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Digital Transformation in Banking: A Strategic Priority in the 2020s

Digital Transformation in Banking: A Strategic Priority in the 2020s

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By WalkMe Team

Digital transformation in banking has been a topic in the financial sector for several years, but in 2020, it has topped agendas around the globe.

This shift in priority is due, in no small part, to the arrival of COVID-19, which has accelerated digital transformation trends in virtually every sector.

Banks and traditional financial services companies have often been slow to adapt to the digital revolution, for reasons which we’ll look at later. But banks can no longer afford to wait – digital is the future of banking, and that future has already arrived.

Why banks are considering digital transformation

Here are just a few of the many reasons why banks are considering investing in digitization, digital adoption, and digital transformation:

Costs, efficiency, and performance. An organization’s technological maturity directly correlates with its operational efficiency. More digitally mature organizations operate more efficiently and maintain lower overheads. In contrast, organizations that continue to use legacy systems underperform against competitors. For instance, BCG has suggested that, with the proper execution, digital initiatives can help financial institutions cut costs by as much as 80%.

Convenience. While back-end performance improvements may drive technology adoption for many companies, consumers are often more interested in benefits such as convenience and ease of use. Benefits such as these, combined with excellent user experiences, have driven many younger generations to adopt financial applications such as Cash App and Venmo – or to sign up with “challenger banks” such as Chime, a digital bank with zero brick-and-mortar locations.

Credit: American Bankers Association

Safety. Before 2020, digital wallets suffered from slow growth, particularly in Western countries. After COVID-19, however, public health became a top concern for people around the world. Safety concerns have been a major driver of growth for contactless payments, e-services, and many other digital trends. Though the growth of certain trends may slow after the pandemic, some are here to stay.

Competitive advantages. Deloitte, among others, have pointed out that digital transformation can provide a significant advantage to financial services companies. While these new technologies add complexity and challenges to banking and financial services, they also enable financial institutions to innovate, capitalize on, and deliver new forms of value to their customers.

In short, digital innovation can not only enhance an institution’s competitive position, forward-thinking companies can actually leverage technology to disrupt their space and become industry leaders.

Most importantly, however, digital transformation is not just advantageous for banks, it is necessary. With the rise of the digital economy, digitally native consumers, and digital challenger banks, digital transformation has become a strategic imperative.

Challenges to digital transformation in banking

Digital transformation is not without its challenges, however. And those challenges have, in many cases, deterred many financial firms from embarking on a digital transformation journey.

In addition to the normal challenges associated with digital transformation, such as software training or resistance to change, financial institutions face a number of other hurdles, such as:

Complexity and organizational change. While BCG suggested that banks and financial institutions can dramatically cut costs and improve operational efficiency, they acknowledge that the road is not easy. To successfully implement change, financial institutions must find a way to overhaul complex business models, legacy IT systems, and entrenched ways of working. 

Cybersecurity and regulations. The need for cybersecurity grows in tandem with an organization’s digital maturity. Financial institutions that want to embrace digital transformation, therefore, must not only invest in new security measures, must also ensure that they are maintaining full compliance with relevant cybersecurity regulations.

Difficulty understanding the potential of digital transformation. Today’s innovators and early adopters often grow at exponential or parabolic rates, which is why their products and services are so disruptive. Since most of us don’t operate at the leading edge of innovation, it can be difficult to fully grasp the significance of many new technology trends. Among other things, this can make it difficult to demonstrate ROI, rationalize digital transformation investments, and predict where the financial sector is headed.

Overcoming challenges such as these is certainly not easy. But it is possible – and necessary – for institutions that want to stay profitable, compete, or even lead in the digital age.

Examples of banks going digital

To better highlight the value of digital transformation in banking, let’s take a look at a few examples of banks that have successfully embarked on the journey to digital transformation.

Royal Bank of Canada

After the Royal Bank of Canada determined that they needed to modernize their customer experience, they upgraded their existing software tools. They then used the WalkMe Digital Adoption Platform (DAP) to streamline onboarding, training, and change management.

During this process, the coronavirus pandemic spread across the globe, vastly accelerating the need for a remote onboarding and training solution. 

The Royal Bank of Canada was not only able to use WalkMe to improve employee productivity remotely, they also used the DAP to automate technical and client support issues as they migrated to the bank’s new portfolio management app.

JP Morgan Chase

JP Morgan Chase has not always been a fan of digital currencies, bitcoin in particular. 

However, in 2020, they reversed their assessment not only of bitcoin, but of digital currencies in general. Towards the end of October, they announced that their new digital coin, the JPM coin, would be used commercially for the first time this week.

Credit: JP Morgan

Analysts have long recognized the potential commercial value of blockchain technology, which can, among other things, make transactions faster, more secure, and more efficient. 

By choosing to become an innovator and an early adopter of this technology, JP Morgan Chase stands a much better chance of becoming a digital leader in the financial sector.

DBS Bank

DBS Bank recognized that digital transformation doesn’t just mean building a new website or putting on “digital lipstick,” as their CIO said in an interview with McKinsey.

Instead, digital transformation means becoming digital to the core, pushing customer-journey thinking throughout the organization, and modernizing the organization’s culture. 

For five years, DBS built out a set of core systems that would act as a foundation for their future efforts. Only with those systems in place could DBS become agile enough to innovate and move quickly at scale. 

DBS Bank’s digital transformation was a transformation in the truest sense of the word. It required significant organizational transformation and sustained, but it was worth the investment, resulting in improved speed to market, scalability, and experimentation.

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WalkMe Team
WalkMe pioneered the Digital Adoption Platform (DAP) for organizations to utilize the full potential of their digital assets. Using artificial intelligence, machine learning and contextual guidance, WalkMe adds a dynamic user interface layer to raise the digital literacy of all users.