At least that’s the view according to a recent report. The Cornerstone Advisors 2022 What’s Going On In Banking Study claims that banks are deluded into believing that they’re digitally transforming their organisations.
According to the study, three-quarters of banks have launched a digital transformation initiative to date and another 15% plan to develop a digital transformation strategy during 2022 – and those transformations appear to be moving fast.
Of those that kicked off their transformation project in 2021, 28% said they were already halfway or more done, and almost half of those who started in 2020 (46%) are at least halfway done with their strategies. That’s some quick work by any standards, but the statistics of the impact of those transformation projects are interesting
Of the banks who believed they were three-quarters of more done only half had seen improvements in loan productivity, 28% reported significant reductions in operating costs and less than one in five had generated significant increases in payments revenue and other non-interest income.
Which begs the questions are their transformations really working?
Having been part of some hefty transformation projects in our time we’re going to say no. That’s not to say that these projects aren’t happening or that significant changes aren’t being made but perhaps they’re not quite as far along as they think they are.
As the report identifies at the heart of any transformation project is the need to address legacy systems and core technologies yet 7 out of 10 of the banks surveyed don’t plan to replace their core systems as part of their digital transformation whilst AI tools and machine learning are even further away in the transformation process, and that’s not to mention a whole host of new technologies already being adopted by challengers and fintech’s that the traditional banks haven’t even begun to consider.
So how can banks get closer to their goal of transformation?
That’s a whole other blog in the practical sense, but in short, it’s about addressing what ‘digital transformation’ actually means to that organisation, why are they doing it, how does it form part of their strategic vision and what problems do they actually want to solve by embarking on such projects. There’s no doubt digital transformation is needed if ‘traditional’ banks are ever going to keep up with the newer and more innovative players in the financial services market but as the industry continues to evolve at pace so too will the type of individual charged with leading transformation projects and that’s an interesting concept – there’s no way digital transformation is ‘done’ for traditional banks but can it be done differently? and with better results? most definitely.