Digital transformation is a phrase that spans many industries but for financial institutions, it largely refers to the shift to online and mobile services—a transition that has been sped up by the COVID-19 pandemic.
The abrupt, forced shift to social distancing measures, bank closures and virtual services left many banks and credit unions scrambling to adopt the new technologies that made this transition possible. As consumer needs and wants pivoted, competition among financial institutions intensified and the need to adapt quickly became the norm—making digital transformation no longer an option but a means of survival.
Four out of five financial institutions believe that digitalization will fundamentally change banking and transform the industry’s competitive landscape; but conversely, only 57% have a digital strategy. And it’s not difficult to see why: digital transformation is difficult with nearly 70% of digital transformation attempts failing.
But while the road may be bumpy, banks must embrace the customer-centric digital transformation or risk being left behind as 79% of banking customers want their bank to offer more all-digital banking options in the future.
While organizational resistance and scalability issues are big obstacles for banks when chasing a digital transformation, the biggest barrier banks face is the legacy technology that many financial institutions still operate under, making both changing the existing IT architecture and implementing new systems an arduous and expensive process.
Reportedly, almost 50% of banks don’t upgrade outdated IT systems when they should, meaning the adoption of new technology is often postponed over concerns surrounding integration with core systems that have faced an array of functionality improvements over the years.
Artificial intelligence (AI) also has a major role to play. While AI in risk management is not new, AI as part of the customer-centric digital transformation strategy is still in its infancy. Some even say that the banking industry will only achieve digital transformation once AI is integrated into the systems that support both back-office and customer-facing functions, as this is how AI’s full capabilities can be truly leveraged.
For instance, AI can provide insight into changing customer behavior, market conditions and vulnerable business actions to avoid in the future. This data, and the answers it provides, presents financial institutions with greater opportunities for growth—a major boon as the landscape becomes increasingly competitive.
While the pandemic has changed the social and economic landscape, it has also provided the prime opportunity for businesses to scrutinize their digital transformation strategy, re-think how technology can help them navigate through the crisis, and adapt to the new business landscape.
If there is one thing the pandemic has shown us, it is that businesses should not only be proactive in times of uncertainty—they must also be predictive. While simply planning for and instituting steps toward digitalization isn’t necessarily a blueprint for success, businesses with pre-established plans are in a stronger position to withstand disruption and prosper.
For more information about implementing a flexible, secure and compliant digital strategy, contact us today.