3 Key Components of Digital Transformation for Banks

by Hanna Khrystianovych, a Fintech Program Manager at Sigma Software Group

In my job I focus on helping financial institutions and Fintech companies move efficiently in the digital world where we already live. I have over 15 years of Telecom and Banking experience working with complex strategic change implementation, and building functions from scratch. So when it comes to digital transformation I know my stuff.

Let’s start by discussing when the term “digital transformation” first appeared. My colleague Sergii Danylenko, a CMO at Middleware Inc., had a good observation on that. According to him, it happened around 2012-2013 when one billion smartphones were sold. That was a huge pivotal moment for everybody. The world changed irrevocably as we were not tied to branches or desktops anymore. Banks understood that they needed to go mobile. The second digitalization driver is that changes are happening at an unprecedented speed. The banks need to adapt and react as quickly as possible.

But, as you know, there are no silver bullets for anything in this world. Digital transformation is also not a one-time action or a decision – it’s a process and requires constant movement in the right direction. Let’s dive deeper and identify three essential components for a successful digital transformation journey for banks.

Three key components

Digital transformation is often about technology. However, to really transform a bank, it’s important to not only think about the technology but also about people and processes. Actually, transformations should happen with all three of these components.

My hobby is triathlons – you need to swim, ride a bike, and also run. One of the most well known triathlon competitions is “the Ironman”, a long-distance race consisting of a 4 kilometers swim, about a 200 km bicycle ride, and a 41 km marathon run. It takes an average 12 to 14 hours to finish this race and to prepare yourself for it you need at least 2 or 3 years. It is a kind of personal transformation, and a lot of things change when you do that. When an organization decides to go through a significant change that is a digital transformation, it needs to go through a similar process.

The start is very important in this process. If at the starting point a bank has many software systems, it creates a lot of complexity. The same is true with processes. Throughout a bank’s history, processes can become extremely complicated and so it’s very difficult to even try to change them. The way you deal with this is to be very specific and to find the right fit for the organization. You cannot just ‘copy-paste’ that from another company. The same with triathletes – the transformation path depends on starting conditions: extra weight, health limitations, available time for training, etc.

1. People

It’s important to understand that this kind of change is always painful and people play a crucial role here. People should change their approach to making changes in an organization, the way they communicate, the way they understand the client needs, etc. The athlete is also forced to change their attitude to food, sleep, and their daily routine in order to really change.

A bank should definitely support and educate its people during such a challenge.

2. Processes

The next component is processes. It’s not a good idea to use all existing processes when you start doing something new because you definitely need to change the approach. Let’s imagine you want to create an innovation or do an experiment. If you initiate the project, plan, implementation, and launch it the way you usually did before, in the end it will take 1 or 2 years and the cost of the experiment will be significant. You should change the processes and find a way to check the ideas very quickly. Thus, you’ll get feedback quickly from the market as to whether you are going in the right direction or not. That is a big challenge for many banks with a long history.

3. Technology

The last component is technology. Coming back to the triathlon metaphor, you can buy a twenty thousand dollar bike, but that doesn’t automatically mean you will perform better. Moreover, if your mindset and your body are not ready for the race that kind of device will not help you. Actually it can even make things worse and create some complexity for you. However, if you have the right mindset and if your body is ready, this technology can give you an edge in the race to win, to beat your competitors, and to be the best.

Final thoughts

It’s very important to remember all three components to achieve a truly digital transformation. A digital transformation might be difficult, but also very interesting when you are part of such a change. It educates you and you can be proud of yourself if you succeed in the end. If you are ready to lead such a change, do it.

Tune in on July 15th to the first UK-Ukraine Fintech Summit where we’ll talk more about the latest trends and how the pandemic has influenced the processes of digitalization in the banking sector.