What does “going digital” actually mean? It’s a buzz phrase companies everywhere are using, but how should it be defined? Quite simply, it means implementing a comprehensive digital strategy that replaces outdated business processes and tools. It means responding to shifting expectations in the wake of new experiences by developing a digital operating model that can (and will) evolve as more technologies and innovations become available. This level of transformation is paramount for financial firms everywhere.
A successful digital transformation project will help your institution to remain relevant and competitive in an industry that’s changing rapidly. It will equip and position you better to offer the solutions and experience consumers expect, incorporating mobile, cloud and big data technologies.
According to a survey from eConsultancy, many retail financial institutions believe their strongest opportunities will come from providing consumers with increasingly personalized and relevant experiences. Inasmuch, banks and credit unions must first understand and appreciate how digital transformation can enable new levels of personalization. Consumers evaluate experiences on three elements; ease of use, effectiveness and emotional resonance — what can also be called “Digital Emotionally Empathetic Experiences or “Digital E3.” The first two of these are increasingly becoming table stakes, while the third component — emotional resonance — is the most important to creating a long-term competitive advantage. Unfortunately, this is something that banking providers have typically struggled with.
While most financial institutions accept that they must pursue a digital strategy — and do so aggressively — many don’t know where they should start or how to begin. Here are seven steps banks and credit unions can use to outline a roadmap for successful digital transformation.
1. Define “Digital”
First, a company should have a clear definition of what “digital” means to them. The somewhat vague word can refer to a range of technological updates or processes. C-level leaders must accept that “digital transformation” is a complex process that can — and will — consist of several key points, and that a project with this sort of scope and magnitude will likely entail everything from products to customer experience design. To be successful, it is critical that the institution’s leadership agree as to what they expect to get out of the transformation before initiating the project. The new business model will be a Digital Operating Model (DOM) and will evolve in many stages.
2. Understand the Financial Impact
Particularly for financial services firms, an understanding of how a digital transformation will likely impact the overall business model is necessary before undergoing the process. By having a general understanding of how your organization will (1) save money and (2) improve its performance, you will be able to begin the evolutionary process. This includes considering factors such as customer relationships, changes employees will need to make, impacts on business partners, how customer lifetime value will be calculated, and the overall journey consumers will take as they engage with your institution across different channels.
3. Build Consensus and Get Internal Buy-In
Before you start replacing outmoded tech with new upgrades and innovations, you need to get everyone’s support, because digital transformation will affect all aspects of the organization — lending, risk, compliance, HR, operations, sales, marketing and of course IT. You will need to everyone’s confirmation and confidence from across the C-suite to successfully drive your digital transformation process. This will help ensure alignment, and sets the stage for a steady stream of communications to all employees about the nature and importance of the project. It’s such a massive undertaking that you should consider handling it in almost the same way you would a core conversion.
4. Develop a Holistic Approach
Using a holistic approach — where you adopt a birds-eye view encompassing all processes, data, applications and infrastructure — can be helpful in transforming a business. When “going digital,” financial institutions should be prepared to undergo major, fundamental changes. Trying to bolt on widgets here and there or tackle the project in isolated chunks could create major issues down the road. Many banks and credit unions are still using ancient systems and models from the 1980s, and there’s no sense automating poorly designed, inefficient or outdated processes. Be ready to retool everything.
5. Ensure Change Management Capability
Finally, any change and automated processes update should have a robust change management capability built in. This involves engaging all employees ahead of a program, in order to explain the relevance and importance of the change, answer all concerns and queries, and work with each individual to identify new priorities and address important needs. It also means having a clear overview of what your robust change management capabilities are, something all employees need to be informed of.
6. Ensure Integration
Some digital platforms are “plug and play” (e.g., third-party payment providers, marketing tools, data analytics solutions, etc.), but you need to ensure that your transformation is integrated — both the team and the overall process. Your platform and service providers increasingly like to say they “do it all,” but with digital transformation happening so rapidly, you have to be very cautious and skeptical. Look at your entire platform and engage your broader team to make sure each player knows what their job is so they can excel.