Financial Services
Assessment of Digital Maturity

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Synopsis

According to PWC, a consulting firm, “46% of customers skipped bank branches altogether, relying instead on smartphones, tablets, and other online applications” and customers were more satisfied with direct to consumer insurers while asset managers have begun more widely offering automated advice. The trends are clear and financial sector firms must either digitalize to survive lose market share.

Financial institutions have markedly increased their digital investments in recent years, retail banks alone have spent US20 billion in 2017 according to PWC. But it is unclear if these investments have paid off as the obstacles to Digital transformation are varied and many. Changing the customer interface alone is not enough, legacy systems must also change to match the changes in the service models that are needed and most large financial institutions often lack the agility for rapid change. Small startups are better at that but they too lack the scale and staying power needed. As a result synergistic partnerships between the two has become an emerging trend.

The other obstacle is the culture shift that is needed in order for the large financial sector workforce to adapt to the new digital paradigm. The objectives, incentives and performance measurement must also change – otherwise all that investment runs the risk of good money after bad. This could be challenge more formidable than technological change for the financial services industry. Security and regulatory compliance are also impediments to rapid change.

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Digital Transformation in the Financial Services Industry - CASE STUDIES

BBVA of Spain goes from being an Analog bank to being a Digital one.

Today, over 70% of surveyed millennials say they would be happy to pay for banking products and services provided by non-banking companies—for example, telecommunications operators, technology and internet providers, online retailers. And of course customers will increasingly want their bank to offer content carrying higher value-added—products and services that fit their needs more closely.

Some banks are responding by trying to extract value from banking transaction data itself by providing customers with APIs to access their data, or directly supplying the tools for any business to manage its financial transactions on its own or for a bank to develop its digital offering (Bancbox, Open Bank Project, Plaid, etc.).

Banks that will successfully achieve transformation will need to leverage their knowledge of their customers to remain as the main point of contact, offering a wider and better range of services, whether sourced internally or through platforms where various specialist providers and customers themselves can interact.

BBVA Bank imageThe Transformation Of BBVA

BBVA, a middle size, mostly retail, bank in Spain, soon became aware of the depth and reach of the change faced by the banking industry when many banks in Europe, still thought their field would be perpetually shielded by regulations and user conservatism.

New technologies (e-learning platform, use of mobile devices) and new learning approaches (newsletters, on-the-job learning, MOOCs) were becoming an increasingly important way of providing a range of flexible training options that everyone could access. BBV embarked upon a goal to create a new work experience for the digital era.

They regarded the new corporate buildings then under construction to be a powerful instrument to accelerate change in their organization and set in motion a highly ambitious Big Data project. BBVA started launching new products designed and produced specially for the digital world, such as BBVA Wallet. BBVA Ventures helps the bank to stay on top of what is happening in the realm of digital banking. But the pace of change in the digital realm and the ongoing acceleration of the innovation cycle all around, further prompted them to speed up their transformation and turn around their organizational structure in radical ways to place the digital world at the center of their vision for the future. BBVA Digital Banking was established as a new Business Area.

BBVA Digital Banking: A Radical Organizational Change to Accelerate Transformation

The main purpose of BBVA Digital Banking was to speed up the Group’s transformation into a digital bank. The Area was directly responsible for developing existing distribution channels, adapting internal processes and designing a new range of digital products and services capable of delivering the best possible customer experience. The guiding idea was that the Area will, in addition to enhancing BBVA’s digital business and presence, work as a catalyst to transform the entire Group. The new Digital Banking Area’s mission has four key angles: a new, enhanced customer experience; knowledge-driven personalization using the best data analysis technologies; communication in clear, concise language; and access to products and services at any time and from any place. This new project management model entailed a new human resource management model.

BBVA Digital Banking brought together all digital ventures and initiatives throughout the Group and drove forward an ambitious project for change, which had two branches: transformation in project management and in human resource management This organizational structure reflected the Digital Banking Area’s goal of transforming BBVA’s existing activity and finding new, knowledge-driven lines of business in the digital realm.

So in the more developed markets, such as Spain and the United States, the Digital Banking Area’s scope of action extended to digital transformation of the entire franchise and the development of new business models and value proposals beyond the scope of conventional banking. Thus clearly, the creation of BBVA Digital Banking was a bold and insightful decision in aid of speeding up the Group’s digital transformation.

The Main Take Away: CHANGE REQUIRES LEADERSHIP

It was some time ago that BBVA perceived the risks and opportunities inherent in technological change, and for several years they had worked towards reinventing themselves and moving on from analog banking—however efficient and profitable it might have been by the standards of the twentieth century—into a knowledge-driven digital business of the twenty-first century. First, the construction over the past seven years of an entirely new technology platform capable of supporting the data capture, storage and processing requirements of digital banking, which were far more demanding than those seen in conventional banking. More recently, the launch of the Digital Banking Area had marked a turning-point in the transformation of their processes, structures, approaches to work, capabilities and mindset, in alignment with the demands of the digital world.

BBVA now sees itself in a position to lead the process of transformation of the banking industry and so become the first—and best—knowledge-based bank, fully in alignment with the digital ecosystem. BBVA also realizes that this is the kind of leadership they will need in future if they are to achieve their goal that BBVA should become the foremost figure in transforming the best of analog banking into the best of knowledge-based banking for the twenty-first century.

Source: BBVA

BMO, Bank of Montreal: Digital Transformation in Personal Banking
Experian: From credit bureau to technology company & the use of single ID APIs

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