Why financial institutions have to digitally transform
The last time someone told you, “The check is in the mail,” there’s a good chance they were being coy or sarcastic. Same if you heard the term “bankers’ hours.”
Today, consumers expect instant banking transactions and 24/7 account access. Some accountholders have never written a paper check, even though they move lots of money around. Gen Z consumers (those born between 1997 and 2012) already have $44 billion in spending power.
Within the next four years, Gen Z will become the largest consumer group in the country. And they’re not interested in the business-as-usual model with limited hours, teller lines and paper-heavy processes. To stay relevant among digital-first competitors, financial institutions need to digitally transform.
But what does that mean?
Digital transformation for your financial institution
Digital transformation is not a software upgrade. Or simply scanning instead of filing paper loan documents. Those are digital enhancements, but they don’t change the business. They pave well-worn footpaths without adding new value.
Transformative projects create new solutions or touchpoints. Banking apps are a good example of digital transformation. Forward-thinking banks used technology to support a bigger-picture strategy. They used digital capabilities to create a new channel, elevate the customer experience and enable self-service.
Opportunities for improvement
Digital transformation plans should be part of your financial institution’s bigger-picture, strategic plan — not a separate effort. Often, digital transformation will help answer a strategic problem, such as employee or customer retention. The key is to establish the goal or problem first before you pursue any tools.
Based on Wipfli’s annual state of banking research, most banks are using digital transformation to enhance the customer journey. Digital transformation is how they define plans to speed up loan approval and account-opening processes, improve digital customer engagement and add payment transaction options. They’re also using digital transformation to tackle labor issues and create new revenue streams.
Banks said that their digital transformation plans for security are the most mature. Digital experience and customer support plans are also further along than others.
Is digital transformation optional?
Based on Wipfli’s research, banks are divided on digital transformation. About half (48%) have very clear objectives and a pathway toward transformation. Just as many are struggling to execute plans in a timely manner or need help decoding the buzzwords and figuring out where to go and how to start.
Does that mean digital transformation is optional?
Unfortunately, nobody can afford to sit this one out. More than 75% of customers use mobile apps for essential tasks like depositing checks, paying bills or checking account balances. Even if an app isn’t on your path, your financial institution will need digitally supported ways to interact with accountholders, make work more efficient, and test risks and decisions.
Banks that delay their journeys risk getting left behind. Executives said the top benefits of digital transformation are improved operational efficiency, faster time to market and the ability to meet customer expectations.
3 steps to jumpstart the journey
Successful digital transformations include three elements: strategy, execution and technology. Notice that technology comes last. One common mistake is to focus too heavily — and too early — on the technology.
Here are three steps to jumpstart your digital transformation journey:
1. Start with strategy
Identify your top goals, even if they don’t seem tech related. Be specific and include metrics when possible. Specific goals lead to better resolutions and provide KPIs to measure the journey. Successful digital transformations have clear KPIs and targets.
2. Include people before you execute plans
More than 70% of transformation projects fail due to people — not technology. Talk to customers, employees and vendors before you buy into a solution. Make sure you understand their demands, experiences and wishes. No guessing. Test your theories and ask for feedback.
Consider how change will affect users and stakeholders. People may need training — or assurance — to accept change. Getting user input up front isn’t enough. Make sure your digital transformation plan includes effective change management practices.
3. Choose technology wisely
Work backward so that you’re matching your technology to your strategy — not the other way around. Make a list of capabilities that are critical versus nice to have. Ask cross-functional teams to build the requirements list so that the technology stays focused on people and true to your goals.
During this stage, it’s helpful to inventory the technology you already have. What’s working? What’s not? What’s costing too much time or money? And what could serve you better (e.g., be potentially cheaper, faster or more integrated)?
Remember, digital transformation is a journey
It’s not a launch or one-time rollout. Most financial institutions move through distinct phases of digital transformation before it becomes an integrated part of the business.
To start becoming more digitally mature, take our quiz to figure out which stage of digital transformation you’re in today. And encourage exploration. Empower leaders and employees to try new technologies, processes and systems.
With the right people and processes in place, your financial institution can learn from every journey. An agile and continuous learning mindset is transformative itself.
How Wipfli can help
We bring deep experience helping financial institutions plan, execute and build on effective digital transformation. Learn more about our digital services for financial institutions to get started.
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