Right now, the financial services industry is in a precarious place. Banks are still dealing with decreased levels of customer trust following the recent recession. As if that wasn’t enough, the last few years have seen major disruptions in this typically slow-to-change industry, with traditional banks being undercut by completely digital services such as PayPal and Google Wallet.
Recent reports indicate that 90% of banks invest less than 0.5% of their total spending in digital innovation—but for any bank that wants to survive amid the current proliferation of agile new competitors, that will have to change. Financial institutions need to look to digital transformation to remain viable businesses in the long-term.
Obviously, a huge part of this is customer-facing digitalization. Customers now expect to be able to do business quickly and easily anytime and anywhere. This naturally includes mobile banking, which has seen a massive upsurge in recent years—mobile now accounts for 60% of all online banking traffic. What’s more, 82% of retail bankers agree that mobile is going to be the main channel of use for millennials in the coming years.
Cloud-based software is another critical aspect of digital transformation in financial services. Cloud systems help to enable “omnichannel banking,” allowing customers to access bank services at all times in whatever way they choose. Cloud-based systems also simplify transactions for customers—a critical feature, given the complex and often daunting nature of traditional financial processes.
Money matters are important, and bank customers want to feel fully informed and in control. Of course, what’s good for the customer is good for the business: research from Accenture has found that financial institutions offering timely, relevant, and personalized online experiences improve their conversion rates by upwards of 30%.
However, the areas in need of digital transformation are not limited to what the customer sees. In fact, those banks that are attempting to digitalize are often hampered by an overly-narrow focus on front-end functionality that ignores the importance of transforming the back end as well. Attempts at customer-facing digital transformation will quickly fall apart if the underlying processes supporting them are not current and well-integrated.
So what are some of the issues with back-end functions in banking? They may sound familiar: as in most industries, the basic keys to digital maturity are breaking down organization silos, integrating disconnected processes, making better use of data, and moving away from legacy infrastructure and systems. These are steps that still need to be taken by most major financial institutions.
Furthermore, a startling amount of data entry and other information-related processes are still done manually. It’s hardly news to point out that this not only takes up time and personnel resources better used elsewhere, but also leaves far too much room for human error.
It just isn’t enough to paste on extra front-facing functionality without updating the core systems behind it all. To compete with all of the new entrants into the industry, financial institutions need to truly integrate customer-facing and internal processes using new technology and innovative strategies.