In the past two years, catalyzed by the growing demand for more customized and efficient digital banking, 1 in 5 adults have switched their primary bank. Even before the pandemic, more than half of millennials had switched banks simply for a better mobile app.1
The benefits of a digital transition are evident. In fact, banks that successfully adopted and scaled the digital operating model saw 30% to 40% growth in customer capacity, a 10% to 15% uptick in annual cost savings, and increased market reinvestment.2
Banks that haven’t made the switch to digital can’t afford to sit back and wait – it is now an imperative. Underpinning this urgency is a new profile of today’s bank customers, especially amid the generational sea change and wealth transfer from Baby Boomers to the now-dominant Millennials, who interact with financial services very differently than prior generations.
Banks must also be cognizant of how embracing digital will affect their employees. As banks begin to look increasingly like technology companies to remain competitive, they need to rethink their employees’ skill sets and prioritize digital-forward talents like technologists, data engineers, and non-traditional hires. If you have not begun the transition by hiring technologists, you can be sure regulators have done so in preparation for your next examination.
It is no surprise that most financial institutions' existing risk and compliance management framework is not designed to work with rapidly evolving digital and innovative financial technology services. So how can banks execute a digital transition successfully, especially if faced with resource, timing, and technical constraints? One approach is to partner with a resource that already has the requisite experience and technical capabilities, such as Risk Management Solutions Group (RMSG).
Experts at RMSG can assist your financial institutions with a scalable digital operating model that ensures the products and services your financial institution and third-party vendors provide comply with applicable laws, regulations, and standards.
The first step of a digital transformation is to identify the holistic set of capabilities required to meet the enterprise’s strategic ambitions. This should include both existing capabilities and new ones (as needed) and address front-, mid-, and back-office functions across all product lines. This self-assessment will help our experts and your institution’s leadership redefine what digital means to the entire organization.
Next steps involve sourcing capabilities or recruitment, a stage in which your financial institution should appoint or hire a Chief Digital Officer or equivalent. Several potential talents and capabilities may exist within your financial institution – seasoned employees, subject-matter-experts, or other fit-for-purpose recent recruits. Surveys have shown that this stage is often the most difficult to execute because as institutions transition, there is often resistance to changing their existing ways of working instead of leveraging the opportunity to untether themselves from legacy processes and technologies. In any case, there are several ways that an organization can source capabilities.
Once your financial institution completes sourcing capabilities, the leadership team should allocate work, starting with the most efficient part of the institution. Then start shifting from the old operating model to an integrated digital operational improvement program designed with customer experience at its center.
The final stage of transition involves a change from using individual technologies and operational capabilities in a piecemeal manner to applying them to the overall customer experience in the right sequence to achieve compound impact. There is no universal recipe on how to achieve this final stage of transition because so many variables are involved. That is why RMSG does not believe in one-size-fits-all solutions for our clients. Rather, our experts will conduct an in-depth analysis on- and off-site to assess your financial institution’s legacy state and the existing interconnections between customer-facing (front-end) and internal processes (back-end).
Our previous engagements with clients have shown that the best results come when the positive customer experience can continue to build on your institution’s digital operating model. Systematic analysis is also necessary to guide decision making, and RMSG can help there, too. Here are questions that we will ask as part of your institution’s assessment:
Sidebar: So, what is this Digital Operating Model?
Some may call it the “next-generation operation model,” but we consider it a new way of running the organization that combines digital technologies and operations capabilities in an integrated, well-sequenced way to achieve step-change or methodical improvement in your target customer experience and revenue while reducing costs.
Innovation within the banking market continues to expand exponentially, which will not allow its stakeholders to sit back and wait. By adopting a digital operating model, your financial institution can discover opportunities to scale, increase revenue, reduce long-term costs, and lay the foundation for success in the digital age. Whether your financial institution has yet to begin or is in the middle of the transition to a digital operating model, RMSG is ready to assist. We have developed a point-by-point strategic path that can help your institution build a successful digital operating model.
Given the challenges of digital transformation, an optimized and strategy-aligned enterprise operating model can be a tremendous help. When executed well, an enterprise digital operating model will improve customer experience in addition to upgrading your company’s resource utilization and efficiency while improving communication, collaboration, and knowledge-sharing.