Changes in the financial services industry are coming fast and furious. Open banking, blockchain, omnichannel banking, the digital workplace, and artificial intelligence are just a few of the recent aspects of digital transformation that financial institutions are working hard to incorporate into their daily operations. What else is coming down the pike can only be guessed at.
How can banks stay relevant when technologies change so rapidly? How can they future-proof their organisations so that they can be agile yet cost-effective? It is all too easy – and self-defeating – to pour resources into “the latest greatest thing,” only to find out in a few short years that “the latest and greatest” has gone the way of the dodo … and return on investment with it.
Here are five key tips for your financial institutions to keep itself ready and relevant – no matter what change comes next:
- Adopt an outcomes-based approach to digital transformation. Always keep in mind what you are seeking to accomplish. By staying focused on your goals, you will be able to weigh tools and technologies objectively and decide what you truly need, rather than be tempted to jump on the latest buzzword bandwagon. For example, there is a lot of talk about open APIs and open architectures. Don’t start there: start with the goal of open banking. How do you want to open up your financial institution? What do you want to accomplish through open banking? How can you better serve your customers with open banking? Strategic questions such as these will guide the more tactical discussion of open APIs and open architectures.
- Take a long view toward digital transformation. Business would be simpler if digital transformation was an item that could be checked off the to-do list in a few quarters or even a few years. But the fact is, digital transformation has no end. To remain competitive, financial institutions need to think strategically about digital transformation in the near-term and in 10- and 20-year horizons. When considering open banking, for instance, determine the specific products or services open APIs might enable you to deliver to your customers now, but also take the time to think about how to structure an end-to-end open architecture that will be both flexible and secure to accommodate disruptive technologies as they appear in the marketplace.
- Incorporate emerging technologies in your digital transformation. Technologies do not always appear on the scene fully-formed and fine-tuned. They evolve and grow over time – both in their technical robustness and in their practical applications. Financial institutions that wait until technologies are fully-developed before implementing them will be playing catch-up with organisations that strategically incorporate emergent and nascent technologies into their digital transformation. In the case of open banking, some financial institutions might hesitate because open APIs do bring increased security risks. However, institutions that incorporate open APIs while addressing the associated risks will be more competitive, as they will have expanded products, services, and benefits to offer their customers.
- Remember that technology builds on technology in digital transformation. Innovative and disruptive technologies do not exist in isolated bubbles. They impact one another. Therefore, financial institutions need to be aware of the many points of connection that technologies – new and old – have with one another. For example, open banking is about more than open APIs. Open banking embraces anything that opens up the financial institution – such as blockchain technology, artificial intelligence, omnichannel banking, and biometrics. In turn, open APIs and open architectures facilitate the adoption of many such technologies.
- Keep the customer at the centre of digital transformation.Technology is not the only thing that is constantly changing: customers are changing, too. Customers want to be empowered. They want connectivity. They want convenience. Financial institutions that keep customer expectations at the centre of their digital transformation ensure that they incorporate technologies in a timely and wise fashion. Open banking, for instance, is ultimately not about APIs and architectures. It is about satisfying customer demands for products, service, quality, speed, personalisation, and the like.
Your financial institution’s digital transformation has only just begun. There are unknown opportunities and threats just around the corner. New technologies will appear and old technologies will suddenly develop new use cases. Innovation will determine who wins the race to be competitive. The next change is coming. That is the only constant in banking. Is your financial institution ready?