Whether businesses were ready or not, the pandemic sped up the adoption of digital technologies across industries and according to a McKinsey Global Survey of executives, many of the changes could be here for the long haul. In fact, the study’s findings suggested that “most respondents recognized technology’s strategic importance as a critical component of the business, not just a source of cost efficiencies.”
But it seems that some industries, such as the banking industry, simply accelerated the digital transformations of activities that were already underway with outside tools prior to the pandemic and haven’t made significant progress in terms of implementing new digital solutions at the organizational level. Actually, this 2020 Innovation in Retail Banking report found that banking organizations rated themselves lower in innovation and digital transformation maturity compared to 2019 most likely because other industries moved faster to keep up with the needs and expectations of digital consumers.
The report also brought up the question of whether legacy financial institutions can avoid “reverting to outdated policies and risk-averse culture”, factors that stood in the way of banks adopting innovation and digital transformation in the past. It also revealed that banking digitalization has been hindered due to the belief from a majority of banks that the industry will experience an economic downturn as a result of the pandemic.
Whether the banking industry faces economic repercussions from the pandemic or not, for banks to make their services more flexible and compatible with a digital world requires a move away from legacy systems—with outdated application programs that can be costly to maintain and upgrade—and an acceleration of digital transformation across the organization (75% of survey respondents in the report identified digital banking transformation as a top priority).
But what other factors are holding banks back? According to this Forbes article, investment is a big factor and once the digital transformation process begins, it can’t be stopped and will require consistent financial support. The article highlights that while a bank is implementing the active phase of transformation—which typically lasts two to three years, “the level of investment that creates tangible results is about 10% of the bank's annual expenditure.” Other challenges outlined in the article include a lack of understanding of the importance of digital transformation. This results in hesitancy and a lack of support from executive leadership, with banks choosing to “digitize” or improve existing and outdated processes instead of creating new innovative ones through “digitalization”.
Digital innovation benefits commercial banks by bringing technology to their products, services and business processes, allowing them to be more agile and to respond swiftly to market needs, especially as the shift towards finding digital products and services continues to accelerate. As this article points out, digital innovation can help banks drive sales, customer engagement and retention—positioning them as a key player and differentiator in the industry. Digitalization also develops trust and loyalty between a customer and their selected bank. It’s important for banks to have a streamlined and accessible experience for digital transactions in order to retain their customers otherwise they may leave and go to a competitor bank.
So how can banks continue to improve and become more innovative without hurting their pockets? It starts by optimizing your planning processes and using a pre-configured solution that can help you grow and scale.
Read on to discover three ways banks can leverage digital innovation to optimize their business planning processes with a complete planning platform that is built to the unique needs of banks and credit unions.
1. Unified Data
Collecting data isn’t anything new for banks. The volumes and types of data banks handle are quite extensive and diverse. Between ERP and GL, ALM, FTP and HRIS data, it can be impossible to find the numbers needed and to keep everything in check, especially when that data is siloed.
But during these times of change and as innovation continues to drive us forward, it’s critical to have the right data at the right time in order to make speedy business decisions, avoid costly delays and manage risk. Where banks can really use help is unifying all that data into a centralized location as well as automating workflows, audits and processes. A complete planning platform that can easily integrate data from multiple ERPs and subsidiaries to create a single source of truth allows for real-time consolidation. When all of that data is combined, with any redundancies or errors removed before it is stored, this will enable banks to streamline their data resources and discover patterns in the data—leading to more strategic planning and insightful analysis about any aspect of the business.
2. Scenario Planning
Once all of those bank data sources are integrated and workflows, audits and processes automated, it becomes easier to move with agility and mitigate risk with what-if and scenario modeling capabilities. Knowing that you are always working with the latest actuals and that your financial models are connected to a centralized location, when any changes occur with key drivers, such as margin or interest rates, you’ll have the flexibility to run ad hoc analysis and create driver-based scenarios so you’ll always be prepared for the impact of those changes.
3. Ad Hoc Reporting and Data Visualization
When it comes to the reporting needs of banks and credit unions—budgeting and forecasting, regulatory reporting, variance analysis—the ability to report against various modules of data (branch, individual, department, etc.) while also being able to set and track goals is a key industry differentiator. And how that data is delivered is what matters when it comes to driving performance and creating efficiencies across the organization. Responsive banking dashboards and data visualization tools can help tell a powerful story with data, allowing for the sharing of actionable insights with stakeholders and decision makers throughout every stage of planning cycles.
Click here to discover three top dashboards to improve financial reporting.
The Rise of Digital Transformation in Banking
Digital disruption is not new, but with the escalation of change brought on by the pandemic, the acceleration of digital transformation can’t happen fast enough, especially in banking.
In order for banks and credit unions to keep up with rapidly changing market conditions so they can mitigate risk and maximize profitability, especially as the pandemic continues, a complete planning platform that is made up of customizable templates, data models, connectors and business logic that meet their specific needs, will make all the difference in helping them survive—and thrive—in a competitive landscape.