digital transformation in banking

The BFSI has been a technologically shy sector when compared to the digital advances that have invaded hospitality, fashion, lifestyle, gaming, and E-commerce. When the core of conventional banking was ripped open by paradigm changes by way of mobile banking, open banking, crypto-currency banking, digital transformation is yet to take shape at its fullest, owing to the following bottlenecks.

#1 Clinging on To Complicated Legacy Systems

Every bank is comprised of a legacy architecture that has been in vogue for decades. To bring in digitization, banks need to transform themselves into vehicles of technological change. This does not mean that legacy systems are to be eliminated. What is needed is a reengineering of internal banking processes.

#2 Stringent Compliance Issues

In every country, the banking sector is subject to a lot of monitoring and overseeing by statutory and federal authorities. In a survey by Liferay on European bankers, 47% of the respondents opined that compliance is a prime obstacle in digital transformation. The Dodd-Frank Act, the Payment Services Directives 2 (PSD 2), General Data Protection Regulation (GDPR) govern the banking sector with a watchful eye. The need to digitize is also a need to adhere to all these directives and conditions.

#3 Lack of Trust On IT Vendors

Digitization requires outsourcing, co-working and collaboration with several third-party service providers. IT technicians, API providers, app makers and digital marketing specialists – the list is endless. Issues of cyber securities threaten banks to come forward and open-up their core for digitization. As guardians of very sensitive financial data belonging to clients, bankers are hesitant to sensitize their culture to the digital drive.

#4 Ignorance of Need to Improve Customer Interactions

This is the huge difference between CX (customer experience) model of the new age disruptive fintech providers and challenger banks and the rigid, closed, self-centered model of banks. Though at the center stage of customer data, day in and day out, banks have not seen the need to capitalize the data, get valuable customer insights and tailor financial services in a personalized manner. This is where their contemporary counterparts have scored big and digital transformation has had robust uses for alternative providers of financial service.

#5 Difficulty of Integrating Fragmented Departments

Traditionally, the banks were made of a number of departments with no unified workflow structure. Each department had its own system of functioning. Integrating them on the digital format poses a severe challenge. Each department responds in a different way to digital transformation and the whole digital set-up per se is fragmented and not integrated. Banks are not able to move into ecosystems that are beyond its traditional core.

In order to overcome these challenges in way of digital transformations, it is imperative that instead of being risk-averse and change-resistant, banks must come forward to adopt top-notch technology for enhancing banking experiences for its customers.

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About the author

Santhiya is a senior SDET at Zuci Systems. She specializes in Test Automation and has hands-on experience in working with popular tools. Get in touch with her at Santhiya PanneerSelvam