How banks can stay competitive through digital transformation

The acceleration of digitisation across the financial industry in recent years has seen many companies scrambling to keep up with changing consumer demands, shifting regulatory and environmental requirements, and the growing number of neobanks looking to lure customers with cutting-edge digital offerings.

Digital transformation efforts are now very much at the top of the agenda for banks and financial institutions, but many businesses are having to contest with roadblocks such as the costs and complexities associated with updating deeply ingrained legacy technology.

Many have found their operations are currently fragmented and in need of modernisation and unity to streamline processes and create an improved experience for customers, clients, and internal associates.

Over the past two decades, ServiceNow has been developing Software-as-a-Service (SaaS) cloud computing software to help companies manage their digital workflows.

In this Q&A, FinTech Futures speaks to Gregory Kanevski, global head of banking at ServiceNow, to get his views on how the industry has responded to the growing need for digitisation and how banks and FIs can upgrade their processes to ensure operational flexibility and a seamless experience.

To what extent have digital transformation efforts at banks accelerated over the last few years, and what results and trends have you seen emerging from this?

Banking efforts to digitise operations have been underway for several years with varying affect and impact. However, the urgency has changed dramatically in recent years, mostly due to the COVID-19 pandemic, but also as a result of a growing shift towards digital services from consumers across the globe.

This means banks have needed to adapt more quickly to meet the needs of an engagement pattern that has now rapidly changed and continues to evolve on an almost daily basis.

This acceleration has also highlighted the need to improve the internal experience for employees and how co-mingled that truly is with the customer experience. Both experiences need to be balanced for the company to succeed and grow.

Banks need to evolve dramatically, quickly, and with flexibility and resiliency built in, and all types of banking institutions have either refocused or prioritised this effort as a result.

What challenges are banks currently facing in regards to their digitisation efforts?

Bank environments are notoriously complex. For most larger banks (for example, regionals and money centres), they grow through acquisition, and legacy platforms with aged applications make for a very costly overhaul.

For some of the smaller and local banks, they may not have the complexity, but they also do not have deep technology budgets. This is further complicated by a host of different priorities that require time and attention, so there needs to be balance there.

All banks are racing to fast-track their efforts, modernise legacy environments, and act more innovatively, but certainly it’s the cost and complexity associated with the work that seem to be the major stumbling blocks.

Those that had a head start are clearly the early winners. Others meanwhile are struggling to catch up or are “buying” capabilities through acquisition.

With the rush to balance flexibility, resiliency, and experience, how have banks and FIs looked to approach this?

The industry has seen a rash of mergers and acquisitions at all levels as well as key focus on strategic partnerships and technology investments, especially toward cloud and SaaS-based initiatives.

This activity varies further by size. The big four money centres are leaning on fintechs to help drive innovation. These “big ships” need the more nimble start-ups to generate movement.

Most regionals are attempting to balance targeted mergers and acquisitions that help with scale as well as organic investments, with the goal to help stimulate modernisation efforts.

And last but not least, driven by recent legislative changes and largely due to the need for scale to fund digital investments, interstate-sized banks and credit unions are consolidating at a record pace to remain relevant providing similar experiences. This either helps them buy pre-existing capabilities or enough “deposits” to fund initiatives.

From your perspective, how should firms look to press forward with digitisation and what steps can they take?

It starts with a plan that’s sponsored by the executive committee of the bank. This may seem cliché, but it truly is not in this instance because a transformation of this significance impacts all parts of an organisation.

Therefore, IT needs to be aligned with HR, business lines, risk, security, and operations. If it is not sponsored by the top with all functions supporting the transformation, the investment will be disjointed, have limited value, and won’t drive net new revenue or improve ESAT or CSAT scores.

Once the executive committee is in support, a cultural change of this magnitude can’t be ignored, and given the competition for quality skills, a focused communication strategy is of the utmost importance.

This will allow for goals to be tied to divisional, functional, and individual performance and if managed appropriately, lead to a substantially improved internal and external experience (that also just happens to be more efficient).

From a customer perspective, what would you say they’re looking for in their digital banking experiences and how can FIs meet that demand?

Customers expect a consumer grade experience. This can’t be stated more clearly, and they are less likely to tolerate anything less. There are choices in the market challenging long-standing norms. Banks risk at best irrelevance if this is ignored.

Beyond experience, customers are looking for security assurances for their money and information. That is often reflected through the experience when associates don’t have or can’t find the right information, or they have a poor digital experience. These efforts are interrelated and the regulators are hyper focused on this topic.

Lastly, customers are advocating for companies that share their values. This is of growing importance and is driving retention decisions. This is why community involvement, ESG, and security/risk are so important.   

What technology trends has ServiceNow noticed from your clients and how have you been looking to meet those needs?

Robust cloud-based SaaS platforms provide the best value and flexibility and balance risk and resiliency more effectively than traditional on-premises options.

In addition, the platforms of today must solve many problems and add “cumulative” value for an organisation. Repeating the sins of the past with a diversity of SaaS platforms simply masks the problem of long-term value and flexibility.

Those that balance these needs, enhance risk, boost resiliency, and allow for adaptive workflows for the future unknowns are winning.

A great example of this is the ServiceNow Financial Services Operations (FSO) platform, which provides maximum value of the important items mentioned earlier while also providing a truly fast time to market, as well as a low-code foundation which reduces expensive technology salaries.

FSO is not only a “game changer” for banks, it’s doing it at speed based on its simplicity!