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Digitalizing a business that offers traditional Banking and Finance Services (BFS) can be challenging but scaling those digital initiatives is a much more tangled process. Even today, the discussion around ‘Digital Transformation in Banking and Finance sector’ is never complete without someone mentioning the undeniable security risks. Hence, introducing digitalization to a business operation or service requires a strategy that goes beyond implementation and includes the scaling possibilities too.
In our previous article, we have discussed how to scale a digital retail business and we intend to scrutinize as many industry verticals as possible, discuss the hardships of scaling their digital initiatives and ways to get through.
Irrespective of the industry, the common mistake every digital aspirant does is choosing the wrong DT delivery model. Selecting a random model off book or going after a successful company’s model in the name of inspiration can turn your transformation journey into a slaughter ground of your ideas. The DT delivery model should be selected based on digital fluency, maturity, and business objectives. Although we strongly believe in the power of a tailored transformation approach, every digital journey can be categorized as one of the following 3 models.
- Digital as Business-as-Usual
- Digital as a new line of Business
- The Digital-native Approach
In Digital as BAU approach, the bank will continue to operate with the same processes and governance models with the newly identified and applied Digital Strategy. This usually becomes the responsibility of one or few identified executive leaders with the help of an extended team/workforce. On the pro side, these digital initiatives are smaller in size yet implemented faster and they face lesser resistance from the inside. But, if it is a product-led organization, there will be very few scaling opportunities for such initiatives. When the digital journey started as a new line of business, this usually means the bank is creating a new digital division for the services and it will most likely have a dedicated executive leader to spearhead the transformation. This is a great way to excite the current customer base because it offers a radical re-imagination of the customer journey and value proposition. But there is a slight downside to this approach too. It will not solve the legacy challenges in the existing IT setup and Data management. This approach creates a parallel digital business model and when it is scaled successfully, it might add organizational complexity and cause disruption in-house. Choosing the Digital-native Approach means building a brand-new digital business from scratch with its own P&L and aim it to a specific and often untouched market aka true Digital Transformation. This model comes with the potential of creating rapid impact, eliminates the need for legacy modernization, and offers plenty of scaling opportunities. The disadvantage with this is, it does nothing to change the existing banking institution that is running on legacy set-up.
So, it goes without saying that every Digital delivery model has its pros, cons, and requires distinct perspectives/strategies to scale further. Digital Transformation means different for each aspect of a banking and finance company, so does scaling. As we already mentioned, finding a delivery model, and implementing the initiative is not as challenging as scaling the transformation successfully. From what we have observed over the years partnering with various enterprises including a few biggest Banks and Finance Companies, the major flaw in the efforts of scaling digital technologies is ‘not having future-readiness’. Let us look at ways of differentiating the DT programs and approaching scaling for each in a more effective way while looking back in time to recall some of the best executions and lessons learned.
Scaling Digital Business Innovation
Banks are not usually seen as technology innovators. The ATMs have been around for 30 years, yet they haven’t improved much, we still use paper checks, and the automation isn’t exactly spinning the gears unattended yet. We can’t point fingers at one entity because scaling business innovation is a 3-axes representation: Product, People, and Process. To achieve successful scaling, every stage of the Product (design, development, delivery, and distribution) must support the Digital strategy. Both direct and indirect Consumers should be taken into account while designing the innovation. Processes should be re-written and realigned to match the internal and external demands.
Gartner says the fundamentals of Value Generation for BFS companies are changing and we couldn’t agree more. Here is the key elements of Global Value Supply Chains according to the leading research group.
- Bank Dhofar of Oman was the first bank to initiate Cardless ATM services in the world 7 years ago. It was considered revolutionary, adopted, and improvised by many other banks later.
- Japan’s one of the biggest Banking and Financial services company Mitsubishi UFJ Financial Group (MUFG), has been making tremendous progress in the space of blockchain technology and cryptocurrency lately. Although MUFG has been experimenting with digital currency in association with a few of their retail clients, making the digital cash known as ‘MUFG Coin’ a means for clearing and settling financial transactions between Recruit group and their consumers. But now the bank holding enterprise is dropping hints that they are planning to scale the usage of their cryptocurrency to non-recruit users too.
- JP Morgan Chase bank was probably one of the few first responders from Banking and Finance service providers when Apple announced its first-generation iPhone in 2007. The global finance leader is now optimizing their 14 years of learnings and adding a touch of AI and ML to their mobile applications to make them more relatable to their tech-savvy millennial user base. The bank’s leaders say that extreme personalization, rapid new releases, seamless omni-device & platform experiences, and deeper customer learning are going to be the main focus of their all-digital mobile application.
Scaling Digital Engagement
Marketing teams of 21st century are leaving no stone unturned to grab the customer’s attention. But the hard reality is the customer's opinion changes right after their first interaction with the bank’s product or service. So, every team from the bank’s ecosystem should work their best towards one unified goal to bring the customer to click on a link, make them take a positive decision, and stick to the business for a long time. A recent study by McKinsey states that 51% of the customers that are interacting with their bank digitally after 2020 are first-timers who are prepared to accept it as a new 'normal'.
So, for all those banks who might have adopted a virtual assistant or an AI bot just because the counterparts are using them, this is the perfect time to find the right digital engagement model that fits your newly acquired consumer’s persona and scale it by focusing on omnichannel experience.
