Financial services companies are facing powerful external forces that compel them to adapt to a rapidly shifting environment. According to a Forbes Insights survey, 69 percent of financial professionals report seeing “significantly greater competitive pressure” in the current market. This is due to many different factors: evolving customer expectations, new technologies, regulatory demands, fierce competition for talented employees, and more.
To better address these issues, many organizations are pursuing initiatives for digital transformation (DX) in finance. But how can financial technology innovators protect themselves against the potential obstacles and hazards along their DX journey?
This article is the latest in our series exploring digital transformation in the financial services sector. In our previous article, we saw how digital transformation is crucial to thriving in the here and now and for future-proofing finance sector businesses. Below, we’ll offer some words of caution about the pitfalls that can occur when trying to future-proof your financial services company.
Viewing digital transformation as a “miracle cure”
Digital transformation projects — and the technologies they encompass, such as artificial intelligence or big data — are often seen as a panacea that can heal long-lasting business problems and revive a failing company. Unfortunately, this is rarely the case.
The use of digital technologies can help your financial services firm see massive gains in productivity, efficiency, customer satisfaction, cost-effectiveness, and other crucial metrics. However, simply implementing these technologies won’t have this effect unless you fundamentally understand how to best apply them within your business. Digital transformation projects can bring your company to the cutting edge of what’s possible — but without solid underlying use cases and business plans, you won’t see the kind of lasting change that organizations are seeking.
Going too fast
If you’re already behind the curve, it can seem tempting to rush your digital transformation efforts to catch up with the industry leaders. However, going too fast during DX projects is a recipe for sloppy, shoddy, ill-thought-out changes that will struggle to have much impact or see large-scale user adoption.
Instead, take the time to establish the right foundation and consider your goals for your DX initiative. Ensure that managers, executives, and other key stakeholders can all voice their input at the early stages of the project. Identify the possible institutional barriers to digital transformation within your business, and select the technologies that will best future-proof your organization in the years to come.
Not fully committing
To have the greatest chance at success, digital transformation efforts require buy-in from everyone in the organization — from the C-suite to the employees who will be using these new technologies. Without a total commitment from top to bottom, your DX initiative will likely die on the vine due to neglect, lack of resources, political infighting, or another unfortunate reason.
According to a study by McKinsey & Company, the good news is that most stalled digital transformation projects can be restarted by addressing factors that are within the organization’s control. These issues include a lack of clarity regarding the project strategy, poorly designed transformations, and insufficient commitment across the organization.
Getting tripped up by legacy tech
Financial services companies embarking on digital transformation must have a vision for what lies ahead — but they also need a roadmap for how to overcome their existing barriers. Legacy technology poses many roadblocks to digital transformation in finance, creating disjointed experiences across different systems and channels.
For example, the use of legacy technology can result in “data silos,” information that is kept under lock and key by a single team or department. Companies that struggle to break down these silos will find it harder to connect their business processes and extract valuable insights through business intelligence and analytics.
Trying to achieve perfection
It’s often said that digital transformation isn’t a destination but a journey. Trying to achieve perfection, especially with your first DX initiative, is a recipe for disappointment and “failure” according to whatever metrics you’ve set for yourself.
Rather, financial services companies should view digital transformation as an ongoing series of incremental changes that bring the organization closer to the “ideal” business. Companies that embrace and excel at digital transformation understand that the DX process will need to be repeated as technology advances and as the market landscape evolves.
Identifying these pitfalls in advance will make it much easier to avoid them for your own DX project. Drawing on the advice and experiences of those before you is the best way to make your digital transformation initiatives a success.
That’s why we founded DigXchange: a forum for business and technology executives and their peers to connect, learn, and share information about digital transformation. We host regular webinars, conferences, and events across a wide range of DX topics, discussing everything from new disruptive technologies to changing market conditions and consumer behaviors.
Want to join us? Sign up today to receive email announcements and updates about our next event. You can also follow us on Facebook, LinkedIn, and Twitter. Stay tuned for the next article in this series, which will look at three megatrends in digital transformation shaping the future financial industry: engagement banking, platform banking, and technology banking.