As a financial institution, you’re probably all too familiar with the challenge of adapting to modern and emerging technologies. The good news is that most financial institutions are in the same boat. This means there are plenty of lessons learned that you can apply to your own digital initiatives.
Today we’re sharing some of the top digital transformation challenges faced by banks and how to overcome them.
6 Digital Transformation Challenges Faced by Banks
1. Assigning the Wrong People
Often, financial institutions turn to their current operations team when it’s time to implement a new technology. The only issue? These employees are used to the current ways of doing things. This means they often resist adopting new systems and processes.
To avoid this problem, take the time to curate an agile implementation team that can lead the initiative from the start. The team can include in-house team members, but also should contain people who have implemented digital banking systems in the past and know how to use the new technology.
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In helping the client get its project back on track, one of our primary focus areas was decreasing their customization needs by improving their processes to align with the system's best practices.
2. Complex Technical Systems
Most banks rely on intricately connected technical systems to run their business. In most cases, the front-end experience is interwoven with back-office networks, and updating the facility isn’t as easy as installing one new piece of software.
Even if you implement new systems up front, those systems still need the ability to access data that’s stored in the back. If those two systems can’t communicate with one another, it can render both solutions unusable.
Ensuring interoperability often falls on the developers, and it’s not always a quick or easy task. One workaround is to install a third layer between your front- and back-end networks, instead of trying to connect the two directly. This way, you can still make changes and updates to your front-end system, even if most of your data remains in antiquated legacy platforms.
3. Failing to Achieve Stakeholder Alignment
It can be difficult to convince both the business and tech side of your banking organization why a digital transformation is necessary. Everyone might agree that you need a new ERP system, but each side can have its own opinion on what it should do.
For instance, the CIO might want to modernize the existing system architecture. Meanwhile, the CFO wants to keep the project lean and affordable, while department leaders are focused on productivity.
Alignment can be hard to achieve, but you need it to move forward. Unless everyone agrees on priorities, there can be major misunderstandings, conflict, and planning problems.
It can be difficult to mediate when you’re in the middle of it yourself, so it can be helpful to hire an independent ERP consultant that can get everyone on the same page.
4. Too-Long Timelines
For banks, it’s not uncommon for the planning phase to last over a year. Then, add another couple years onto that for the actual implementation. Then, more for subsequent go-lives of additional modules.
These evolutionary or continuous transformations can even last five to ten years. During this time, market demand changes, technology evolves, and regulatory requirements shift.
We recommend going live every one or two years. After each rollout, evaluate the external forces at play and ajdust accordingly.
5. Siloed Innovation Labs
In theory, innovation labs are a great thing. As more facilities offer online banking services, they’re establishing these separate groups to research available options and understand potential outcomes.
However, the issue lies in how separate these labs are from the organization as a whole. While some innovative ideas might arise, they’re rarely connected to overall organizational goals.
Instead of being the sole focus of one specific entity, innovation should be woven into your company culture. Everyone should feel free to offer up new ideas to make work easier and customers happier. When this is the foundation from the start, adjustments are more welcome and there’s less resistance to organizational change.
6. Underestimating the Scope
Before you invest in a digital transformation initiative, make sure your team fully understands the scope. Remember: You’re not only changing technology. You’re also changing the way people work.
Allot enough time to guide your company through this transformation. By pressing ahead without taking the time to plan and prepare, you could be left with technology that’s either ill-matched to your goals and not robust enough to help you reach them.
Avoid These Challenges
The banking sector has been slow to adopt many digital technologies. Much of this hesitancy has centered around data security, system complexity, and change resistance.
While these are some of the most common digital transformation challenges faced by banks, they don’t have to be your story. Contact our ERP consultants below to learn how we can set you up for success from the beginning.