Ron Huber

Ron Huber is the CEO and co-founder of Achieve Internet. He's an experienced senior executive with over 15 years managing and leading software teams in the online media, Internet, and software development space.

About the Author

Only 27% of banks were projected to implement a digital transformation strategy in 2021, even though 85% of decision-makers planned to pursue it.

As competitors continue to provide digitized individual services, financial institutions feel the pressure to adapt quickly or risk getting left behind.

With 81% of customers’ demanding more flexibility in their journey and access to on-demand services, like mobile banking and convenient application features, some of the largest banks have started offering their own automated options to cut down on costs and increase profits.

Even though digital transformation offers the opportunity to remain competitive, 46% of banking executives are still unsure how to embrace different aspects of the process.

What is Digital Banking Transformation?

Digital banking transformation is a process of digitalizing customer services, improving processes, and streamlining operations. "Going Digital" is an essential step for banks to take when trying to stay competitive with fintechs and other financial institutions.

To accomplish this, many banking institutions adopt a digital transformation strategy—a comprehensive, actionable plan to help you transform your tools, processes, and company culture to prepare you for the future.

These strategies use a holistic approach to integrate new technologies into all aspects of their business. That means transforming everything, from customer experience platforms and apps to mortgage lending processes.

In the past, several banks have attempted to use smaller digital initiatives to improve online services. However, this is like putting a bandaid on a leaking pipe. These small changes simply aren’t enough and leave many risks unaddressed, like regulatory compliance.

Here are the challenges that an effective digital banking transformation strategy addresses:

  • Lack of understanding by leadership: How do you help key stakeholders understand the process and get them to buy in?

  • IT resource management: What are you doing to provide support for your IT team during this process? Do you need to partner with a third party?

  • Hindered innovation: How are your company’s culture and beliefs restricting your ability to innovate?

  • Non-compliance with regulatory standards: How long will your institution be able to remain compliant without going digital?

  • Increased cybersecurity risks: What actions will you take to protect your client’s data from exposure and fraud?

Benefits of Digital Transformation in Banking

Digital banking transformation is an excellent opportunity for financial service providers to modernize and improve their services. Here are some of our favorites:

1. Transforming the Customer Journey

The future of a customer's journey is a cohesive and personalized experience. This means you'll need to incorporate a digital transformation strategy that integrates all your systems into one central platform so that your customers are served better by responsive technology.

To accomplish this, banks have to utilize APIs to support customer-centric digital initiatives becayse even though financial institutions are not technology companies, they need to be very technologically savvy to stay competitive in today’s digital economy.

To accomplish true digital transformation, they need a robust partner ecosystem that helps them consolidate their digital assets, create high-quality customer experiences, and encourage innovation with the help of API-first architecture and advanced API portals.

Taking the customer journey to the next level will save money in the long run, improve customer satisfaction, and help teams work together more efficiently.

2. Additional Revenue Streams

The focus of today's banking system is no longer solely on providing a private platform for online transactions, but rather on exposing APIs that allow customers to accomplish their needs outside the proprietary portals provided by banks in recent years.

APIs have made it possible for banks to cultivate additional revenue streams by partnering up with innovative fintech businesses that can use their existing digital infrastructure - mainly through an API portal - to build targeted and innovative financial products.

Zello, Stripe, PayPal, Allstate, Payoneer… These are just a few examples of companies that create new products with the help of integrations with third-party APIs.

This trend isn’t showing any signs of going away, so banks that invest in digital transformation will get even more opportunities to integrate their APIs into the value chains of other businesses in the not-so-distant future.

By opening up their API products, banks can remain competitive and preserve customer loyalty while providing third parties with an easy way to connect to and leverage their ecosystem.

3. Flexibility and Adaptability

Financial institutions that want to stay competitive in this digital era need a thorough transformation. The shift from traditional banking methods has been rapid and dramatic, with sophisticated technologies at the forefront of change.

Digital transformation allows your institution to equip itself with the latest technology to scale these efforts gradually over time. Companies that don't evolve will need to provide updated services that traditional in-person interactions cannot deliver to their customers.

4. Improving Security and Compliance