- Royal Bank of Scotland (RBS) is one of the most digital enthusiastic financial institutes globally. In addition to their many virtual assistants that serve their customers, RBS also has a virtual agent, Marge who’ll help the employees to serve their customers better.
- BMO Harris Bank has recently launched their ‘Smart Branches’ where they bring the best of technology and human element together. These compact smart branches include video tellers that interact with customers through digital screens, smart ATMs, and on-demand videos to demonstrate new products and give advice.
Scaling Operational Transformation
Banks are regulated mediators between businesses and consumers. Those regulations could be bureaucratic and heavy but and without them, the financial system would collapse (and it did when a few banks tried to loosen the walls a bit. It wasn’t pretty). But things are slightly changing with the entry of fintech corporations and digital-native banks. The newbies are teaching a lesson or two to slowly change the way banks can be operated – internally and externally.
- Earlier this year, one of the largest American financial institutions, Capital One made a bold move by exiting all its data centers and moving all applications and systems to the public cloud with AWS. The bank’s technology leadership revealed that they have started exploring and experimenting with digital-first operation models 8 years ago and all that learning has led to this move.
- A UK-based Finance and Consulting firm was using extensive SAP modules with way too many technology platforms, and that is slowing down their application development process and innovation. They’ve paired up with Qentelli and that engagement introduced Automation to their testing process and
Lesser time spent on obtaining Test data
Improvement in QA cycles
Faster test execution
Scaling Workplace and Workforce Transformation
As much as we’d like to move on, a conversation about the workforce and its transformation can’t start without mentioning the pandemic’s impact on it. For both, the bankers and the bank’s customers, the ‘workplace’ isn’t a physical address anymore. It is just a website, an application, or some other digital way where both parties can virtually interact. The way corporates hire, induct, train, employ, and operate with the manpower has changed (for good!). Now scaling workplace transformations mean – scaling the engagement models, employing digital workforce, repurposing non-digital talents, re-skilling/up-skilling resources with digital literacy, and turning the physical features of branches digital. Most importantly, scaling means both scaling up and scaling down whichever enables Agility.
- Banks are joining forces with technology partners to develop collaboration platforms for their employees to enable better inter-team engagement which is showing great results in customer experience metrics as well. Three areas where the scope of scaling is evident are – Automation & Digitization, Digital Operation Models, Learning & Upskilling.s
- Institutes like Saudi Arabia’s The Financial Academy are re-looking at their training curriculums to better equip the BFS personnel to fit better into the digital world. Many Banking & Financial companies such as JP Morgan, Capital One, and Bank of America are collaborating with such institutions to transform their workforce and improve their digital literacy to serve the increasingly digital-savvy customers.
Scaling Data and Cyber Security
Slowly but steadily, banks are moving operations to Cloud, attempting data migrations, adopting technologies – and that calls for advanced security strategies and supporting tools. Because traditional security approaches would not suffice anymore. Product leaders are advised to infuse security strategy in much earlier stages of development and treat it as an integral part of solution roadmaps. Innovation centers of large banks are making progress in ‘Passwordless Authentication’. Going Passwordless doesn’t mean not having an authentication check post, but to generate instant unique One-time-passwords/passcodes, MFA, Digital Signatures, leverage stronger mechanisms such as Public Key Cryptography and Triple Data Encryptions to offer stronger defense to customer data.
According to a recent forecast published by Gartner, Global enterprise IT expenditure of the banking market is expected to reach USD 570 billion by 2021 which was USD 542 billion in 2020. Investments for digital security should certainly see a raise too.
During 2020, Banking and Finance was the most hit sector for Cyber-attacks.
Irrespective of the customer base, every bank should start exploring the capabilities of Data Analytics and scale it towards Big Data. Banking and Financial services thrived with the help of 3600 view of customer data. This not only helps the bank detect malicious activities, irregularities, and user behaviors but also sheds light on suspicious patterns which could be potential threats. This might require some external help, but it is worth it.
- Based on various articles published by ITPro, in Q1 of 2020, an unnamed European bank was targeted for what they call the ‘biggest Distributed Denial of Service (DDoS) attack ever’. If the reports were true, the attack was recorded to be 2.3Tbps. Apparently, the bank’s infrastructure partner AWS has noticed network volume irregularities, suspected an exploiting the Connectionless Lightweight Directory Access Protocol (CLDAP), and blocked the activity before any data exposure.
A bonus tip: Alliance with global players
An Indian multinational, public sector banking and financial services company SBI has entered into a strategic partnership with American Express in 2020. Apart from its retail, corporate, and investment banking, SBI is also known as a pure-play credit card issuer. As a result of the partnership, SBI`s high-end premium credit cards are listed under the global merchant network of AmEx, which gives global benefits and exclusive privileges for SBIs Indian customers.
This strategic move by SBI is aimed to offer its customers an enhanced experience, a better value proposition, and improve their premium consumer base. This piggyback ride will help SBI to gain a premium positioning as a brand and expands its global footprint.
All the success stories and recaps of other banks’ transformation stories are only to demonstrate the potential width of innovation space in the Banking sector. At Qentelli, we strongly believe in the power of customization and tailoring solutions that are as unique as your business model and its digital quests.
Are you wondering what should be your next digital move? Or what seemed like a ground-breaking idea a few months ago is encountering scaling challenges now? Our team would love to brainstorm with you. Drop us an email today: firstname.lastname@example.org