Today, chief executives in financial companies face several challenges. One of the most essential aspects refers to tech evolution. Banks have to work hard to remain competitive in the modern market.
For example, did you know that FinTech startups are the most popular institutions in terms of personal loans now? In 2018, they controlled 38% of the market compared to 28% related to banks, 21% of credit unions, and 13% of traditional finance groups. Yes, it’s only about loans.
But the trend looks clear – innovative small FinTech companies tend to attract more and more customers. Success stories almost always include a customer-centric strategy, omnichannel presence, mobile solutions, and new technologies.
In this case, CIOs of traditional banks would agree that their enterprises have to do something to remain competitive. For 10 years of work with customers from the finance industry, we at Diceus have seen a lot. Today, we have a clear vision of how banks should position themselves to keep the pace set by startups. This vision is highly based on CIOs’ responsibilities.
In the article, we’re to unveil the most crucial steps a chief manager should perform to drive the bank’s success. Mostly, the concept is based on adopting new technologies and managing the existing sets. Let’s go!
Understanding CIOs and their Role
Firstly, it’s important to clearly understand the role and responsibilities of CIOs in banks. Jeff Bittner from Exit Technologies thinks that a CIO is a «technology leader» who «have to understand what the technologies can do and how they … impact the business». Rod De Vos from Resolute Technology Solutions adds that a CIO is a «leader who … turn business … challenges into solutions enabled by tech».
Within the last years, CIOs and CTOs have become more important for almost all organizations, including banks. From regular executors, they moved to core strategists responsible for growth. Today, a CIO is a board member whose voice explains and demystifies tangled tech ideas that are too complicated for other executives. Deloitte has a survey about CIOs where respondents focus on transforming operations and driving growth.
According to this study, there are two modern roles: a change instigator and a business co-creator. However, their shares are 9% and 36%, respectively, while purely operation-focused CIOs make up 55%. Needless to say that this role is likely to become obsolete. Respectively, the key responsibilities of a next-gen CIO in the bank include the following:
- Be responsible for organizational changes. Help the company to evolve and become more competitive by delivering new technologies.
- Create professional teams. Oversight HR processes to find the best talents for each position in the IT department and other related structures.
- Handle risk management and security. Analyze new and existing technologies to make them safe for both internal workers and end users.
- Manage regulative and legal aspects. Think about innovations in the context of governmental and industry regulations.
- Share and spread the business goals. Deliver his or her vision to other executives, as well as help IT employees to understand corporate values.
As you can see, there are a lot of tasks but we want to focus on one particular aspect – technology management. CIOs should remember about IT hardware purchases, the management of departments, and IT recruitment. But the most important processes now revolve around technologies. Mainly, it’s because of the ongoing evolution.
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Digital Transformation as a Core Challenge for Banks
The influence of technology is undeniable. It disrupts entire industries and changes other markets beyond recognition. Another survey conducted by Cognizant in 2016, reveals that 45% of CIOs think that they lead the digital transformation in their banks. 70% of respondents consider old-fashioned organizational culture as the main hurdle.
Among major reasons of the transformation, banking information officers named the next ones:
- Constantly rising pace of tech progress.
- The need in customer-centric strategies.
- The importance of all existing channels of connection with customers.
- An end-to-end digitization focused on higher efficiency.
- General demand for better services provided to clients.
It’s important! To fully understand how a modern banking CIO can enable the digital growth of the company, we suggest exploring four key imperatives. They’re identified by Cognizant and carefully analyzed by our specialists.
If you need more comprehensive and personalized analysis for your bank, use our business intelligence offers.
Imperative #1 – Build Better Customer Experience
New players brought new technologies and started the new customer-centric era. Using startup services, people can now enjoy seamless mobile interfaces, web apps, and branchless interaction. To remain competitive, banks have to set their own services focused on customer satisfaction. Obviously, it’s possible when a CIO pushes the right technologies.
This imperative is the most comprehensive as it includes everything, literally. From quicker processing of requests to the more beautiful design of applications, each decision that boosts your customer experience is valuable. Further, we will talk more about how banking CIOs manage technological portfolios.
Imperative #2 – Enable Omnichannel Interaction
A regular modern bank client wants to get access to the services 24/7 regardless of the location. Thus, equal development of online, mobile, and social media channels is required. Phone calls and branches remain important for clients. A lot of startups promote the idea of mobile-only banking. However, traditional customers require physical interaction channel.
For digital CIOs, we can suggest these ideas for omnichannel development:
- Data science tricks to realize the best channel for each client. You can utilize Big Data analysis to find out which approaches customers use to reach your bank. Some uses prefer phone calls, other love chatting in messengers, and so on.
- Equal services provided via all channels. It’s crucial to provide the same options for all customers. Regardless of the channel (voice, text, social media, personal interaction, etc.), users should get the full package of services.
- Flexible tech architecture with quick adoption of changes. All the connection channels must work seamlessly. For this, you want to integrate a reliable yet scalable tech basement. Remember that the system should be able to handle high load.
- Standards for business processes across all channels. Similarly to equal opportunities for users, all the channels should come with equal processes. The same brand voice, similar approaches to data collection, similar upgrades – use these points.
Imperative #3 – Transform Back-Office Parts
Surprisingly but even fresh innovative firms rarely go beyond front-end digitization. All the core banking functions and services like crediting, depositing, and money transfers remain the same. They’re based on traditional architecture. Among banks, only 12% of CIOs are considering comprehensive digitization that would include transformational, strategical, and tactical changes of back-office.
