Recently, I read a study from the research and advisory firm Gartner, in which chief information officers in the financial services industry predict that 45 percent of gross enterprise revenue will come from digital business products and services by 2020. That's only two years from now and frankly, I think the industry is farther off than that. To meet that prediction, financial institutions will need to embrace a digital-first mentality, and I’m not seeing enough of that shift in thinking. Don’t get me wrong, a shift is occurring—but not quickly enough. Competition from and partnerships with fintech firms are adding pressure to traditional banks, but digital transformation has a long way to go.
“CIOs will need to help their organizations change the basis of competition, create new markets and cross-industry boundaries by creating an industry vision for digital business in banking,” according to Gartner. Is the CIO in your organization driving digital transformation, and creating new markets and opportunities?
Before that can even start, a digital-first strategy must be embraced by the institution. Banking remains channel-centric, meaning that bankers tend to think in terms of channels, mediums and devices, so I’m afraid the industry has yet to adopt a digital-first methodology. The term ‘mobile first’ is used frequently, but the term is overused and shortsighted. Digital first, on the other hand, recognizes that the digital landscape will constantly evolve to meet the market's needs, and to keep in pace with emerging technology and market expectations.
Then there is the issue of culture. Digital transformation is not something that can be steered and driven within an organizational silo. It’s holistic in strategy and execution. Digital transformation must begin with an organizational philosophy that is embraced from the board down, and there should be an enterprise-wide agreement that such a transformation won’t happen overnight, but rather will evolve through a deliberate strategy. The good news is that most of us in the industry understand the underlying rationale to digitalization, and the benefits it brings to customer experience and the ability to drive bottom line revenue. Executive teams now fully comprehend the need to reduce friction in the overall banking experience, regardless of the pursued market segment.
In the ‘80s we all heard the call to emerge as “high tech, high touch” providers of financial services. Finally, this evolution has begun. We acquire, service, engage and retain customers through digitalization now, more than ever before. However, this progress toward a digital-first strategy is due to broad, inescapable cultural shifts and strong leadership, not a lone CIO with a vision.
A financial enterprise runs in a very dynamic environment. A digital-first approach can yield a framework for how financial institutions should evaluate strategy, and change the operational approach and culture of the bank. This framework includes organizing teams, creating customer-centric internal processes and building an experience with flexible, innovative technology. Simply understanding the value of digital transformation is not enough. We all need to see and feel the rubber hit the road. This can start with a very conscious shift in allocation of dollars to digital, and understanding that digital will make “traditional banking” better.
Digital should evolve as a philosophy, and its principles and insights should weave through all aspects of a financial institution. It should be the cord that ties together every retail or business banking experience, be it marketing or delivery. It is the DNA of the new banking experience. Digital is no longer just a channel or a series of tactics, and can have a profound impact on all stakeholders at a financial institution, beginning with its customers.