Banks urged to adopt 'enterprise-wide' approach to digital transformation

According to a survey of more than 250 retail and corporate banks across Europe, the Middle East and Africa (EMEA), carried out by IDC Financial Insights during the second quarter of this year, fewer than a quarter of banks (24%) view digital transformation as an organisation-wide strategy.

The report said that banks have tended to focus their digitisation efforts on customer-facing elements of their business, but are now "collectively shifting their focus … toward improvements in the back and middle office".

However, IDC Financial Insights said that "a lack of strategy and integration of effort leads to fragmentation and disconnects". It said that continuing "tension" between customer-facing digitisation projects and core, legacy IT systems will hinder banks as they seek to adapt to changing business models.

"IT must work with lines of business to create an enterprise-wide approach, the end goal being an entirely digital platform," it said. "Digitising the bank (front and back) means that the bank can reduce its cost base and improve customer experience."

Adopting an "enterprise approach" to digital transformation will enable a bank to "fundamentally shift the way it uses technology" and prepare it to "address evident, as well as unforeseeable, changes in the industry", IDC Financial Insights said.

The report highlighted the threat that banks face from emerging financial technology innovators and said the institutions must "prepare for a future where the only certainty is change".

"Fintech companies are using digital technologies to disrupt parts of the industry which lend themselves to capital-lite operating models, such as mobile share trading," it said. "But the fundamental reason for their success is their ability to follow customer behaviour very closely and isolate places in the value chain where they can plug into the growing digital ecosystems."

IDC Financial Insights said that its survey revealed that only 21% of banks in EMEA employ a chief digital officer to lead digital transformation efforts. However, it predicted that more than half of banks in the region would employ a CDO to drive such initiatives by 2020.

Executive-level leadership, a focus on developing a 'digital core', and a willingness to collaborate with financial technology companies and other third parties are the main three characteristics of leaders in digital transformation, it said.

The report said: "For [digital transformation] initiatives to be truly game-changing, innovation teams will need to leverage the collective technology assets and data of the organisation – through agile development platforms and tools, APIs, access to complete and real-time data and analysis, cross-departmental access to financial data while being able to manage and anticipate risk associated with new business processes and products versus going about it on their own and working in siloes as is so often the case."