Digital Banking Transformation Requires Speed and Scalability

Digital banking transformation requires banks and credit unions to rethink previous ideas around being flexible and being able to pivot quickly. Speed is just the beginning. The value of digital banking transformation also requires banking organizations to scale for growth.

To be future-ready, financial institutions need to be resilient. This includes having the ability to make decisions quickly, rapidly pivot during times of change, and be able to scale capacity to accommodate increases in demand with minimal impact to operations. To achieve this, organizations must be able to create collaborations with outside providers that can support both speed and scale.

Modern technologies can enable speed and scalability, but technology doesn’t necessarily result in the ability to be resilient. This requires executive management support and strategic priorities that allow the technology to be deployed correctly. In other words, people are still at the core of successful digital banking transformation. That said, technologies like cloud computing, data management, advanced analytics, machine learning, and cybersecurity can’t be ignored.

Speed Unlocks the Value of Digital Banking Transformation

To succeed, banks and credit unions must be able to digitally transform their organizations – constantly and quickly – to evolve business processes and operations that will improve customer experiences and reduce costs. Leadership needs the ability to exploit emerging business opportunities in an instant to deliver differentiated solutions at the pace the consumer demands.

By avoiding long decision cycles and traditional long-term implementation calendars, financial institutions can identify innovation gaps more quickly and get full value from tech investments over longer periods. More importantly, by hyper-charging an organization’s capacity to change, building blocks are created for process redesign and modular technology deployments that can stay on the cutting edge.

Power of Being Nimble:

In moments of incredible change, companies that are able to respond and pivot the fastest win.

According to McKinsey research, “In the past, when companies witnessed rising levels of uncertainty and volatility in their industry, a perfectly rational strategic response was to observe for a little while – letting others incur the costs of experimentation – and then move as the dust settled. Such an approach represented a bet on the company’s ability to ‘out-execute’ competitors.”

This strategy is sub-optimal in a world that changes quickly. In fact, McKinsey found that revenue growth for the fastest organizations is nearly twice that of companies that “played it safe” with average reactions to digital competition.

The reasons provided were that first movers and the very fastest followers develop a learning advantage, have access to early market growth, and can produce better margins. In fact, there is additional research that suggests that being late in adopting a digital business model is as bad as not starting the process.

When the right digital banking infrastructure is in place, and a financial institution has the culture and systems to leverage the capabilities it enables, it is possible to repurpose the infrastructure to meet unexpected demands and marketplace changes quickly. This includes maximizing a remote workforce and reimagining what banking can be in the future.

Most importantly, a digital banking infrastructure that is built for speed and scale also can create powerful customer experiences, digitizing the entire customer journey. Customers do not want digital versions of the manual, bureaucratic processes they had in the past. They want innovative products, insightful recommendations, and multichannel engagement in real-time.

Read More: 6 Digital Banking Transformation Trends for 2022

Delivering Digital Banking Solutions at Scale

Despite significant investment and focus, relatively few financial institutions have been able to fully deploy new digitally-enabled ways of working across their organizations. Many banks and credit unions are just coming to the realizations that digital banking transformation goes beyond new technological solutions. Internal processes and back-office operations must be rethought and simplified, data and insights must be democratized, and the way humans and machines interact must redeployed.

Digital banking transformation – designed correctly – must go beyond speed to also include scalability. Usually inferring the ability to grow quickly, scalability also needs to be able to handle unanticipated demand in an instant. An example was how banking was required to move from a standing start to fully operational with the offering of PPP loans. Outside the banking industry, oft-mentioned examples of scalability associated with the pandemic are Zoom, Amazon and Instacart.

Read More: 3 Ways Any Financial Institution Can Move with Fintech Speed

The objective of scalability is to maximize the efficiency of a new or existing business model for increases in demand. The ability to scale can be achieved internally, or with the assistance of a third-party solution provider. If you invest in extra capacity, this can result in underutilized resources. If you wait until demand increases, you may not be able to respond quickly enough and the cost of upgrades may be prohibitive. By partnering, the scalability can be achieved through collaboration.

But the devil is in the details. As demand increases, so does complexity. Financial institutions need scalability that supports increased complexity of processes, potential integration with new technologies, and new workflows. Multiply these dynamics by the number of channels and departments that must be supported and the equation becomes more challenging. Organizations must be able to support a somewhat undefined accelerated pace that allows your business to grow.

Where to Start

To maximize the potential of speed and scale, banks and credit unions should focus on making the changes that will have the greatest impact on these powerful dynamics. This usually requires a look within the back-office processes and procedures first. Organizations are usually best served by bringing all parties that will be impacted together and start with a blank sheet of paper. This is because it is almost impossible to rethink the future with two feet in the past.

Just as importantly, organizations should move from a product-centric perspective that values efficiency, to a customer-centric perspective that values engagement and experiences. This is what will truly help an organization achieve digital transformation at speed and scale.

More than ever, digital banking transformation is no longer optional – and the importance of being able to be nimble and have scalability has never been higher. To achieve the desired result requires that executive management leads from a united front supporting a digital-first culture. Buying modern technology is not enough.

By reimagining the business model and understanding the impact that digital banking transformation can have on customers, employees, and the future of the business, banks and credit unions can move closer to be future-ready in an increasingly competitive marketplace.

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