The age of traditional banks is rapidly drawing to a close. High-tech-resistant and paper-reliant brick-and-mortar institutions live on borrowed time. Why? The dynamic digitalization of most spheres of our lives spells the demise of businesses that ignore the current civilizational trends.
Modern people use state-of-the-art technologies and devices to study, work, shop, and have fun. So, there is no reason why getting financial services should be treated otherwise. They want to be able to open an account, make payments, manage their finances, and do other operations via their gizmos wherever they are and whenever they find convenient. Given the ubiquity of mobile devices, digital transformation for banks is not an option but a necessity.
Like any other revolutionary endeavor, bank digital transformation isn’t that easy. The successful outcome of the process crucially depends on a well-thought-out digital banking transformation strategy. While mapping out this digital transformation strategy for banks, it is essential to be aware of the obstacles that organizations in the industry are likely to encounter.
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Challenges of digital transformation in banking
As a seasoned vendor specializing in developing software products for banks and providing banking digital transformation services, DICEUS knows this domain inside out and realizes well the pitfalls and bottlenecks that await financial institutions in the process of digital banking transformation.
Internal resistance
The financial realm is a very conservative one. Whatever happens around them, many decision-makers in the niche prefer to stick to old-school practices and time-honored workflows. Thus, the organizational culture they maintain poses a threat to any innovation and leaves them behind more far-sighted competitors.
CEOs have to realize that digital transformation in the bank pipeline is the imperative of our time, dictated by the demand of the clientele, whether they like it or not. When this realization comes home to them, they should reconsider their lukewarm or outwardly negative attitude to all initiatives in the field of digital transformation. Their ability to make changes in their stride will eventually create a comprehensive buy-in among the organization’s personnel (both tech and non-tech employees on all levels) and trigger the fast-paced digital switchover.
Lack of digital skills
This is not about finding high-profile experts in digital transformation for banking since the modern IT outsourcing market offers a wide choice of proficient vendors in the sector. We mean substandard competence of the workforce that is going to handle various digitalized shop floor processes.
At first sight, it may seem incredible that, in our IT-driven age, some people may be technologically crippled or manifest a lack of enthusiasm for harnessing software products. Yet, we should remember that using mobile apps and playing computer games, which many of us enjoy, is quite different from leveraging sophisticated professional solutions banks rely on in their routine.
To enable digital transformation, financial institutions should switch to continuous learning mode and encourage the personnel to master new skills and software types. After all, going digital isn’t totally about technology but rather about experience. Awareness, knowledge sharing, and in-job training are the key elements that will help seamlessly implement your bank’s digital transformation strategy.
Legacy solutions and infrastructure
Even the most stick-in-the-mud organizations can’t do without some sort of IT infrastructure. Yet, most on-premises systems turn out to be cumbersome, inefficient, functionally limited, and expensive in the upkeep. The databases they use tend to be siloed structures that prevent any exchange of information between separate departments, to say nothing of bank branches located far from each other. Moreover, attempts to upgrade legacy systems or integrate them with novel software are mostly doomed to defeat, which significantly hamstrings such an environment’s flexibility and growth potential.
The only way to overcome legacy systems’ siloed and obsolete nature is to hydrate the cloud. By migrating your data and infrastructure to the cloud, you will pave the way to creating a robust and cost-effective IT system that will meet all your requirements and can be upscaled when necessary.
Rapid technological advancements
The contemporary digital landscape is extremely volatile, and innovation cycles are becoming ever shorter. A tool or a framework that was disruptive know-how only yesterday, a couple of months later, is ousted by a newer technology that becomes all the rage. For a brief spell. Naturally, financial institutions should take pains to stay abreast of the latest trends in the niche and introduce changes into their digital environment as soon as they appear and prove their efficiency.
Security and compliance considerations
Possible cyber attacks and potential data leakages are among the top digital transformation risks in banking. When onboarding digitalization on a broad scale, financial organizations should take utmost care to protect their customers’ financial and personal data and rule out unauthorized access to the system. The must-have measures to do that include data encryption, multi-factor user authentication, regular vulnerability assessment checks, penetration tests, etc.
Besides, banks often struggle with observing regulatory compliance in their industry. Legislation of this kind tends to lag behind the more dynamic progress of technologies that frequently remain uncovered by the existing laws and thus stay in the legal grey zone.
Budget burden
Embracing digital innovation is a big-ticket item in any field, and in banking, it requires capital investment above the average. The substantial sum you will have to allocate for it can become enormous if the digital switchover involves some cutting-edge technologies, like big data, artificial intelligence, machine learning, blockchain, and more. However, the expenses will eventually pay off when your innovation-powered organization attracts more customers, optimizes its workflow, and reduces expenditures on legacy infrastructure maintenance.
Benefits of digital transformation in banking
Having delivered multiple fintech products, we know the advantages digital transformation can bring to banks and financial organizations.
About DICEUS
Driving digital transformation in banking: How DICEUS can help
We offer two basic concepts that can help your financial institution embrace digitalization and enter the digital banking market.
By opting for our solution, you can smoothly and incrementally migrate all professional legacy products, databases, and components to a new target environment and obtain a highly adaptable, scalable, and survivable IT system to let you excel in the pipeline tasks your organization fulfills.
Our banking digital transformation services
Drawing a bottom line
In conditions of accelerated technical progress, the vital importance of digital transformation is evident to organizations across all industries, and the banking sector is not an exception. By going digital, financial institutions will enter the digital banking market, cut down on operational expenditures, automate their pipeline, improve risk management, step up data analytics, increase competitiveness, and augment customer experience by personalizing their services.
However, the successful digital switchover in banking faces several challenges. The most serious ones are the considerable cost of implementation, the internal resistance of stakeholders, the lack of digital competence among personnel, outdated software banks currently use, the rapid pace of IT advancements, and formidable security threats.
You can essentially mitigate these challenges by hiring a seasoned team of IT professionals who will perform your bank’s digital transformation, enabling it to stay abreast of the current trends in the industry and taking its efficiency to a new level.
FAQ
What is digital transformation in banking?
This is a complex of measures aimed at introducing high-tech initiatives and products in all areas of banking operations. The major outcome is the creation of a state-of-the-art digital ecosystem comprising a network of digital platforms, channels, portals, apps, and tools that will provide a seamless banking experience for the clientele and satisfy all their consumer needs in this domain.
What is digital finance transformation?
Digital finance transformation boils down to modernizing financial services to make them more efficient and accessible. It covers all high-tech innovations that can enhance customer experience in the niche, including mobile banking, digital investment companies, digital payments, paperless transactions, blockchain solutions, AI-powered products, and more.
How banking digital transformation is affecting bank branches?
Any brick-and-mortar outlets will see the diminishing of their relevance as customers increasingly embrace self-servicing and digital interaction with financial institutions. However, bank branches will still exist as primary venues for providing localized and personalized services, such as being a delivery point of financial products (like foreign currency), a place for furnishing detailed information on the scope of services offered by the bank, a channel for distributing product packs (for instance, mobile phones with bank apps installed), etc.
