Banks are under continuous pressure to innovate and evolve, leading much of the sector to launch ambitious digital transformation efforts that are key to remaining competitive and meeting customer expectations. While these technology-focused projects are necessary and offer significant opportunities for growth and efficiency, organizations are likely to encounter a range of challenges along the way.
Though these are manageable, leadership needs to be aware of them and put in project plans that either take them into account or allow for the flexibility required to adjust their digital transformation strategy as obstacles are encountered. Otherwise, the initiative may fail or slow down to the point where it becomes ineffective or unviably expensive.
Here are three major challenges bank digital transformation efforts can face:
1. Legacy System Integration Challenges
One of the biggest obstacles most banks will encounter during their digital transformation journeys is integrating new technologies with existing legacy systems. Replacing this legacy infrastructure is expensive and risky, which is one of the reasons why these systems remain in use (just ask any company that's performed an ERP migration how that project went), so any digital transformation project timeline will need to take into account the reality that getting new technology systems integrated with these existing ones may take longer than expected. The implementation project could also require a partial modernization of a legacy system, which may require hiring specialists and extending the project timeline.
To solve the integration challenge more easily, banks should look for technology vendors with experience working with the legacy systems they use. They may already have an internal solution from a previous implementation, or their team will know the intricacies of integrating their tool with your particular infrastructure.
2. Cybersecurity and Data Privacy ThreatsWith the convenience of increased digitization comes the downside of increased vulnerability to cybersecurity threats and data breaches. The larger a bank’s digital footprint, the more likely it is that it will face a large volume of cyber attacks – one JPMorgan executive recently said that the bank faces 45 billion attacks per day – which means having more secure systems as well as needing more cybersecurity employees.
In addition to investing in their cybersecurity infrastructure and teams as part of their digital transformation efforts, banks should look for partners that understand the threats financial institutions face and have made their own cybersecurity investments. These companies will typically have certifications such as SOC2 that require them to develop stringent cybersecurity controls and processes and undergo a comprehensive audit. Not only will their products be more secure and less risky to add to your technology stack, but their cybersecurity teams will be able to provide assistance that helps banks improve their own practices.
3. Cultural Resistance to Change
One of the most significant barriers to successful digital transformation in banking is cultural resistance to change. Many banks have well-established ways of operating, and shifts toward digital-centric models can be met with skepticism and reluctance, especially considering that banks have a history of being slow to change and modernize.
This resistance can be motivated by several factors. Some employees may not like the business risks that come from changing technology or processes, or they may need to understand the potential benefits that justify those risks. There may also be employees who resist change simply because they don’t want to learn a new tool or workflow or because they worry their job will be made unnecessary in the process.
It is important that leadership clearly communicates the purpose and benefits of their digital transformation initiatives to their teams, particularly those that will be directly involved in the implementation process. The leadership team should also be aligned on the purpose and necessity of the initiative so that there are no conflicting messages or signals.
It is also important to foster a culture that values innovation, agility, and continuous learning as this will be critical to long-term success. Cultures that emphasize these values adapt more readily to change and are more likely to see digital transformation as an opportunity rather than a threat and will be better able to adapt to the ongoing shifts and disruptions the banking industry will be facing for the foreseeable future.
Transform Your Business Credit Card Program With Torpago
At Torpago, we're focused on helping banks transform their business credit card programs and help them overcome digital transformation challenges. We created our PoweredBy solution suite with these needs in mind.
The Suite consists of a modern business credit card platform and a range of services that support bank credit card programs. The platform includes advanced spend management and program administration features as well as an extensive list of integrations, all designed to make it easy for banks to quickly launch a branded program without building out the technology infrastructure on their own. And our service offerings are designed to help banks support their programs and include assistance for underwriting, customer service, training, and marketing needs.
Request a demo today to learn more about PoweredBy and how our solutions can help your bank build a successful and profitable business credit card business!
