to make data, analytics, AI, and many other ever-evolving tools the centre of all you do,” Richards said.