The Covid Pandemic has changed many things, it has provided a major push towards accelerating the Digital Transformation Journey of Financial Institutions. Many have gone back to the drawing board to redraw digital strategy and the future transformation landscape. Banking is at the tipping point towards moving from partly digital to fully digital but there seems to a big gap in defining “fully digital” and getting the right answer to this is a step forward in the direction of digital.
Finding an Answer
But how do we go about finding an answer to being fully digital? Technology or digital team may not have answers on their own. Definitely, digital transformation is not about having cloud solutions in place or just next-generation technologies such as A/ML adoption. The answer goes beyond technology and starts redrawing entire customer acquisition & engagement as well as redefining the whole value chain with all participating parties including the back-end team’s approach. The whole approach of digital transformation also requires one to look at products digitally and services delivery differently.
Getting the right approach for Digital Transformation
It is truly said that Digital Transformation is more about thinking about business digitally rather than technology. Technology is there but how & where to deploy technology in the business context remains central to the transformation journey. This defines reason that it is not a technology project, but more of the business initiative of transformation driven digitally. The Digital Fifth has devised a full framework to define and implement Digital Transformation Strategy within the organization.
Step 1: Assess Digital Readiness
The first step towards redefining the digital transformation journey requires firms to assess the current state of digital readiness at the organization. Taking stock of the on-ground state of digitization before developing initiatives is vital for efficiently creating a digital strategy. This phase will set the context for the entire process of digitization and optimization.
This enables an organization to closely understand the business strategy vis-a-vis the short-term and long-term plan of the organization along with looking at business context for digitization. In addition, firms should look outside to assess the competitive landscape which may involve the study of peers, Fintechs & Startups, other ecosystem players. For example, any Small Finance bank building transformation journey may like to benchmark itself against other SFBs, Small Private Banks, Fintechs, Neo Banks, NBFCs, etc.
The next critical part of assessing overall readiness is to draw a digital maturity plot of the organization. Building the digital maturity model of the firm will give a better perspective on components for dramatic transformation or enhancement. Some of the components, which may be assessed as part of digital maturity study, can include Digital Journeys, Data Strategy, Customer Servicing Channels, the digital side of Organization Structure, Culture to support digital, Fintech & partner strategy, etc.
For example, not having a good view of organizational culture may derail the digital transformation journey due to a lack of acceptance from employees.
Without knowing the deep state of technology, the next phase of digital transformation may be impossible. The industry has seen some prominent examples of technology failing to take a load of digital growth. Technology readiness should be from three to four-year horizons and include a review of channels for products, services, operations, etc.
Step 2: Redraw Digital Landscape
The good state of the current digital map will go long way to build a scalable roadmap as one starting off from the right state of readiness.
Knowing the evolution of customers, their expectations in the future, behavior, choices of financial products & services will form compelling inputs to build a transformation journey. Also, the roadmap needs to have a good idea of changing environment of regulatory guidance, government ecosystem evolution. Such as Public Credit Registry (PCR) from RBI will be operational somewhere next year or so.
The strategy may take this as feed to define the next phase of the digital lending journey for the Bank. The future landscape would also require looking at key innovations shaping the industry, a new set of players emerging in the market, and impacting business models across segments, partnership opportunities. For example, Banking-as-a-service platforms are becoming one of the key players in the banking ecosystem and Banks may look at opportunities to tie up with them. Then, it could be a critical component of defining the digital transformation journey.
Step 3: Create positioning
This would be another intermediary phase of the process where the management team of the firm needs to have clarity over expectations for the Digital Journey and goals to achieve across
- Business Model
- Rolling out of Technological enablement
- Extend values across the customer journey
- Monetize data
Step 4: Develop a roadmap with project initiatives
Based on the current assessment, analyzing the future landscape in the financial segment, and understanding of digital positioning, the organization would be in a good position to define a roadmap and digital strategy for the next 2 to 3 years.
The objective of defining solutions should be on empowerment of teams with faster time to market for digital properties, while offering a flexible framework consisting of web-based components, APIs, and mobile apps that can be precisely configured for clients.
This process needs to look at the organization’s goal on three broad objectives for the next phase of transformation
- Enhanced digital engagement through deeper use of data
- Digital acquisition
- Unified service platform
- New customer segment
- Digital products
- Unified CRM platform
- Process Reassessment & automation
- Tab/Mobility platforms
- Collaboration platform
- Flexible cloud/ hybrid infrastructure
- API Gateway
- Big Data & Analytics – AI as a technology offers a transformative solution to digitization. It helps in improving efficiency through automation, decision making, and risk analysis.
- In-house/ partner model
- Highly secure
Step 5: Develop a roadmap with project initiatives
Planning and developing Strategy is one part of the game, Execution is the Key. Many of the banks & FIs have struggled to put the right tools and processes in place as part of execution and this becomes major bottlenecks in rolling out partnerships with Fintechs.
Digital transformation is the journey with milestones defined by what an organization wants to achieve and how does it want to go about it. But the whole strategy is designed to fail if it has not been built in a proper way to make it work. This has to have a top-down approach and horizontally mapped across business units. Digital transformation Strategy needs to be managed from CEO or CXO desk and needs to operate as a business unit. So, this would require participation from Operations, Compliance, Risk Management, Finance, and other supporting units to be completely onboard on the same.