DIGITAL TRANSFORMATION IN BANKING
Tony Virdi, Vice President and Head of Banking and Financial Services in the UK & Ireland, Cognizant
The financial services and banking industry has been undergoing a huge amount of scrutiny in the past few years due to the continuous scandals and credit crunch. Despite this, it appears to remain a sector of fascination and awe to many as it helps underpin most economies.
Behind the scenes, however, the wind of change is in play. Increased regulations to avoid another credit crisis have led to a need for greater transparency, changing traditional working habits and patterns. The rapid advancement of technologies such as mobile, social, analytics and cloud have created major opportunities to drive a better customer experience but are also spawning headaches when it comes to integrating them into ageing systems. Considering that banks and financial services firms often pride themselves on their heritage and generations of service, their infrastructure is often equally dated and can struggle to take advantage of the newer technologies, platforms, systems and solutions on offer.
A need for transformation – and its challenges
The financial sector is faced with a need to innovate while cutting costs in parallel to remaining transparent to adhere to regulations. All the banks and financial companies want to run better, and the solutions to this appear to be ‘simplification’ and ‘transformation’. Instead of purely innovating, as other brands and sectors may be able to, for example in the consumer technology space, banks and financial services companies have to take into consideration the many regulations and compliance restrictions that surround their industry to ensure that any new technology can adhere to the requirements. This means they have to run differently if they want to transform their operations to keep up with the rapidly changing environment.
With profitability and return on equity under challenge, when faced with legacy systems, banks and financial services companies have to find cost-effective ways of upgrading them, so they can take advantage of the new technologies available and ultimately offer their customers a better service and increase their own revenues. In addition, this transformation and upgrade is not a one-off situation. Banks need to continually re-evaluate their IT systems to find more cost-effective ways of working while freeing up time, resources and investment capital to explore new models, from omni-channel banking and digital-only branches to flexible working for their employees.
Another challenge that banks and financial services companies face in embracing new technologies is that they need to think in terms of what the customer wants. With research[i] showing that smartphone sales have finally outstripped basic feature phone devices, more consumers will want to take advantage of their smartphone to engage with their financial services companies and banks – to drive a simpler and better customer experience– but they also expect security in tandem with convenience. This adds another layer of technology and business process change for each company in the midst of ‘transformation’ to consider.
Embracing the digital opportunity
As technology becomes more evasive, ever more intuitive, from tablets that can be operated by toddlers to older generations embracing social networking, there is an opportunity for banks and financial services companies to ensure their next generation solutions match this trend. The worlds of technology and traditional design are colliding as companies look for solutions that can deliver on the technology at the back-end, while offering an enjoyable experience to consumers (and banking and financial services company employees) at the front end.
The typical bank branch will no doubt change as financial services companies and banks transform to take advantage of new opportunities. As transactions become digital, the reasons for people to come to a branch will evolve – with ever increasing level of ‘self-service’ and the need to come into a branch only for more complex transactions / enquiries. The type of services that are emerging include a more personalised service with video links to a remote financial advisor, tablets available displaying pop-up information tailored to our specific interests based on geo-location and social information garnered from our smartphone, and advice offered from employees who are freed up from traditional routine activities such as cashing cheques.
This personalised, mobile, social experience can only occur if the banking and financial services industry continues to transform its technology platforms and solutions, with the ultimate aim being channel integration and embracing the digital opportunity. While it is a never-ending task given the restrictions around this industry in particular and the challenges that legacy infrastructures present, it is heartening to see that forward-thinking banks and financial services companies are ‘transforming’ their businesses, putting IT and technology at the heart of future operations.