Much of the banking industry believes the Coronavirus crisis has accelerated digital transformation among financial institutions (FIs). However, increased adoption of the digital channel alone does not equate to transformation nor does it fully reflect our highly digital lives.
In our most recent Gold Standard Series event, a panel of digital banking technology experts explored why this perception of digital transformation persists. Below are highlights from the discussion.
Digital transformation: what’s really happening?
Cornerstone’s 2021 What’s Going On in Banking report set the stage for the event’s discussion, and reveals some telling truths about how mid-size banks and credit unions perceive digital transformation.
About three quarters of FIs surveyed for the report have already developed and launched some form of digital transformation strategy or initiative. Some of these FIs began their journey as far back as 2017 while others are still in the planning stages and hoping to launch later this year or in the near future. Of those who said they began their transformation last year, 20 percent say they’re at least halfway through the process. There are even a handful of FIs who started their journey in 2018, claiming to already be through with their transformation.
Considering the high number of emerging technologies that FIs have been slow to adopt, these numbers don’t add up. According to the latest What’s Going On in Banking report, less than half of FIs have adopted cloud computing, and even fewer are using APIs. AI technologies are just barely in the double digits of adoption among surveyed FIs. If the numbers don’t match what FIs say they’re experiencing, what’s really happening with FIs’ digital transformation?
What does digital transformation mean?
Among the panelists, digital transformation was defined similarly: internal digital and technological initiatives that drive a culture shift and reimagining of an FI’s business model alongside the delivery of solutions in a modern experience that makes banking easier for users. In this way, digital transformation is not simply upgrading digital banking and adopting the latest technologies — it’s reimagining how the business works.
To this end, FIs can develop committees to manage their new internal digital organization. For instance, FIs can separate their digital transformation management structure into two camps: one that manages all existing digital initiatives (e.g., mobile, bill pay, cash management) and a separate innovation team that looks outside of “business as usual” to expand the business model outside of traditional brick and mortar thinking.
Starting internal groups to oversee digital projects indicates that transformation is a long process. Considering panelists’ digital transformation stories, the length of time it takes to be far along a digital transformation journey is drastically different from respondent claims in the What’s Going On in Banking report. While many surveyed claimed to be halfway or completely done with their transformation in at most two years, Dave Mitchell, EVP, Digital Bank GM and Chief Digital Officer at Liberty Bank outlined a 3-5 year strategic plan for expanding their business model with technology as part of their larger transformation journey. Christine Wiley, President/CEO at Rocky Mountain Law Enforcement Credit Union stated they began their journey 12-15 years ago. Both FIs anticipate never reaching an end to their journeys, but to always be evolving alongside technology.
Practicing coopetition along the digital transformation journey
For FIs that lack scale and technical expertise, keeping up with changes in technology during their transformation is daunting. But innovating and transforming are team sports that require the input of many within an organization. Growth-oriented collaboration can also take place outside of the organization with unlikely partners.
FIs can practice coopetition — working with potential competitors across the digital banking ecosystem to build value internally and externally — and work with outside development teams to fill internal knowledge gaps while building user relationships through digital experiences. These coopetition partnerships typically form with fintechs specifically and empower FIs to go farther faster on their digital transformation journey.
If each organization is creating value for users, there’s room for multiple players. But how can mid-size FIs pick their coopetition partners? Firstly, FI’s should never count out someone that has a relationship with users that is based on trust. A partner should be able to bring the value of an ecosystem to the FI, providing greater speed to market and enhancing the ability to compete with larger players.
Thank you to Cornerstone Advisors, Liberty Bank, Rocky Mountain Law Enforcement Federal Credit Union, and attendees for another great Gold Standard Series event!
You can watch Beyond the Hype of Digital Transformation in Banking on demand by clicking the link below.