For banking and financial services (BFS) institutions, 2024 continues the battle for customer attention. Nimble fintech players and evolving customer expectations are pushing traditional BFS entities to innovate with speed and scale. To thrive in a constantly shifting business landscape, BFS firms must fundamentally rethink how they operate, innovate, and deliver customer value at scale. Successful digital transformation is pivotal in future-proofing businesses.
Driven by market changes, BFS firms are investing in digital transformation use cases that:
- Propel data-driven decisions to better and faster service customers.
- Drive operational efficiencies and seamless operations by enabling straight-through processing, particularly for manual and time-consuming workflows.
- Improve adherence to an evolving regulatory landscape with real-time, actionable insights.
However, few BFS firms have seen their digital investments translate into tangible outcomes.
The digital dilemma: Why banks strive but still struggle to transform
For most banks and financial institutions, digital transformation efforts have been lacklustre. Despite pouring millions into digital journeys, nearly half of these institutions admit to falling short of their desired outcomes. While there may be incremental gains in some areas, scaling value from digital initiatives has proven to be a significant challenge.
According to McKinsey & Company, many of these efforts fail because they struggle with issues like organisational silos, foundational data problems, and piecemeal tech strategies that create a fragmented landscape.
These transformation challenges often morph into an inefficient labyrinth, eroding customer experience, operational efficiency, and employee satisfaction. The inability to implement new processes and capabilities further exacerbates these issues, holding back the realisation of digital value.
On the other hand, firms that are able to harness digital are uncovering new value streams. For instance, 54% of respondents in a Forrester study accelerated loan processing, and 66% improved adherence to stringent risk and audit requirements by leveraging document discovery.
Similarly, a leading US bank experienced a 60% reduction in contract review time and a tenfold productivity boost aided by a generative-AI-based co-pilot.
What are the ‘digital leaders’ doing right?
A select few “digital leaders” have understood what it takes to harness digital value, making them 2.3 times more likely to succeed in their digital transformation initiatives. They are also 8.5 times more likely to experience significant revenue growth.
A select few “digital leaders” have understood what it takes to harness digital value. They are also 8.5 times more likely to experience significant revenue growth, according to Forrester’s report, “Build an Insights-Driven Business.”
These results are due to their deep focus on:
- Building connectivity and visibility across their business and IT ecosystems.
- Experimenting with new technologies and prioritising AI and automation, with a focus on augmenting human capabilities.
- Strategically leveraging platform-centric models to capture value through efficiencies, insights, and growth.
Building a customer-centric connected enterprise
According to Forrester, connectivity across the enterprise (business and IT) and its partner ecosystems is a key priority for BFS leaders. A significant portion of decision-makers agree that connectivity across data and network silos is essential for effective digital transformation, and many BFS players see partner optimisation through connectivity as a game-changer for visibility and collaboration.
Unlocking the AI advantage
BFS firms are leading the way in AI adoption, with significant investments being made in AI technologies. This investment is setting the stage for a new paradigm of work where humans and AI can collaborate to create greater value. For instance, using AI and automation to drive self-service at scale can free employees to focus on more complex tasks and provide better customer service.
However, few BFS firms have the data readiness required to support AI. According to a Forrester study, 33% of stakeholders reported lacking well-curated, quality data to train AI systems — an essential challenge that must be addressed.
Similarly, while BFS firms are eager to harness generative AI and other emerging technologies, they often lack a clear strategy. Without clearly defined use cases and a strategic map linking capabilities to outcomes, prioritising the right emerging tech capabilities for business success will be challenging.
Leveraging a platform strategy to capture value
The current shortfalls and gaps in digital transformation effectiveness have highlighted the need for a platform-centric approach. This approach involves connecting business, IT, and partner ecosystems, as well as enabling technical connectivity across systems, data flows, and operational processes.
A platform-based approach can help BFS firms gain the visibility they need to make better decisions, automate tasks to improve efficiency, and generate insights to create new products and services.
Catalysing digital transformation with platform-centric models
A platform-centric approach can address several challenges that hinder scaling digital transformation efforts. By connecting disparate legacy and modern systems, it enables a free flow of data and information across the business, breaking down organisational silos. This integration allows BFS firms to improve operations and better utilise AI and automation.
For BFS institutions ready to redefine customer and business value, the time for strategic platform adoption is now. However, BFS leaders may need to shift their mindset to fully benefit from a platform-centric approach. Rather than viewing digital transformation as merely an investment in new technologies, it’s crucial to maximise the potential of existing tech investments with a clear vision, a focus on end-to-end customer journeys, and a willingness to break free from traditional constraints.
