Digitisation: win-win for customer, banks

With digital being the norm these days, industries can no longer hide behind traditional systems for conducting business. As we progress further into the digital age, businesses have transformed their operations from assets to customers. The banking sector is no exception.

Over the past decade, banks have slowly transformed their operations to adopt a customer-centric approach. Digital banking is helping large enterprises break through organisational barriers to develop new revenue streams. Banks engage with their customers on e-commerce portals, mobile apps, social media, and other digital platforms. Investment banks have also been able to leverage technology to build faster trading systems, automating tedious manual processes.

With customers on the move, banks have been strong-armed into developing digital models that cater to a new customer segment — the omni-digital user: a customer that interacts/engages only through digital channels.

Digital banking can be seen as a win-win for banks and customers. It offers the best of two worlds: a new customer experience (external) balanced by an efficient operating model (internal). A digital shift in customer behaviour is observed as a younger demographic form the core user base for digital banking. The rise of ‘omni-digital’ customers has led to diversification of digital banking services, ranging from cash management to merchant services. Value-added services are increasingly seen as a necessity along with simplification of core product portfolios.

While banks have changed their business approach, their core objective still remains to attain organisational agility. In the recent Digital Banking Report, banking executives define their greatest challenges in digital transformation: 39% identified their complex legacy IT environments as the most significant barrier; 31% identified conflicting priorities; 28% pointed towards lack of strategic vision by leadership; 24% cited recruitment challenges in finding the right employee

The customer-centric business approach has also led banks to rethink their digital infrastructure. Long-standing legacy systems are being tinkered with while customers continue to look for experiences that go beyond what legacy systems can deliver. Banks are inching towards addressing these challenges to ease the transition to a digital future. Latest technologies, including blockchain, in-memory processing, and artificial intelligence, are being employed towards this end.

The siloed nature of banks’ IT system and business process impedes development. Alternatively, banks can look at new channels to improve customer experience. For example, traditional banks such as Axa have bypassed their legacy system for the development of digital banking through mobile apps.

Factors for change

MGI’s Industry Digitisation Index takes a look at digitisation across sectors, combining ‘27 indicators to measure digital assets, digital usage, and digital workers’ for every sector. To progress in digital banking, organisations have to address the ‘hows’ rather than ‘whens’. The index looks at digitisation of:

• Assets, including infrastructure, connected machines, data, and data platforms

• Business operations, including processes, payment and business models, customer and supply chain interactions

• Workforce, including worker use of digital tools, digitally skilled workers and new digital jobs and roles

According to Deloitte Digital’s Digital Banking Maturity Study, PSD2 and FinTechs have increased market pressure on banks to adopt digitisation faster. The report classifies the EMEA regions banks into 4 categories based on digital maturity — Digital Champions, Smart Followers, Adopters and Latecomers. The scores were based on assessment of 826 functionalities of the banking sector which covers the entire digital customer journey.

A critical aspect to address is the potential for cyber-risk and the measures to be taken to protect customer data. Organisations have to build a culture wherein cyber security is incorporated as a norm across business processes. An end-to-end digitisation of workforce and technology is being recognised by banks for their success.

In this highly regulated sector, banks have to find innovative solutions to stay afloat or risk losing out to FinTechs and other players. The transition to an efficient digital environment would require balancing of multiple factors and continuous evaluation of risks, regulatory policies and customer experiences.

Organisations cannot overlook aspects of work culture, resource management and talent acquisition that are intrinsic to sustain digital transformation.

(The writer is Vice President – Digital, Maveric Systems)