With the world's rapid digitization, banks have to change faster than they're used to. Bank leaders are increasingly aware of the need to adapt and transform their operations to meet changing customer expectations. However, successful digital transformation efforts require more than just an executive understanding that "something needs to change." The key to a winning digital transformation strategy lies in a handful of considerations that can drive substantial competitive advantages:
Embracing Customer Centricity
With competitive pressures being the main driver behind the need for digital transformation in the banking industry, adopting a customer-centric approach will help prioritize projects and allocate resources to the initiatives that will make the biggest impact.
By working with your existing customers to solicit feedback about their digital banking needs, you will be able to determine what features to add to your mobile app, what solutions to add to your business banking offering, and even identify opportunities to use technology to improve the physical banking experiences at your branches and offices.
Prioritization of Data Security
Banks collect an immense amount of data, much of which is quite sensitive. While a digital transformation strategy may (and should) involve upgrading analytics capabilities to get actionable insights from this customer data more easily, ensuring it remains secure is even more important as financial institutions are popular targets for cybercriminals.
According to a report by American Banker, at least 79 financial services companies reported a breach that affected at least 1,000 customers in 2022. Some of those affected millions of customers, including the breach of Flagstar Bank. That incident involved the data of 1.5 million customers and included personally identifiable information such as social security numbers, leading to a class-action lawsuit.
While a data breach may not necessarily send existing customers scrambling for the exits immediately, it may cause them to explore alternatives when they have a new financial need (e.g., a business checking account owner decided to go with a different bank for a business line of credit). Additionally, it will give potential new customers pause unless there’s clear communication that security measures have been improved in the wake of the identified breach. There is also the risk of lawsuits and regulatory action.
Given these realities, any bank embarking on a digital transformation journey needs to prioritize investing in state-of-the-art security systems and personnel to protect its customers and business.
Developing a Culture of Innovation
While the term "digital transformation" implies a one-off undertaking, it's actually a continuous journey because the digital world continues to change. Banks must cultivate a culture of innovation to continually adapt, learn, and improve.
This cultural change is perhaps the hardest part of a digital transformation to implement as moving quickly and rapidly adopting new technologies is almost antithetical to how banks operate. According to a recent McKinsey report, the average age of IT applications inside the average bank is 14 years, which has the side effect of making new technologies harder to implement.
At the same time, the freewheeling approach tech companies often favor is only sometimes compatible with prudent risk management. This means that timelines for digital transformation projects in banking will inherently need to be longer than they would be for most other industries.
Building an Openness to Partnerships
A key component of a culture of innovation is an openness to partnerships that banks have historically yet to have. Given the digital challenges banks face today, and the capabilities that fintech and other technology companies have developed, sticking to a "build it ourselves" philosophy is untenable, and building an openness to partnerships will be critical to a successful digital transformation.
Partners can bring fresh perspectives on how a solution can be built and implemented and accelerate the transformation process while reducing costs and time-to-market -- making your bank more competitive faster. While finding the right partner can take some time, it will often still be a faster process than the ground-up construction of a new solution with internal resources.
Transform Your Credit Card Program With Torpago
If your bank caters heavily to business customers or wants to expand its business customer lineup, modernizing your business credit card offerings will help you become significantly more competitive. Modern business customers want solutions that make managing their business credit and employee spending easy. That includes making it easy to issue physical or virtual credit cards as necessary, robust spend management capabilities that can be customized to align with the business' spending policy, simple submission and processing of reimbursement requests, and a straightforward rewards program.
We created Torpago Powered By to help banks meet these business customer expectations quickly. With Powered By, your bank can use our platform to power your business credit card offering. Developed through work with SMB clients, our platform is SOC 2 certified and offers integrations with over 1,000 software tools, minimizing the security and implementation risks that could threaten the success of your digital transformation efforts. Request a demo today to learn more!
