With digital banking transformation on the rise, financial organizations are incorporating robust tools and services. However, organizations make false moves by launching many digital initiatives together. This results in unsuccessful transformation initiatives due to lacking resources to compete with digital-native substitutes.
A successful digital transformation initiative needs numerous iterations and strategies to fulfill changing consumer and industry demands. Businesses must undertake digitization from the top-down approach by combining applications, digital systems, customer experience platforms, and infrastructure. Here are a few common challenges of digital transformation financial organizations must consider ensuring their efforts stay on track.
Social Media Communications Security and Other Security Issues at Scale
Like any other organization, the financial sector must communicate with its customers in the spaces where they spend time, which is social media. Therefore, businesses must ensure that social media accounts are protected. Deploying a central monitoring system to detect and avoid potential policy violations in all communications is essential. Implementing effective and user-friendly controls over social media communications is required during digital transformation in investment banking operations.
In addition to the security of social media channels, IT infrastructure security is one of the most critical challenges of commercial banking digital transformation. A typical financial organization deals with hundreds of systems and other networked devices. Hence, incorporating cloud, social and mobile platforms expands the attack surface considerably. At the same time, as a result of supply chain and cloud transition issues, the dissemination of hazards changes gradually.
Interestingly, the digital revolution in banking drives the need for tailored security and compliance solutions. These solutions scale to any size covering everything from automated updates to cloud enablement.
Collapsing Silos and Risk Mitigation
Financial organizations have substantially worked in silos with multiple separate divisions adhering to their tools and goals. This leads to poor development, minimal scalability, and decelerated customer satisfaction. With a surge in digital banking, there is an establishment of a collated platform that combines customer data and integrates existing independent financial systems.
This solution diminishes all the silos-related pitfalls that might have led to poor cooperation and consistency of policies jeopardizing compliance and security. Businesses must establish and implement integrated solutions to benefit the banking forefront and the parties involved.
Moving Distant from Legacy Applications
Transitioning from outdated and disorganized financial systems to robust, new digital systems is difficult. As per a recent report by Accenture, “The great cloud mainframe migration: what banks need to know,”
- 82% of businesses aim to move more than half of their mainframe workloads to the cloud, while 22% aim to move more than three-quarters of their mainframe in the next two to five years.
- 91% of banks reported that the budget for mainframe maintenance had been maximized over the past years.
- 9% of them own mainframe systems that are 21 to 30 years old, 27% have 11 to 20 years old systems, and 58% have 5 to 10 years old systems.
Hence, financial organizations must acquire applications, custom processes, system connections, security, and maintenance before transforming.
Additionally, businesses must update the back office technology since legacy technology underperforms in the current digital environment. If companies want to get the most out of their budget, they must invest in a dedicated training and education schedule for the employees.
Daunting Cloud and Aiming at Less Jolting Priorities
Digital transformation necessitates agility. Cloud-based technologies allow businesses to try new operations to see if they progress while also allowing them to iterate when they don’t rapidly. With a few financial institutions utilizing and relying on physical services, they encounter a substantial increase in costs. This happens when businesses have to scale up the usage and volume of current digital services forcing them to continue investing in physical stores as they grow.
Popular cloud computing providers with flexible data plans enable businesses to rapidly scale new services and experiences that can shift based on customer use. Transitioning to complete and flexible cloud-based services will allow companies to achieve this solution faster than adhering to slower and more expensive on-premises hosting solutions.
Furthermore, to iterate on existing and building new experiences, businesses need to map them to the customer experience (CX) journey and ensure consistency across all the touchpoints.
As per a recent report by Statista, “Digital transformation spending worldwide 2017-2026”, in 2026, digital transformation spending is anticipated to reach USD 3.4 trillion globally. With such exorbitant costs, businesses can recruit all the help required to initiate digital transformation initiatives internally. However, this is not as simple for a majority of financial institutions. While most banks are deliberating how to effectively manage the limited sources to offer the value and experiences customers expect, this is not achievable when done solo.
Businesses must look for partnerships to help them create and maintain adequate solutions or offer commercial solutions worthy of integration.
A successful collaboration can actively diminish pain points from high-friction aspects of the customer journey. Digital transformations allow customers to quickly connect with their accounts increasing the likeability of funding their accounts.
Digital or no Digital: The Dilemma
The broad availability of digital banking solutions has addressed numerous customer issues related to financial transactions at a physical branch. However, one of the critical banking challenges is to find an appropriate medium that fulfills the customer requirements of the customers and incurs the opportunities confronting the financial organizations. Customers utilize devices to check their account balance; some use a computer, while some like the convenience of completing a quick loan application online.
Businesses must understand that some customers still prefer to conduct a transaction or, perhaps, prefer to communicate major financial issues in person. Digital technology successfully augments in-person interactions. Hence, financial organizations must overcome the challenges of digitization to accelerate customer centricity and the proportion of digital wallets.
Addressing these challenges will allow businesses to offer thorough, transparent security to their customer and end-users. Banks must research multiple methods to improve their services and establish beneficial manual connections with the customers in the areas where they perceive challenges allowing businesses to win customer trust.