Top 8 digital transformation challenges faced by banks
Banks are increasingly turning to digital transformation to become more efficient, secure, and competitive in today’s digital age. However, the process of digital transformation is not without its challenges. In this blog post, we’ll explore the top 8 digital transformation challenges faced by banks and how they can overcome them. By understanding these challenges, banks can ensure they are well-prepared to succeed in their digital transformation journey.
1. Technically Complex Systems
The majority of banks run their various operations using a network of technical systems that are intricately connected. The majority of the time, back-office networks and the front-end experience are intertwined, making it more difficult to update the facility by simply adding a single new piece of software.
Even if you put new systems in place up front, they still need to have access to data that is kept in the back. Both of those solutions may become useless if those two systems are unable to communicate with one another.
Developers are frequently responsible for ensuring interoperability, and it’s not always a simple or quick task. Instead of attempting to connect your front- and back-end networks directly, one workaround is to install a third layer between them. In this way, even if the majority of your data is still on outdated legacy platforms, you can still make changes and updates to your front-end system.
2. Making the wrong partner choices
Avoid following the temptation to make your tech vendor selection solely based on financial considerations. Instead, give top priority to partners who are well-versed in the operations of the banking sector.
Even though you want to keep your digital transformation costs low, you still need a team that can handle your complicated requirements. Your needs can be precisely met by technology with the assistance of these professionals.
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A less expensive, more knowledgeable partner, however, is more likely to overspend on technology. This frequently entails over-customizing or implementing unnecessary scope changes, both of which increase your project’s costs and duration. To ease this selection, SmartOSC can help you.
3. Innovation Labs Segregated
Innovation hubs are fantastic in theory. As more facilities offer online banking services, they are creating these distinct groups to investigate the options and come up with possible outcomes.
The problem, though, is how isolated these labs are from the rest of the company. There may be some excellent ideas generated there, but they are rarely linked to more important organizational objectives.
4. Too-Long Timelines
Regardless of the industry, planning is essential for any digital transformation. Banks, on the other hand, frequently heed this advice to the letter.
Their planning stages frequently last for at least three years. For the actual implementation, they then add another five to ten years onto that. This is typically accomplished through a series of go-lives where one system update builds upon the next. These projects, also referred to as evolutionary or continuous transformations, take a very long time.
This is not ideal because technological advancements and alterations in regulatory requirements occur over time, in addition to changes in market demand.
5. Choosing the Wrong People
When it comes time to implement a digital transformation, financial institutions frequently look to their current operations team. The sole problem? These workers are accustomed to the methods used today.
This indicates that they frequently oppose implementing new architecture systems and procedures. They might even attempt to migrate a legacy workflow into the new platform without the proper procedures in place, which would lead to unneeded delays.
6. Keeping Social Media Communications Safe
Like any other business, banks must interact with their customers where they spend the most time—increasingly on social media. Since social media sites like Facebook and Twitter have such large user bases, marketers will invest more money on them.
The top priority should be to ensure the security of all social media accounts. It is necessary to set up a central monitoring system that can identify and stop potential policy infractions in all communications. Implementing effective yet user-friendly controls over social communications is crucial for investment banking’s digital transformation.
7. Scaling Security Issues
One of the biggest challenges of the digital transformation of commercial banking is the security of the IT infrastructure and all the data it contains, along with the security of social media channels.
A typical financial institution today may house tens of thousands of computers and other networked devices, if not hundreds of thousands. The attack surface increases significantly when social, cloud, and mobile platforms are used. Furthermore, supply chain problems and cloud transitions both have a significant impact on how hazards are distributed.
8. Underestimating the Dimensions
Make sure your team fully comprehends the scope of digital transformation initiatives before investing in them. Keep in mind that your changes extend beyond technology. Moreover, you are altering how people conduct business.
Give yourself enough time to guide your business through this change. By moving forward without taking the time to plan and prepare, you run the risk of using technology that is either mismatched to your objectives or insufficiently robust to assist you in achieving them.
While these are some of the most typical issues banks have with digital transformation, they don’t have to be your story. To find out how we can position you for success from the start, get in touch with our SMARTOSC Fintech consultants right away.