For financial services, cost is always a factor. Cost is often what prompts banks and other financial service organizations to go down the path of digital transformation in the first place, since a well-executed transformation reduces expenses, improves efficiencies, and makes it easier to find new ways to save money. But what happens when the cost of financial services modernization gets out of control, offsetting any potential ROI from the transformation?
For complex, highly regulated industries like financial services, this is a very real possibility. Technical challenges, poor communication, a lack of understanding (or buy-in) from stakeholders, can all result in the cost of a digital transformation ballooning exponentially. The risks associated with a digital transformation that goes well over budget are well documented and can potentially involve board intervention and C-level departures.
While IT modernization can be challenging, most organizations in the financial services space understand its importance. According to Gartner, roughly one in three CIOs in the financial services space said that investing in digital was a priority. For example, 46% of banks surveyed stated that using modern technology solutions to cut costs was a priority for 2019.
Gartner also concluded that, while more financial services organizations are looking at digital transformation, the industry as a whole is a bit behind the times.
Financial services organizations are ultimately left with the following problem: commit to a digital transformation to stay competitive but do so in the most cost-effective way possible. Fortunately for those looking to take the journey of financial services modernization, there are ways to keep costs down and better guarantee an ROI from their technology investment.
Achieving Cost-Effective Digital Transformation in Financial Services
Connect Different Apps with Custom Integrations
According to The 2019 State of Ecosystem and Application Integration Report by Cleo, about half of all enterprises surveyed said that poor integrations cost them between $250K and $500K in lost revenue. The purpose of a digital transformation in financial services is to connect and centralize disparate digital assets so that processes are made more efficient and data becomes more reliable. When integrations are poorly executed, they end up having the opposite effect: workflows grind to a halt and data becomes untrustworthy.
To ensure a seamless flow of data, utilize integrations that are customized to your specific firm’s needs. A more tailored solution guarantees that different cloud solutions are working together to deliver value.
Align Processes, People, and Technology
One of the costlier mistakes that occurs during a financial services modernization is the adoption of a “lift and shift” mentality that seeks to replicate existing processes in a new, cloud-based environment. Approaching a transformation with this mentality typically results in costlier changes made later down the line, as these old processes can be inefficient or not easily replicated in the new environment.
A more cost-effective approach is to think of transformation in terms of people, processes, and technology in one. When developing your digital transformation strategy, make sure that these three elements are in alignment. Also, evaluate any impacted processes before the digital transformation and determine how they could be simplified, automated, or improved in some other way.
Keep Your Inertia
When it comes to keeping the cost of digital transformation low, maintaining inertia is critical. Digital transformation in financial services is a long and complex process, potentially taking years to complete. Projects that get bogged down in technical or organizational challenges tend to stall, resulting in more time and money spent to kickstart it back into motion.
Having a core team of advocates, also known as change champions, within the organization can keep teams accountable and engaged in the transformation process, allowing the organization to hit milestones consistently and keep its momentum.
Consider Change Management Services
As mentioned earlier, one of the easiest mistakes to make during a digital transformation is to focus on the technology side so much that the human side is neglected. At the end of the day, however, it is people who will be the ones using the tool. Passive resistance to change is a concern that every business should expect during a transformation, as it is a common problem. Confusion or ignorance can stall a transformation just as easily.
To ensure that those within the organization that are impacted by a digital transformation are bought-in and up to speed, financial service organizations should consider change management services. Change management for financial services combines communication, strategy, training, and sustainment in order to ensure that those impacted by a transformation are bought-in, educated, and have the resources they need to utilize the new system.
Final Thoughts on Financial Services Modernization
Keeping digital transformation costs low requires careful planning, established management processes, and a lot of problem-solving. More than that, however, it requires a clear view of the financial firm’s strategy and how modern technologies like automation, AI, and cloud solutions can help the organization successfully carry out this strategy. This will ensure that the transformation ties to specific business objectives instead of simply modernizing for the sake of modernizing.
Popular Articles About Digital Transformation in Financial Services
AI in Finance: 3 Hurdles to Overcome
Four Ways to Make Your Global Business’ Payroll More Efficient
