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Goal: digital transformation. Reality: meh

As legacy systems stagnate, banks must innovate to satisfy customers and remain competitive

Bank tech trends can make your head spin. So regularly longtime Tech Exchange Editor John Ginovsky does his best to “make sense of it all.” Bank tech trends can make your head spin. So regularly longtime Tech Exchange Editor John Ginovsky does his best to “make sense of it all.”

Increasingly banks, and businesses in general, are recognizing the connection between innovative product and service delivery and customer satisfaction … and by extension, improving the customer experience.

Also increasingly, they are realizing the need to transform their strategies, operations, and basic thinking from their legacy systems to fast-changing digital capabilities.

The problem is, recognizing and realizing are much easier than accomplishing. A number of analysts and consultants recently have weighed in on this.

North American firms upbeat but not spending competitively

Ovum, for example, captured insights from 7,000 enterprise organizations across 62 countries.

It found that one third of these are underprepared for digital transformation. Ovum defines the term as “the process of replacing legacy networks and dedicated service platforms with a coherent digital environment that is flexible, cost-effective, and capable of delivering changes rapidly and dynamically.”

The good news for bankers in this report is that it found that respondents from the financial services sector demonstrated the most confidence in enabling digital transformation. Six in ten financial services IT decision makers believe the process is “well advanced” or “in progress.”

Not so good news according to this report, for U.S. banks: North America was cited for showing the slowest increase in IT spending compared to other parts of the world. The top three areas were found to be South Asia, Southeast Asia, and Latin America.

“The new study closely examined the process of digital transformation currently taking place within enterprises today, and found many are struggling with omnichannel customer/citizen engagement, predominantly focused on online/mobile channels to date,” the report observes.

While it is talking about the 7,000 organizations in general, that comment should resonate with bankers in particular.

More indications Asian-Pacific region’s pulling ahead

SAP, in a report titled “Digitizing IT,” had similar conclusions. Based on responses from 812 senior executives at multinational corporations, it found only one in five organizations globally have implemented a digital strategy that encompasses the whole company.

It describes a “digital strategy” as one that “fully integrates strategic, financial, and operational elements.” As in the Ovum study, organizations in the Asia-Pacific region lead the way in enterprise-wide digital strategies, with nearly one in three companies reporting progress in this area.

“Digital transformation is the new strategic imperative—no longer just a handy source of competitive differentiation but a must-do for every company, in every industry, and across every geography,” says Thomas Saueressig, CIO, SAP.

The SAP executive adds that “forward-looking CIOs understand that they need to change their roles from ‘keeping the lights on’ service providers to ʻleaders of innovation.’ This is easier said than done, but there is a positive correlation between the early involvement of IT and meaningful success rates of digital transformation initiatives—so the first step is the most important one.”

Widespread disappointment with IT

Deloitte also recently weighed in with a related, and equally massive, global survey of 1,217 technology leaders across 23 industry segments. Again, its conclusion revealed tepid attitudes toward digital capabilities vs. organizational goals.

It uncovered a shift in business priorities from “business performance” to “customers,” with 57% of CIOs choosing “customers” as their top priority, compared to 45% last year.

However, only 45% of CIOs said their information technology organization is involved in delivering customer experience through IT capabilities, and 28% of CIOs feel their IT organizations are below average in their digital skills.

It grows worse, according to Deloitte.

While 57% of CIOs report that the business expects them to assist in business innovation and developing new products and services, more than half say that innovation and disruption priorities currently do not exist or are in the process of being built.

Even worse, 61% identify cybersecurity as a core expectation, but only 10% of CIOs report cybersecurity and IT risk management as top business priorities.

Says Khalid Kark, managing director, Deloitte, and director of research for Deloitte’s CIO program: “CIOs create value by delivering capabilities that are in tune with business priorities. Rapidly shifting business priorities mean that CIOs can’t afford to just react to business needs; they need to develop the business acumen to anticipate and pre-empt future business needs.”

From the client’s side…

Getting much more specific to U.S. bank performance in this area, Protiviti recently surveyed 2,000 U.S. bank customers about their customer experience issues. Again, the good news: 93% said their banks at least meet their expectations.

But that’s not good enough, says Protiviti. It found that only 36% of customers believe their banks exceed expectations.

“Consumer banks are no longer squaring off solely against traditional industry opponents to attract and retain customers,” says Atul Garg, managing director, Protiviti. “They’re also contending with established consumer brands, emerging fintech players, and others. Succeeding in this new competitive landscape requires a rigorous focus on customer care and a commitment, at every level of the organization, to finding ways to consistently exceed customer expectations.”

Protiviti zeroes in on one specific area in which banks might find ways of exceeding expectations: How they handle customer complaints.

According to this survey, only one in three customers thinks that their financial services company “absolutely cares” about their problems. Nearly as many state that their banks either do not care or are unsure if they care about any complaints.

“While customer complaints represent a fact of life in the financial services industry, these problems also present prime opportunities to delight the customer,” says Jason Goldberg, a Protiviti director in the firm’s business performance improvement practice. “We’re finding that regulators increasingly review and act upon customer complaints, which means compliance executives should be as concerned as their marketing counterparts about the speed and compassion with which issues are resolved. Even though innovation in the banking experience is a key consideration for financial services organizations, customer service remains a fundamental tenet of the business and we don’t expect that to change.”

A banker weighs in

Perhaps Greg Carmichael, president and CEO, Fifth Third Bank, puts it best. (Notably, he came to that position having first joined the bank as CIO in 2003.)

In an essay he wrote, published on the Financial Services Roundtable website, he says: “To me, technology needs to help solve a business problem or create a business opportunity. Technology is a means to an end, allowing us to do something faster, better, and cheaper. Most important, it allows us to better serve our customers.”

Sources for this article include:

1 Out Of 3 Companies Underprepared For Digital Transformation, Ovum finds

Deloitte Global CIO Survey

Fintech And Banking: An Exciting Opportunity

New Protiviti Report Finds Many Banks Are Merely Meeting Customer Expectations, Few Are Exceeding Them

Newsbyte: Only One In Five Organizations Globally Have A Cross-Departmental Digital Strategy

John Ginovsky

John Ginovsky is a contributing editor of Banking Exchange and editor of the publication’s Tech Exchange e-newsletter. For more than two decades he’s written about the commercial banking industry, specializing in its technological side and how it relates to the actual business of banking. In addition to his weekly blogs—"Making Sense of It All"—he contributes fresh, original stories to each Tech Exchange issue based on personal interviews or exclusive contributed pieces. He previously was senior editor for Community Banker magazine (which merged into ABA Banking Journal) and for ABA Banking Journal and was managing editor and staff reporter for ABA’s Bankers News. Email him at [email protected]

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