Banks, especially larger banks, have generally been slower to embrace digital transformation when compared to other industries. The scope of time and resources necessary for digitization, plus a tendency to prefer more gradual change, has limited the number of digital transformations in the sector. When banks do launch digital initiatives, it is often in response to market trends and shifting customer expectations that are too big for them to ignore, such as mobile banking.
That said, digital transformation in banking is poised to pick up as competition from new, smaller financial entities increases and established organizations see more digital transformation success stories.
The benefits of digital transformation in banking are numerous and vary depending on the challenges and goals of the organization. That said, there are some general benefits that most banks will see when they choose to go on their path to digitalization. Below are some of the biggest benefits that banks may see from a digital transformation.
Benefits of Digital Transformation in Banking
Here are some of the ways in which banks can benefit from digitally transforming core systems.
Gain Flexibility and Adaptability
Mergers and acquisitions are common in today’s banking environment. Cloud-based ERP systems make it easier to merge banks and consolidate business entities since they remove the need for customized on-premise systems. Since modern cloud-based ERP systems are more user friendly, they are also easier to adopt.
Consolidate Data, Applications and Processes
Digital transformation allows banks to transition from their various legacy systems, which are often a mix of different tools that are pieced together and don’t share data well, to a centralized system. This yields several benefits: a bank’s overall technology stack is reduced in size and complexity, making it easier and more cost-effective to maintain; data is standardized across the organization globally; data accuracy is improved; and the need for time-consuming ETL processes is removed. After transitioning to a cloud-based HCM and Payroll system, one of Collaborative Solution’s bank clients was able to either eliminate or consolidate at least five different applications, improving operational efficiency.
Transform Reporting Capabilities
Not only is data consolidated, but it is made available in real-time, greatly changing how banks can approach reporting. Banks can monitor and react quickly to changing trends or identify issues earlier. It also makes some data more accessible, allowing senior leadership to pull reports that traditionally would require IT to pull together and format.
Since less time is spent compiling reports, more time can be dedicated to analysis and strategy. This gives banks the opportunity to transition staff whose roles primarily focused on compiling reports to more analysis-based roles that can have a bigger impact on business.
Switching to a new financial management system makes it easier for global banks to stay compliant. Modern features such as auto-auditing allow employees to spend less time on auditing activities. Data can be standardized and pushed into the financial management system from other applications automatically, reducing the chances of human error. A modern, cloud-based payroll system regularly gets compliance updates, meaning the bank does not need to worry about changing regulations.
Improve Talent Acquisition and Retention
A modern, cloud-based HCM improves every aspect of hiring and employee management. Banks can easily source new talent using mobile-first technology, automate aspects of the interview process, and onboard new hires more quickly. Modern HCM systems also paint a clearer picture of employee performance and provide succession planning and other tools. At the same time, modern HCMs allow bank employees to self-service many basic HR tasks and questions, saving HR staff time.
Perhaps the biggest benefit of digitally transforming HR is that it gives banks the tools needed to adopt workforce planning initiatives. In other words, modern HCMs allow bank HR departments to better align talent needs with overall organizational goals. It is a more proactive approach to hiring and managing talent that can save banks time and money while making them more competitive at the same time.
Building a Strong Digital Core
The scope of a digital transformation can extend to just about every part of a banking institution. For a bank considering a transformation initiative, this creates the problem of knowing where to start.
Generally, it’s best for banks to focus their initial transformation efforts on their core business systems. This includes their financial management system, HCM, and analytics platform. Banks can choose to start with one or two of these systems, then roll out the rest in subsequent waves. From there, banks can expand their digitalization efforts to other business functions, like marketing.
Starting with these three tools builds a solid digital core and establishes a foundation for much of a bank’s critical data. From there, other cloud platforms can be added and then connected to these systems with ease, automatically pushing data into the core applications without the need for complicated custom integrations.
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