Following our “The future of banking: Platforms and digital architecture” webinar, Forrester guest speaker, Jost Hoppermann, sat down with us to answer some additional questions. You can watch the webinar on-demand by following the link at the end of the article.
How have banks’ attitudes to digital transformation changed in recent years?
Over the last decade, Forrester has seen most financial services firms working on digital transformation or planning to start within the next two or three years. However, there was no comparably high improvement in digital capabilities. Today, a Forrester survey shows that four fifths of financial services firms recognize that they are in a weak position to best serve their customers, and therefore that they need to accelerate their transformation. Covid-19 will put the break on some banks’ initiatives (although they urgently need better digital banking capabilities to keep up with the increase in digital demand), but it will only delay the imperative need to transform, not make it disappear.
What impact will Covid-19 have on banks’ transformation plans?
The first of three different bank categories consists of banks that are or expect to be in a financially difficult situation. They are limited to focus on urgent activities, such as closing the technology gaps that Covid-19 revealed – like unscalable homeworking environments. The other categories are in a more comfortable situation. One does not see much impact, if any. The other is facing reduced but manageable budgets. The latter typically shifts activities and budgets on key asks, such as improving automation and scaling up lending systems to keep up with Covid-19 related loans while keeping transformation alive. The former does the same, but some even try to accelerate their transformation initiatives to be ahead of their competitors after the crisis. And even in times likes these, new financial services institutions like Monument in the UK come into existence.
What impact does digital transformation ultimately have on customer experience?
Improvement of the customer experience is one of the key goals of digital transformation. However, it is not a one-shot approach, but a continuous activity. Major ingredients include highly convenient and seamless interactions, personalized experiences, and less painful security.
Should banks be more concerned with bank-end or front-end digital transformation?
Some banks have started with one or the other, but they will eventually need to work on both front-end and back-end transformation because no bank can remain successful in the longer term without end-to-end digital transformation. Customers rightly expect that customer experience is not limited to front-end capabilities. Great customer experience needs to build on seamless close-to-real time interactions and transactions. If an initial focus is mandatory, a digital banking engagement platform with its extended capabilities to also deliver business capabilities would be a good place to start.
What’s the biggest mistake banks make when implementing digital transformation strategies?
The first and biggest mistake is certainly not to start digital transformation – without this, a bank will eventually lose its competitiveness. If banks start transformation with insufficient transformation know-how and large information gaps about existing systems, it typically does not end well, either. Increasing scope — typically happening when a transformation shows early signs of success — is another reason that caused several transformation disasters. Finally, rip-and-replace approaches and even meticulously planned multi-year transformation projects are unwieldy longswords in times that need a swift rapier.