If you want to be the leader, consider ultimate evolution that should include the following directions:
- Interconnected data-based front- and back-office systems. Successful banks may use different solutions but they connect them to get a single banking ecosystem.
- Modular architecture and organization. Modern solutions include several independent tools for each functional area: CRM, ERP, accounting, data gathering, reporting, etc.
- New tools and tech, e.g. RPA, blockchain or AI. Innovations are crucial for progress. Pay attention to automated chatbots, AI-driven analytical tools, and decentralized apps.
- Open APIs for global integration. Today, open banking initiatives are obligatory for EU companies and highly suggested for other firms.
Imperative #4 – Deliver Digital Tools for Employees
Not only customers should be the main focus of banks today. So far as people aren’t ready to rely on self-serve and automated tools, they still need a human-based experience. Often, they require instant and personalized help. For this, a CIO should foresee reliable digital tools for bank employees who can use them to meet the customers’ demands.
The best approach is based on mixed human and digital interaction. Banks can integrate video chats with real operators and tailored feedback system. Or they can add a smile feature of a voice call from the mobile app directly. It’s pretty simple to implement but require proper planning.
The Technique of Technological Portfolio
Well, all the previous guides and suggestions were helpful for a general understanding. But one important question remains: how to manage the portfolio correctly? To answer, we should grasp the concept, firstly.
Generally, IT portfolio management is a set of organizational activities related to various assets of the local IT department. Assets may include ideas, projects, services, and exact tools. The technique aims at efficient control and evaluation of existing and/or planned stuff, profitability boost, and overall growth of the department and the company.
The most comprehensive approach to management includes three portfolio types:
- Application. Analysis of integrated systems and technologies based on the direct profitability/ROI and non-tangible things like experience or familiarity.
- Infrastructure. Management of processes, inventory, data, human resources, etc. Infrastructure is crucial to implement innovations.
- Project. Research of issues related to processes of re-engineering, structural organization, acquisitions, regulatory changes, etc.
As we’re interested in technological portfolios for banking CIOs, the first two types are the most relevant. Project-oriented management can be delegated to subordinates but a CIO should perform the global control, too.
Technological Portfolio for Banks
Let’s accept the fact: not all the technologies are valuable. Even less of them can benefit your bank. For this, skilled CIOs should utilize the technique of technological portfolio to determine the potential attractiveness and profitability of new products/tools. Among key criteria, there are points like tech development, its dissemination, use cases in the chosen sphere, versatility, and costs.
For banking CIOs, we can suggest a simple step-by-step guide on tech portfolio analysis:
- Group the services of your bank by technology sectors.
- Study the technology and define its attractiveness for your firm.
- Try to forecast how the implementation of this tech can affect the bank.
- Compare the efficiency of current tech with the planned innovations.
- Estimate risks, especially ones related to competitors.
- Evaluate how specific parts of the technology can be adopted in your bank.
Attractiveness is the main criteria. Good technologies reduce expenses and/or improve the quality of banking services. With this idea in mind, CIOs can build large portfolios with different suggestions for different tech: invest in; research more; deny; replace; and so on.
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Other Ways to Evolve
Remember the third imperative for banking CIOs? We talk about changing back-office parts. While startups introduce new ways of communication and personalized offers, the basics remain the same. In this case, banks can lead the digital transformation era by deploying innovations in the core systems and services. A CIO who can recognize the best technologies for back-end solutions is definitely a good CIO.
Here, we also have a few tips:
- Agree on the pace of change. Each sector of the bank should receive new technologies right when it needs them. It’s suggested to start with IT department that should feature the quickest changes and proceed with operations. After initial implementation, a CIO also should remember about the different pace of old and new systems.
- Decouple old and new. Respectively, it’s not recommended to mix things up. Startup-grade innovations both in tech and culture should exist independently to not disrupt ongoing processes. CIOs need great mastery in management to seamlessly integrate new stuff while maintaining existing solutions.
- Establish new models. Innovative tech and processes require innovative operating models integrated into each part of the bank. The best way is to think about them before actual implementation. For this, banks can seek the help of technology partners who can analyze, develop, and integrate new tech.
Outsourcing is one of a viable cooperation models. You can find more about this approach and our outsourcing offers in the dedicated article.
CIOs as Collaborators and Technology Seekers
Apart from just technological aspect, CIOs and other C-grade managers should care about dozens of other things, from corporate culture to employees’ satisfaction. And it may be really difficult to handle.
Cathy Bessant, CTO and COO at Bank of America, talked to Forbes about the challenges she faces. Managing the giant team of 95,000 workers, Bessant mentioned that she had to be able to count on each employee. Moreover, she insisted on the importance of internal links between departments. In this case, IT staff can realize business nuances while entrepreneurs and managers understand how technologies work. Such an approach facilitates the global bank’s development as each part of the company knows where they’re going.
Let’s summarize by returning to the beginning. In the era when banks face numerous threats from FinTech startups based on innovations, it’s dangerous to refuse changes. CIOs are the first people who should analyze, compare, and implement new technologies or strategies. They can act as competitors to new market players. But they also can be collaborative and explore the opportunities to work together with startups. Hence, a professional CIO should constantly scan the horizon, find the best technologies, and integrate them into the bank.
It all may look too complicated even for top managers. If you need dedicated technology partners to facilitate certain business process of your internal IT department, we’re here to help. We have a rich experience in the finance industry. Our team handles analysis, FinTech development, testing, re-engineering, data migration, integration, and support. Just reach us.