Solving the digital transformation challenges in financial services
Digital transformation can often be challenging. It entails the adoption of new technologies, as well as a mental and cultural shift that can be difficult to change in a well-established organization.
Although most financial institutions have implemented some digital transformation initiatives, many watched their efforts stall or take much longer to implement than originally anticipated. As financial service enterprises begin to envision their digital transformation roadmap, they face six common challenges to a successful transition.
Six challenges to digital transformation in financial services
Catching up with newcomers and tech giants
The digital transformation has accelerated significantly in recent years. The pandemic has opened up financial services markets to new providers, both fintech and, more recently, large technology companies who are searching for ways to boost their revenues.
The intense competition from digital native organizations brings new competitive dynamics to the market, and for many legacy organizations, it's becoming more challenging than ever to catch up.
Legacy technology holding you back
The generation, storage, and transfer of information have always been a core element of financial sector operations.
The financial industry has, since the outset, been based on the processing of information, and digital technology has offered the industry efficiency on the never-seen-before scale when it comes to data processing.
This explains why historically, financial organizations have invested most in information and communication technologies. Financial services organizations have been some of the first to explore the application of nascent digital technology to business operations back in the 70s and 80s. Since the late 1970s, with the emergence of the first mainframe computers, financial institutions have gradually computerized operations and internal processes, concentrating first and foremost on processes and workflows which were extremely paper- and manpower-intensive.
The adoption of technology has been progressing in layers, with newer technology being built on top of existing solutions. As a result, the amount of legacy technology and code that these organizations need to maintain staggers the further digital transformation. As old technologies are often incompatible with new digital standards, such as UX, mobile-friendliness, and multi-channel capabilities, organizations often need to find workarounds that enable them to take advantage of the legacy technology they already have in the new world.
Balancing the competing priorities within the organization
Organizations are under a great deal of market pressure to deliver better software applications faster to their customers. As a result, IT departments often tend to focus more on the tools and operational KPIs that promise performance benefits.
Companies often try to bite more than they can chew and adapt multiple digital initiatives at once. Each one of these initiatives requires an investment of time, attention, and resources - limited commodities that must be distributed wisely.
The key to success is to kill everything in your backlog that isn't aligned with your company's strategic priorities. The initiatives that pass this test must be reexamined and realigned in order to realign the entire organization on delivering the best possible service to end customers as a matter of policy.
Lack of resources
Digital transformation is a resource-intensive enterprise. Often, budgetary constraints severely limit the scope of the digital transformation strategy that the organization can adapt.
Digital transformation often requires substantial investments. Your budget is a reality check that should be used to prioritize what your company can handle. Develop a digital transformation roadmap that splits the budget over several phases over several years, if that's what is required to achieve your end goal.
Lack of expertise
53% of respondents to a recent TalentNeuron survey have identified the inability to distill needed skills as the number one impediment to workforce transformation.
The lack of qualified personnel to manage digital transformations is the hardest gap to fill, especially in today's competitive landscape. COVID-19 has escalated digital initiatives into digital imperatives across the industries, creating urgent pressure on organizations across sectors to reconceptualize the skills they need to succeed in the new reality.
It's no easy task for financial institutions to identify and acquire the digital skills their organization needs to pursue digital transformation. Financial service organizations must address the challenges of a new reality - digital skills are now part of almost every role.
Today, technology skills are no longer highly centered in IT; they need to be present across organizational functions and coupled with soft skills to achieve transformation success.
The lack of digital culture
According to a 2016 Digital McKinsey survey, the most significant obstacle to achieving digital goals is the cultural and behavioral shift.
Digital transformation is not simply the adoption of new technology; it requires significant structural and process changes. However, traditional financial services enterprises often already have a very strong organizational culture. The old culture is often resistant to change or implementing new workflows, hindering new digital initiatives.
How no-code helps solve these challenges
For digital transformation initiatives at financial institutions to succeed, the culture shift must be addressed first. By adopting a. digital mindset, organizations can create an environment where employees are empowered to deliver solutions that focus on the customer first.
Organizations can confront these cultural barriers by drafting and communicating digital transformation strategy, objectives, and timing to their employees in a clear way.
The next step is to identify skill gaps and create opportunities to upskill existing employees to meet future needs.
Another solution is to find technologies that support digital transformation. One such technology is no-code development.
No-code platforms enable citizen developers to deliver solutions quickly, providing the best customer experience without the need for protracted and expensive development sprints.
Digital transformation is a marathon and not a sprint, and organizations must prepare accordingly.