Start with the Customer

Too many digital transformation programmes are conceived or led by the bank’s IT department, following the latest trend without understanding what the bank’s customer want or need. It is important that the customer management team defines what is required for the transformation team based on fact-based insight gathered from customers.

Technology stack: Having modern cloud-based modular technology that is API-led is essential to transforming the bank. Whilst there are new security risks with a cloud-based technology, regulators are becoming more encouraging, emphasising the need for enhanced due diligence when making architecture and buying decisions.

Programme Management: Actively sponsored, well-resourced and supported programme management is crucial, with involvement from all parts of the bank. Don’t ignore departments such as Human Resources who may not be directly affected by parts of the transformation.

Partnerships: Most transformation requires a bank to work with external partners who have experience in business process re-engineering, systems development, and integration.

Options for achieving the goal

Many banks are replacing legacy components such as core banking, data repositories, channels, and CRM with new technology, followed by a ‘big bang’ migration of customers to the new platforms. If it is not well-managed it may pose a risk to the bank’s customers who sometimes cannot access their accounts on the new platform, and the bank’s reputation and involve losses in revenue, fines levied by their regulator and compensation having to be paid to affected customers. The UK bank TSB’s system migration failures in April 2018 are estimated to have cost them £330 million in customer compensation, fraud losses and other compensation, losing them 80,000 customers and plunging them into a loss.

Some banks have gone back to basics to address the problem rather than taking a piecemeal approach to solving their technology problems that replaces components from corporate systems but may not leave the bank in a much better position.

As discussed in Fintech Revolution, banks can take ‘Fintech-like’ options, such as launching a fully digital Fintech Retail Bank in parallel to their incumbent Retail Bank. The digital bank then competes with new challengers, but also provides the ‘lifeboat’ for the incumbent Retail Bank that allows a managed migration of customers as they adopt more digital services.