Why are financial services struggling with digital transformation?

Posted by Kristina King 08.06.21

Is your organisation struggling with Digital Transformation?

Customers are demanding a better experience when it comes to their financial services.

They want them to be personalised, relevant, faster, slicker, optimised, more convenient. Quite the list.

But while customer demands are driving digital transformation, for many financial organisations the move to a more digital world has been stalled.

The desire is there…and clearly, the need is there…so what’s holding them back then?

What are the challenges of Digital Transformation for financial services organisations?

We know some of the common fears FSOs have when it comes to transforming how they operate include:

  • Constraints of legacy systems
  • Time-consuming
  • Costly
  • Too difficult a project
  • Fears about compliance
  • Day-to-day being affected
  • No buy-in from senior management about the necessity of the project

We hear them time and time again – and we understand they are legitimate concerns.

We spoke to one bank at the beginning of the pandemic, who wanted to move its call centre operations to home working and had given themselves timescales of about two years to do so, just to address the types of worries above.

When Covid hit, that change happened within a matter of weeks.  The transformation happened because it was a different level of focus and the business ultimately needed to do this in order to survive. That’s just one small example, we know, but it shows what can be done when something becomes a priority.

So, let’s look at some of the concerns in more detail.

Legacy systems

It goes without saying that legacy systems developed years, sometimes decades ago, are a barrier when it comes to moving with the times. They are inefficient and costly, but they also seem complex and difficult to decommission. 

Organisations say that business processes and rules using these systems have become an integral part of how they work.

But digital transformation is not just about coming off a platform and moving data. It’s also about reviewing business processes as part of the transformation.

Modern workplace

Moving to a modern workplace is about doing a gap analysis and seeing how to work better and smarter than before.  You don’t need to move processes if they, too, are out of date.

Then there’s the issue of investment- how much will this program actually cost us? Is it really worth it? “If it ain’t broke, don’t fix it” right?

The reality is that, often, financial organisations haven’t been able to identify what the Return on Investment will be– and that is a very difficult thing to do.

Costs involved

It is a perceived sense of cost but think about it- there’s less data storage, you’re removing the cost of running and maintaining legacy systems, there’s the reduced costs of office space as a result of the new business operating model where you do not need central locations.

There’s even the monetary gain from increased productivity from staff, and the customer retention due to the faster/slicker/more personalised services.

It’s about thinking long-term and the financial benefits from an investment now.

Compliance fears

We’re in the business of RegTech so we know that financial institutions, by their very nature, tend to be risk-averse. But, in reality, a fear of a lack of compliance moving to a new system is a fear of change.

It’s a fear that the way they have been doing things for a long time is going to change and something is going to get missed because of that. “But we’ve always done it that way!

But new technology can not only handle compliance, but improve it massively. Our software automates the data governance that is required by your first line of defence and flags and quantifies actionable key risks indicators. So, this streamlines the process of compliance to meet regulatory standards– making it much easier than ever before.

How to get buy-in?

Lastly, let’s address the issue of buy-in. Whether that is user buy-in or senior management buy-in, both can be hard to crack!

So often user adoption fails because of a lack of planning and hoping users will just automatically embrace any new system. Wrong.

People don’t just “get it.” So, what needs to happen? Well, it’s about working with the business from the outset, engaging them, lauding the champions and advocates who welcome new technology. If you enable them, then you’re enabling that message to spread company-wide.

And for senior buy-in, it’s an education piece. Understanding that to develop new products, to help know our customer, to make us more relevant in the market, and to compete against our competitors, we need to make the change. (And that message needs to be spread across board level.)

In short, financial organisations must value their data and know it’s the lifeblood to keeping them successful and enabling them to grow.

Digital Transformation can seem overwhelming or years away, but the reality is that the likes of challenger banks are already breaking through because of a strong use of data and customer-focus, such as open banking.

If you have any of the above concerns, or any other queries about Digital Transformation, why not join our next webinar entitled, “Why Digital Transformation doesn’t have to break the bank” taking place on 22nd July.

Register for the webinar via the form below.

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