This blog is part of a series about the operations pain points that many organizations face as they tackle digital transformation and change management. Our experts provide insights and recommendations based on their decades of hands-on experience and tackle some of the most pressing business and technology pain points.
Challenges and complexity, inherent to any digital transformation, are particularly pronounced in the financial services sector as business needs and customer expectations accelerate.
Executives may be caught between the competing needs of stakeholders, antiquated practices and technology, and taking the necessary actions to optimize systems for the best employee and user experience possible.
Recent events such as the pandemic and ongoing changes in global dynamics have caused fundamental shifts for financial services organizations. It’s no longer enough to simply keep things running – it’s imperative to build processes and systems that will thrive in changing markets.
6 key areas for transformation
There are six vital areas to consider when undertaking financial services technology transformation. Implementing a clear, well-defined strategy across the following areas with focused goals and objectives is paramount to transformation success.
- Legacy systems and infrastructure can be difficult to integrate with newer technologies and lead to a slow, costly implementation of new systems and initiatives. Cloud computing, data collection and management, and cybersecurity must be interwoven across the IT ecosystem.
- Regulation and compliance requirements and standards regarding issues such as data privacy, security, and anti-laundering measures are critical when implementing or changing technology systems.
- Security and fraud measures to protect sensitive customer data and prevent financial losses are a must for an industry that’s a prime target for criminal activity.
- Customer trust and adoption and minimal disruption are the goals of any customer-facing changes. Prioritizing customer needs and preferences and providing a seamless digital experience across all touchpoints and channels will minimize resistance to change.
- Talent acquisition and retention of people with the necessary skills is particularly important to sustain base knowledge and relationships in pivotal technology roles.
- An organizational culture shift is necessary to become more collaborative and transparent and to minimize internal resistance to change.
While most financial organizations understand what needs to get done and want to continue their journey toward their desired future state, they often face challenges of costs, time, and talent.
To get the required budget, build a business case that includes the projected value from the change initiatives. It’s also important to identify the correct budget decision-makers and make sure that the business case is presented to them.
A realistic roadmap that details the time needed from start to finish will include steps for communication and cultural change. One of the biggest complaints about transformations is that they always take longer than estimated, and that happens when roadmaps only account for the rosiest outcomes at every step rather than building in realistic timing.
Getting the right talent involved may include both internal resources and external partners. Once key performance indicators are defined for transformation, evaluate each one to identify the best resources to achieve desired outcomes.
The collaboration of IT and business leadership is imperative to making sure that strategic conversations include the input and alignment of those tasked with all technology and platforms. Business leadership, users, and tech teams should work in tandem to ensure that transformation changes can be integrated and adopted across all systems without redundancies and integration issues.
Benefits of platform-based agility
A platform can become a more agile business solution to operate independently from other areas or platforms while maintaining its integrity within the larger IT ecosystem. Platform models create connections and organize services for more efficient change management.
Although a central control point is necessary to manage cross-platform services and implement governance and cybersecurity, three groups of platforms that can help simplify the services needed within a financial entity.
Customer journey, business capability, and core IT platforms can be tasked with groups of services. Examples within a financial services customer journey platform include searching, account opening, and transacting. Business capability platforms include credit underwriting, payments, and investment management. Core IT platforms include access and identity management and in-branch services.
The flexibility of independent platforms allows companies to scale effectively. Solutions can be exchanged within platforms more easily without affecting other services, and business units can focus on modernization or migration. Platforms also provide room for innovation and growth through focused feature and solution development.
Emerging risks in financial services technology
Technology in financial services has the power to create or amplify risks. A financial services transformation should include a forward-looking and outcome-focused strategy to address the evolving risk landscape.
- Increased interconnectivity: New financial players such as big tech companies are creating decentralized finance models that operate outside of regulatory structures. Similarly, increased digital relationships between service providers are creating new interconnections and exposure to risk.
- Geopolitical landscape: Another emerging factor for risk is the inconsistency between global and national approaches to regulations and cybercrime. Conflicting national priorities and a lack of globally coordinated systems and efforts for malicious threats have led to more openings for financial and cybercrime across borders and operating models.
- Ineffective data protection: The accelerated pace of expected innovation and capabilities has created an opportunity for Increased malicious activity across digital landscapes. Threat actors target ineffective digital authorization and authentication controls, vulnerabilities from data portability and user experience features, and security gaps due to increased endpoints and connectivity.
- Exclusion: There are also barriers to financial inclusion driven by inaccessibility and algorithmic biases. Inaccessibility includes the pronounced impact of physical bank location closures on certain populations and discriminatory practices in lending.
- Influencers: Additional new financial services risk drivers include influencer sources for market manipulation such as the recent investor social media posts that led to a large bank’s collapse and a social media-driven group that continuously works to affect the stock valuation of troubled. companies.
Want to learn more?
The “Operations Pain Points Solved” series highlights common issues faced by organizations everywhere. Read the other blogs in this series to learn about establishing a target operating model, optimizing the customer experience, transformation planning, managing people, and more.
