Banking’s Delusions Of Digital Transformation

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In today’s landscape, digital transformation in banking requires more than just offering an app or website to customers. It’s a full transformation of processes and company values, and it’s achievable for banks of all sizes.

Anyone immersed in the financial services industry has likely read an article or had a conversation about how the Coronavirus pandemic accelerated the digital transformation of banking. It’s true, more customers than ever are using online and mobile banking services. But does that really mean digital transformation is complete? Not even close.

At its core, the term “digital transformation” refers to improvements made in the banking industry to incorporate financial technologies with the goal of simplifying, optimizing, and digitizing processes, while also increasing data security. With the endless array of exciting fintech tools at our disposal today, having a website and app has become the minimum requirement rather than an extra selling point.

The Requirements of Digital Transformation in Banking

In modern times, true digital transformation requires banks to fully leverage data through automated means, redefine the operating model, and undergo a cultural transformation. These steps are necessary for a bank to deliver an experience that truly feels digital to the customer. Despite the importance of keeping up with the changing times, only about a quarter of banks and credit unions started a digital transformation plan prior to 2019, and 45% still had not started one by 2021 (Cornerstone Advisors). Banks that can’t move past legacy systems may fail to keep up with competitors that have already taken these steps.

Using the Power of Data and AI

Data and Automated Intelligence (AI) enable banks to improve efficiency and reduce costs while simultaneously delivering a better customer experience and driving additional revenue. The possibilities range from highly-targeted marketing efforts to predicting loan defaults, and many other uses in between. According to Epsilon, 80% of consumers are more likely to make a purchase when the experience is personalized. Banks can’t ignore the ever-growing demand for offers that feel customized to the business’s exact needs at that moment.

Redefining the Operating Model
In the early years of banking apps and websites, many thought leaders predicted that customers would one day abandon branch banking entirely. That theory has proven false. Customers still want help from a real human in many cases. Surprisingly, this preference is even stronger among younger generations, according to data from the KeyBank 2020 Financial Resiliency Survey. People under 35 are quickly growing into decision-making roles at work or starting businesses of their own, and banks that begin catering to their preferences now will be poised for future success.
The key to successful digital transformation is uncovering the right mix of digital convenience and human touch. Banks that combine human interaction with digital and self-service functionality can expect a 15% rise in sales, a 35% reduction in branch costs, and a 15% increase in customer loyalty, according to Boston Consulting Group.

Embracing Cultural Transformation

When banks begin embracing digital transformation, many quickly uncover things they may not have known about the company culture. A top-down approach is necessary for innovation, and executives must be enthusiastic advocates for change. In a Cornerstone Advisors survey of executives, 85% said corporate culture was a barrier to transformation. Technology alone can’t be a bank’s only competitive advantage, because every bank is pursuing technology. Firms are differentiated by their leadership, community, and their human factor in the technology and innovation process.

Digital Transformation Myths


1. Digital transformation should only be a priority for B2C financial services

Whether you’re selling services to a business or an individual consumer, you’re still working with people. That means your services are being compared to the likes of Uber and Starbucks — and your customers still expect an experience that is easy and customized.

2. Digital transformation makes your bank less secure

The vast majority of fintech providers have prioritized security measures when building products. Data encryption prevents leaks and increases the safety of customer transactions. AI in particular has been used very successfully to lower risk and improve security. As long as you work with a well-reputed fintech provider, security risks should decrease with digital transformation.

3. Digital transformation causes too much disruption to operations

A fear of business disruption has all too often held the banking industry back. Fortunately, advances in technology have made it easier and faster to implement new technology. You should be able to work closely with your fintech provider to ensure there are no disruptions during implementation and get help with any issues after the technology is in place.

The Path to Digital Transformation in Banking

The truth is, the digital transformation of banking is likely more of a journey than a destination. There will likely never be a point when we can say it’s “done,” because technology is continuously evolving. That’s what makes it an exciting time to be a banker!

To remain competitive in this rapidly changing environment, banks should focus on finding digital solutions that are as scalable as they are efficient and effective. They must work with fintech vendors that understand their unique challenges and appoint advocates within the organization. A good fintech provider will help your bank prioritize various digital transformation projects while also ensuring there is no disruption in day-to-day operations.

You don’t need a huge IT team or a megabank budget to begin digitally transforming your bank. All you need is the right partner to help you get there. Ready to start improving customer experience while increasing efficiency? Learn more about how Accrue can make your digital transformation journey as fast and easy as possible.