As a financial organization, you are likely well-acquainted with the difficulty of adjusting to modern technologies. Since most financial institutions are in the same boat, there are plenty of lessons learned that you can apply to your own digital initiatives.
Today we’re sharing some of the top digital transformation challenges faced by banks and how to overcome them.
6 Digital Transformation Challenges Faced by Banks
1. Assigning the Wrong People
Often, financial services firms staff their project team with operationally minded employees. While knowledgeable about existing processes, these employees may lack the necessary digital expertise and may prefer the company’s digital status quo.
Banks should supplement this team with external resources who have specialized digital banking experience and technical knowledge. A balanced team is better equipped to ensure successful implementation and high user adoption.
Software Selection & Process Improvement Case Study
In helping the client get its project back on track, one of our primary focus areas was decreasing their customization needs by improving their processes to align with the system's best practices.
2. Complex Technical Systems
Most traditional banks rely on intricately connected front-end and back-office systems to run their business.
Any new systems these banks implement need access to data from all existing systems. However, these existing systems may not be fully integrated with each other.
Ensuring interoperability often falls on the developers, and it’s not always a quick or easy task. Hiring a reliable systems integrator is essential. Our software expert witnesses have seen far too many projects fail due to misaligned expectations between the organization and the systems integrator.
3. Failing to Align Stakeholders
Convincing the business and tech sides of a bank why digital transformation is needed is challenging. Everyone might agree that you need a new ERP system, but each side can have its own opinion on what it should do.
For instance, the CIO might want to modernize the existing system architecture. Meanwhile, the CFO wants to keep the project lean and affordable, while department leaders are focused on improving productivity.
It’s hard to mediate when you’re involved, so hiring an independent ERP consultant can help unite everyone.
4. Too-Long Timelines
For banks, it’s not uncommon for the planning phase to last over a year. Then, add another couple years onto that for the actual implementation. Then, more for subsequent go-lives of additional modules.
During this time, market conditions change, technology evolves, and regulatory requirements shift. As such, we recommend going live every one or two years. After each rollout, evaluate the external forces at play and adjust accordingly.
5. Siloed Innovation
In theory, innovation labs are a great thing. However, the issue lies in how separate these labs are from the organization as a whole.
Instead of being the sole focus of one specific entity, innovation should be woven into your company culture. Everyone should feel free to offer up ideas to streamline processes and improve the customer experience. When this is the starting point, changes are easier and there is less opposition to organizational change.
6. Underestimating the Scope
Before you invest in a digital transformation initiative, make sure your team fully understands the scope. Remember: You’re not only changing technology. You’re also changing the way people work.
Allot enough time to guide your company through this transformation. If you rush without planning and preparation, you may end up with technology that doesn’t fit your goals and a team that refuses to adopt new systems.
Avoid These Challenges
The banking sector has been slow to adopt the digital technologies that other sectors are adopting with gusto. Much of this hesitancy centers around data security, system complexity, and change resistance.
While these are some of the most common digital transformation challenges faced by banks, they don’t have to be your story. Contact our ERP consultants below to learn how we can set you up for success on your digital transformation journey.
