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6 success factors for the digitalisation of the financial sector
success factors for the digitalisation of the financial sector6
Many services from banks and insurance companies are already available online and are popular with individuals and businesses. However, the fact that accounts can be managed online and claims can be settled digitally is just one facet of digitalisation in the financial sector. Customer expectations and regulatory requirements continue to evolve and new competition such as fintechs, comparison portals and large internet companies continue to disrupt the sector, driving the need for accelerated digitalisation efforts.
Maintaining focus on developing better end-to-end digital processes will help financial institutions and insurance companies keep pace. Digital interfaces for customers, partners and services are needed to ensure companies can continue to deliver innovation. We have identified six strategic considerations that can help guide your digitalisation journey.
Choosing the right technologies is central to successful modernisation, but it is only one component among many. Corporate processes and culture also need adapting in parallel.
Digital solutions make new and more open collaboration possible and present opportunities for process improvements via automation across departmental and company boundaries.
Employees need the freedom and support to try out new solutions - and sometimes to fail. Making sure to share knowledge about mistakes and successes lets other teams build on the experiences and innovate more effectively. 2. Lead from the ground up as well as top down
Management certainly needs to be a driving force behind digital transformation, not least by providing budget and giving employees the freedom they need to get the job done. However, digitalisation is not just a matter for leadership.
Comprehensive transformation requires everyone to pull together and participate. Front line workers are often the best source of fresh ideas because they regularly encounter internal processes and applications as well as the company’s products and services, and therefore know best where the problems are and where improvements can be made. Continuous communication from management about the opportunities of modernisation including how it will make everyday work easier will help motivate people to get involved. Open communication also helps alleviate the fears that come with change, for example around job security and workload. 3. We can't do it alone
External partners can contribute empirical value to strategically important digitalisation projects. As well as bringing practical experience and technology implementation knowledge to the table, partners can also provide support as coaches around internal change processes. They can help identify and remove structural barriers and promote agile collaboration between departments.
Working closer with third parties opens up a new world of innovation, particularly around customer experience. Using open APIs, an ecosystem of diverse companies can work together to create new digital offerings. To take one example, the financial services and aviation industries can join forces to enable automated proactive claims settlements in the event of flight delays or flight cancellations. The scope is endless, and if you stay focused on your core business – what is it that you do that no one else can – you can make informed decisions on what to build yourself, where to use external people to solve a problem, and what areas need third party software to do the job. Entrusting partners with those tasks outside of your core business will enable you to focus on the exciting innovation opportunities rather than keeping the lights on.
4. There is more to cloud than migration
Financial services organisations often focus on migrating legacy workloads to the cloud to help reduce IT costs. Looking beyond this use case, cloud-native application development tools and cloud platforms provide huge potential for simplifying infrastructure management and making it easier to develop and scale applications both old and new.
With flexibility being a major consideration, hybrid cloud is becoming a widely used cloud strategy – meaning an integration and orchestration layer that provides consistency and security across different clouds. Data from Red Hat's 2022 Global Tech Outlook Report shows 30 percent of the 1,300 IT executives surveyed rely on a hybrid cloud strategy and 13 percent on a multi-cloud approach, meaning the use of multiple public cloud providers. The dynamic use of private and public clouds is also necessary for incoming regulatory requirements such as the Digital Operations Resilience Act (DORA), incorporating the need for a future-ready Cloud Exit Strategy. 5. Digitalisation needs customer focus and crossdepartmental cooperation
Banks and insurance companies often start by digitalising existing products and processes. This is understandable because they tend to work in silos – products, risk management, claims processing, technology, customer service and so on. However, it is just the tip of the iceberg.
Innovative solutions emerge when cross-departmental teams gather together and put the customer at the centre. For example, in the world of corporate banking, a bank might be applying data analytics from customer onboarding verification checks to help boost customer satisfaction. The next step is looking at how these insights can be used by other teams such as sales, which might be to make timely offers around financing for company mergers or D&O (Directors and Officers) insurance policies for new management. 6. Digitalisation is a continuous process
It would be naive to assume that digitalisation has an end point. Technologies are constantly evolving and will always bring opportunities to unlock new areas of business. More than just helping meet regulatory requirements and reducing costs, organisations are increasingly recognising that there are limitless possibilities for innovation if they can stay agile and flexible. This entails an ongoing mission of adapting and automating processes and nurturing a culture of open communication and collaboration, inside the organisation and beyond.
Nikolai Stankau, Director, Business Development, EMEA Financial Services, Red Hat
