Banks are painfully aware that they must transform for the future but struggle to deliver on their digital ambitions, according to EY. Based on interviews with banking transformation executives across the globe, 38% saw transformation initiatives underperform against key performance indicators and 67% experienced at least one underperforming transformation in the past five years. The reason, EY experts suggest, is that transformation means different things to different organisations. However, it shouldn’t. At least not in a big-picture sense.
At the core, digital transformation should be viewed as a top-to-bottom overhaul of how a bank operates and what it offers. One that is key to financial institutions’ long-term survival in the face of all the challenges disruptors, stakeholders and customers throw their way. This also means that digital transformation, if done right, never really ends. Can it be translated into stand-alone projects? Certainly. As long as they all serve the ultimate goal of digital transition: building organisational agility and resilience.
The same goes for the technology side of the transformation journey.
Some banking executives think of buying a digital banking platform solution like buying an iPhone. They’re looking for a solution that comes in a neat package, hardware and software included, and only takes a few taps to set up. Sadly, this is a surefire way to become an “underperforming transformation” statistic. Most of these out-of-the-box digitalisation solutions, albeit fast and convenient, turn out to be limited in terms of functionality, scalability and customisation options.
What financial service providers should be aiming for is a solution architecture that empowers them to build digital capabilities in a way that best serves their and their customers’ needs as well as to achieve digital sovereignty. Having gone down this road dozens of times before, let me give you a few pointers on what to look for when choosing a digital banking platform to make sure it solves, not worsens, your digitalisation headaches.
1.Connect your customer and internal applications
Customer-facing and internal applications represent two entirely different breeds within a bank’s application ecosystem. Enabling people to connect and engage with their banks, consumer-facing applications are built around customer experience and they are heavy on security, performance and usability. Core banking systems and applications are purpose-built to manage specific back-office activities with a focus on productivity and efficiency.
Connecting the two is no easy task. A well-designed digital banking platform, however, should be open and flexible enough to detect customer needs and allow the bank’s internal or third-party systems to respond to them as well as to provide users with information in real time – and at the same time. In other words, it should simultaneously merge and decouple customer and internal applications and do so in a fast, efficient and sustainable way.
2. Go for tried-and-tested instead of proprietary technology
Digital banking platform solutions come in all shapes and sizes. Some platform developers might use proprietary software to address specific problems, while others select and integrate readily available technologies to cater to a wider range of customer needs. My advice is to steer clear of the former whenever possible. While both platform types can be customised and scaled for specific use cases, proprietary ones can easily lead to vendor lock-in.
Vendor lock-in, also called proprietary lock-in or customer lock-in, means that a customer has no other choice than to keep using the product or service of a company because switching would cost too much in terms of money, time and productivity. This means that a purpose-built proprietary solution might be the answer to a certain banking challenge today but a major barrier to growth tomorrow as business and customer needs evolve.
A digital banking platform is only as good as its ability to allow banks to participate in or fully overtake digital channels development.
3. Embrace – and encourage – citizen development
US banks’ technology spending, according to Insider Intelligence, is set to hit $112 billion by 2026. But with bigger dependence on technology also comes bigger dependence on the teams who design, build and run it. IT isn’t a department within today’s financial service providers, it’s their bloodline – and a major cost driver. Spending this money on technology that doesn’t take an army of developers to run, could significantly improve their productivity and bottom line.
That is, technology that is designed for citizen development. Fast, agile and cost-efficient, the citizen development model encourages non-tech staff, such as business users, to create or customise business applications using low-code or no-code platforms. The result? Applications that are fully aligned to business and market needs, delivered when and where it matters – without taking away from IT teams’ operational bandwidth or growing their backlog.
4. Look for a solution that supports digital sovereignty
Albeit extremely complex and still evolving, digital sovereignty, that is, control over digital assets including data, content and infrastructure, is becoming a top-of-agenda issue for businesses and policymakers alike. It encompasses several layers from data to geopolitical considerations, IDC’s Rahiel Nasir argues. Technical sovereignty, a key layer within the “sovereignty stack”, can only be achieved if organisations don’t “lock themselves into custom-built solutions that become legacy systems in their own right.”
Modular digital banking platforms that can adapt to any business model and allow hassle-free integration with new products or microservices might just be what banks need to avoid this trap. Ideally, they also make it possible for developers, in-house or third-party, to plug in and access any number of additional solutions through unified and secured APIs. In other words, these solutions serve as a backbone for distributed digital application development rather than just platforms, delivering speed, resilience and self-sufficiency for banks.
