By Matt Tuson, SVP & MD EMEA, Conga
In the financial world, digital transformation (DX) has been born out of necessity. Driven by competitive market forces, the rise of challenger banks, crypto and blockchain, as well as changing customer demands – traditional institutions feel immense pressure to invest in completely transformative technology.
As indicated by Gartner, one third of financial services CIOs classified ‘digital’ as a top business priority in 2019 (1). In the age of disruption, these new emerging technologies are at the forefront of every DX strategy; artificial intelligence (AI) is used to make ‘risk-free’ decisions for wealth management, apps are designed to automate transactions and exchanges, and Chabot’s are integrated within customer services to speed up response times.
It is assumed that organisation needs a complete overhaul in order to compete or stay relevant. Too often, financial leaders mistake full digital transformation – the complete transformation or automation of every department and all areas of their business – as success and a return on investment. While this is true, within reason, it can be messy. Indeed, most DX initiatives fall short of expectations or, indeed, fail, as they lack a clear direction. Gartner revealed only 25 percent of companies actually succeed in establishing better ways of working (2).
As indicated by McKinsey (3), one of the main reasons DX initiatives fail is because most organisations and business leaders do not fully understand what DX is or means, or in fact, how to integrate it within their existing operating model. This means DX initiatives are overly complex or disjointed – a lack of understanding leads to poor execution and misdirection.
The ultimate drivers of digital transformation should, in fact, be connectedness and simplicity. Complete system integration and the automation of basic processes – with the intention of saving time and money. Despite this, financial leaders never consider the most basic elements of day-to-day business.
DX 101: data, documents and processes
The finance industry has been changing rapidly in recent years. After all, financial services organisations need to remain competitive. However, a rush for growth and digital dominance has led to great oversight. Despite playing a vital part in everyday business interactions, many financial institutions still rely on rudimentary or ‘legacy’ systems and have not taken the first step in updating the processes around commercial documents or legal contracts.
A PWC study revealed that 60-80 percent of all B2B deals are regulated or secured through contracts, while Conga unveiled the average business manages anywhere between 20,000-40,000 contracts, each with an average lifecycle of 3.4 weeks. Despite this, they continue to rely on outdated, manual processes that often lead to bottlenecks in their organisation and stall progress.
Whether it be missed deadlines and expiration dates, erroneous overpayments, or completing financial statements or populating client data in spreadsheets – with regulatory issues constantly evolving, meeting compliance and mitigating risk have never been more important. Yet, vital data is exposed at every stage of the business cycle. The financial sector requires constant adaptation, but, too often, these manual processes are what affects day-to-day business. In fact, research by IACCM reveals that poor contract management and oversight lie at the heart of 70-75 percent of failing projects, costing businesses on average, 9.2 percent of their annual revenue (4).
Compliance becomes a greater concern as overall data cycles appear disconnected. Without complete visibility, critical business data remains locked, preventing the analysis and insight that drive meaningful change and generate results. As statements or financial clauses are filled manually, or client information and confidential agreements float between parties with multiple approval stages and endpoints, this can add human error to the mix. In addition, regular business processes often result in hold ups, stalling progress or worse, in some cases, further expenditures or fines. Considering the poor data culture that has likely been established, inefficient approval workflows, ineffective reporting and poor contract lifecycle management (CLM) affects organisations’ overall capital and success on a regular basis.
In an age of mass acceleration – DX must be simplified
Traditional financial institutions need to invest in technology that fosters a ‘digital-first’ culture that actively encourages positive data behaviours from its employees. The best organisations need to recognise that a company-wide digital transformation initiative may be a too greater leap. Instead, they should focus on changing their company mind-set.
Only by putting data at the core of any transformation project can organisations guarantee seamless connectivity and execute successful strategies – both internally and externally. By unifying systems of record with systems of engagement, businesses can deliver a differentiated and personalised experience for their customers and staff.
Businesses also need to consider what is driving their DX initiative. Whilst they may be keen to implement new, emerging and fully transformative technologies, they should first consider the most basic processes their employees and business practices day-to-day. Considering the money lost in the financial sector as a result of paper-based document management, or inefficient manual processes, an effective contract management process would be a good start.
Too effectively leverage new technologies, financial services companies must consider where they are best utilised. However, most importantly, they should not overcomplicate matters. Leaders should start by compartmentalising their DX journey, understanding why they are transforming and what it is that they are transforming – they should have a clear end-goal. Only by simplifying DX will finance companies be able to reap the rewards it has to offer.