Every bank knows that it needs to prepare for digital transformation. The old ways of doing business are no longer cutting it for banks that want to build (and retain) their client base. It might be a matter of core modernization, or using data-driven approaches to customer-centricity, but one way or another competitive banks will need to ride the digital wave.
It’s easy enough to agree with the premise, but it’s far more difficult to actually get digital transformation underway. Banks are necessarily risk averse. They need to be because they deal with the wealth of people and companies — realistically their most precious possession. Putting a functional system in jeopardy for the potential of positive change can be a tough sale to make.
Here’s the thing: while banks are humming and hawing over the risks posed by a robust digital transformation, Big Tech is pushing into the space and putting the financial market dominance banks have enjoyed for a century at risk. The only way to stem the tide of interlopers is by changing to meet new expectations. The question is — how?
There are three main steps every bank must take to set the stage for a realistic digital transformation. Here’s what you need to know:
1. Establish Internal Champions
If you want to create an environment of change in an organization as glacial as a bank, you’re going to need some help. You are already a champion of change, but this isn’t a fight you can win alone. Identifying key stakeholders who recognize the value of digital transformation and will join your quest is essential.
Choosing the right champions requires a bit of consideration. It’s not merely about who’s got a big title, or someone who’s a consummate optimist. It’s about someone who can understand the value of digital transformation, someone willing to work hard to achieve it, and someone with the cache to influence decision makers.
But even then, it’s about more than just appealing to the higher ups. Digital transformation ultimately impacts everyone in the bank, and those on the ground floor need to buy in too. If you’re a hiring manager, it’s important to look for individuals that are forward thinking and enthusiastic about working in the future of finance. Those too concerned with rocking the boat will be ineffective champions of change.
Once you’ve identified the internal champions, work together to create an advocacy strategy. Squeaky wheels get the oil, and when it comes to your bank remaining relevant in the modern world, it’s a squeak that ought to be heard.
2. Justify a Budget
One of the biggest obstacles to change is, of course, the expense it incurs. Especially when it comes to core system augmentation, there is bound to be a steep up-front cost. But you’re not only interested in digital transformation because it’s the next hot thing. You pursue it because a bank ready for the dynamic change and expectations of the future is one ready to be profitable.
When it comes to the cost of implementing new technology, focus on the existing costs of maintaining the current tech setup. Legacy core technology is often outdated to the point that using it to even make a small change to the rates or fees of a banking product can cost tens (or even hundreds) of thousands of dollars. Does propping up a system like this really seem like the less expensive option? And as digital-only banks push the envelope with faster-to-market, more targeted offers how will your bank maintain its customer base?
But it’s not just the current expenses you can use as a budgetary justification. Digital transformation means accessing tools and software that can help your bank become more profitable than ever. Whether it’s highly targeted promotions or lucrative product offerings, transforming your bank will be as profitable for your bank as it will be for the customers who enjoy a modern banking experience.
3. Form Smart Partnerships
Banks are really good at banking. And they’re pretty darn good at risk management, and maintaining a stable status quo. What they struggle with is efficient, effective change which is why the notion of digital transformation rattles so many cages.
Allocating internal resources needed to keep the lights on to a project as extensive as digital transformation can be a tough sell. That’s why looking for the right FinTech partner is the third (and arguably the most important) step when approaching it — determining a company that offers the solution you need, within budget and with minimal risk to the day-to-day is not always easy but extremely important.
Looking at the logos and case studies of a company you’re considering is a good first step. Who have they worked with? How long have they been around? And what kind of work have they done for other banks? Zafin is proud of the reputation we’ve built working for nearly two decades in the financial space with dozens of partnerships among the world’s most reputable banks. If you’d like to find out how we can help meet your digital transformation goals, get in touch with one of our experts today!