The acutely digital bank

A few months ago there was a question posed on Twitter which sparked a pretty intense debate: “What makes a bank a digital bank?” Perspectives varied, but after a reading through many of the responses, it seemed most were answering a different question. How far do incumbent banks have to go in order to adjust to the new age of digital financial services? At a very basic level, most bankers understand the importance of digital. Many started digital transformation years ago, but the strategies have often been too narrowly focused to make a significant impact. Efforts consisted of stand-alone projects running in isolation within a LoB, too vertical to meet the needs of a real transformation strategy. Simple point solutions and narrowly defined projects in turn produce lackluster results, and the perceived value of Digital decreases, potentially falling out of favor with key decision makers based on a cost/ benefit analysis. Stakeholders might think digital is important, but without a vision they´ll often decide that the risk isn´t worth the reward. This can be underpinned by an organization´s lack of understanding around what it means to be a digital institution. A Celent report from December of last year, Defining a Digital Financial Institution: What “Digital” Means in Banking, proposed a definition for the industry. Digital banking is:

• Delivering a customized but consistent FI brand experience to customers across all channels and points of interaction…
• … underpinned by analytics and automation…
• … and requiring a change in the operating model, namely products and services, organization, culture, and skills and IT…
• … in order to deliver demonstrable and sustainable economic value.

We´ve used this definition quite a bit, but it´s important as institutions develop visions around digital. It´s difficult to develop a clear strategy around a topic so loosely defined within an organization. In a new report set to publish in a few days, The Acutely Digital Bank: Mechanisms for a new Reality, we outline a few of the mechanisms institutions are using to transform. The report will also propose a general model for how many organizations are evolving. Digital transformation is not an easy proposition. The cultural and business model changes required for some institutions are daunting, and inertia always has a seat at the table. Without orienting the business towards digital, banks risk losing out to more agile and digitally adept competitors, both from within the industry and from nonbank challengers. How is your institution approaching digital? Feel free to leave a comment.