By Rodrigo Castelo, VP of EMEA at OutSystems.
A digital transformation journey is often daunting and complex, and even more for major banks and financial services players (BFSPs). Traditional systems and processes block their efforts to meet today’s fast-paced standards, leading to increased technical debt, siloed environments and, ultimately, an inability to meet customers’ demands.
McKinsey research found that most banks that undergo digital transformation fail to reach their digital strategy objectives, with only 30% reporting success. Yet, it is crucial for banks and financial services institutions to keep up with the changing tides of technology to increase productivity and reduce cost per revenue unit, while delighting customers to sustain growth.
Roadblocks to digital transformation
BFSPs are coming up against numerous roadblocks on their digital transformation journeys and there are three critical bottlenecks that they need to navigate in order to enhance customer experience, and to be more innovative and efficient.
Firstly, many BFSPs operational models are built on legacy systems that are not equipped to handle the needs of today’s digital world. Over time, as more layers get added to the existing infrastructure, systems often become too complex and intertwined. This makes a seamless integration of new technologies, such as external payment systems or financial management applications, more challenging to achieve, ultimately resulting in poor performance, lack of speed, downtime, and substantial maintenance costs. The impact of all of these on customer experience and retention is massive.
Secondly, rising technical debt drains businesses’ resources and undermines capacity for innovation. The ability to keep ahead of the competition fades fast, especially in an industry where new challengers are coming on the scene with enticing offers for digitally-savvy consumers. BFSPs technical debt is tied to the legacy systems adopted and used over many years to keep up with competition. While adding to the stack to keep up may appear harmless, it has several consequences including duplicated efforts, higher operational costs, siloed environments, and decreased agility. These all have a negative impact on delivering customers the seamless experiences they demand.
Lastly, customers’ expectations are changing by the day. They expect nothing less than a smooth and convenient digital experience that allows them to manage their account and conduct transaction,. They have zero tolerance for businesses that fail to offer a first-class digital experience and when self-service does not live up to expectations, they can become frustrated that they need to resort to customer support. This can lead to added pressure on the business, hampering productivity. This means that BFSPs who fail to provide a simple, easy-to-use digital experience risk not only significant productivity losses, but also reduced customer satisfaction and retention.
Characteristics of a successful digital transformation
A successful digital transformation can be measured on decreasing operations costs, improved customer experiences, accelerated automation, and ultimately faster growth with better margins. And while this is easier said than done, there are some key characteristics that BFSPs can focus on to put them on the road to digital success.
First and foremost, BFSPs must ensure their digitalisation efforts are implemented with customers’ needs, preferences, and behaviours at its centre. BFSPs can offer customised services by leveraging Artificial Intelligence (AI) technologies and adopting open Application Programming Interfaces (APIs). By employing APIs and allowing third-party developers to access their data and services, BFSPs can create new opportunities for collaboration and innovation. This includes offering digital services that enhance the customer experience, such as integration with external payment systems and financial management applications, or embedding spot services into the digital journeys of third party companies.
Delivering a modern, seamless customer experience also requires significant application development and infrastructure investment. BFSPs must balance innovation and a sleek user interface with the complexity and security of their backend technology. To do this, they must prioritise robust development processes, honing in on quality and testing to avoid accruing technical debt. BFSPs are responsible for handling a vast amount of sensitive customer data that, in the wrong hands, can be used for fraudulent activities. Therefore, it is crucial to develop digital applications with multi-level security protocols in place.
To be able to develop and deploy digital banking solutions that meet the needs of customers and that are capable of evolving with changing market demands, BFSPs need to be agile in their approach to software development. This includes leveraging modern software methodologies, such as DevOps, which emphasises the necessity for continuous integration, deployment, testing and monitoring.
High-performance low-code can also be an ally on BFSPs digital journeys. It offers a powerful solution to address these challenges and help BFSPs to modernise outdated legacy systems while streamlining the entire product lifecycle. These low-code technologies also include generative AI, further accelerating the pace of app development while reducing the risks and limitations that generative AI can have without the right guardrails in place if used in traditional coding. This brings further benefits, from better governance controls and better security to higher level coding patterns that are easier to understand than traditional textual code.
Using tools such as high-performance low-code ensures rapid development and innovation without additional debt or risk – allowing banks to stay competitive, continue to grow, and meet their customers’ expectations and needs.
