How banks are making the leap from aspiration to action

In part 2 of our Global Banking Benchmark Study series, we explore what leading banks are doing to drive forward their digital transformations.

Banks are looking to the future, and it’s clear that the time for talking about digital transformation is over – so how can banks make the move from digital laggard to digital leader?

Publicis Sapient’s Global Banking Benchmark Study shows the scale of the challenge faced by the banking sector. Just 14% of banks are transformation leaders (see below), alive to the opportunities offered by the pace of change and the threat of a growing range of challengers. The remainder have made progress only in certain areas or are still struggling to get started.

Who are the transformation leaders?
Who are the Transformation Leaders? - Our research found that banks fall into one of four groups based on their current level of progress in two areas that are critical to digital innovation: customer experience and operational transformation.

The good news is most banks recognize that improving their digital competencies is mission-critical. More than 80% have a clearly articulated transformation strategy in place. However, 60% have not made significant progress on executing on that strategy.

Investment has to work harder

One significant problem banks face is resourcing. More than half of those in our study (54%) say their investments in digital innovation are not enough to keep pace with digital-first challengers such as new entrants from fintech or big tech.

“Incumbent banks have to invest more just to keep up,” says Philippe Duban, Global Head of Business Transformation, Wealth and Personal Banking at HSBC. “The question is not about how much to invest, but how we can invest smarter and more efficiently. The complexity is exacerbated because the bank’s systems are different in every market. We need to accelerate our organizational agility to deliver faster, better solutions to our customers in order to be much more competitive.”

“We need to accelerate our organizational agility to deliver faster, better solutions to our customers in order to be much more competitive."

Philippe Duban

Global Head of Business Transformation, Wealth and Personal Banking

HSBC

Many banks are struggling to connect with a new generation of digital-native customers whose first relationship with the banking sector is now online. More than 78% say they have to do more to appeal to these digital natives, whose share of the market is only set to grow.

While a clear majority of banks believe they take a proactive approach to improve their technology, they also agree that they need to do more to appeal to digital native customers.

How can banks close the gap between aspiration and action faster?

Those at the head of the pack - transformation leaders – say that acquiring new capabilities to keep technology-led competitors at bay is their second most important digital transformation goal (only revenue growth ranks higher). The rest of the industry, however, puts it down in fifth place.

Transformation leaders are far more focused on acquiring new capabilities to ward off technology-led rivals, relative to the rest of the banking industry.

Similarly, transformation leaders are focusing on the demands of their new digital-native customers. More than a third (37%) are looking to develop new products that blur the lines of traditional financial services.

“It all comes back to customer simplicity,” says Allison Beer, Chief Product Officer and Head of Customer Experience and Digital for Consumer & Community Banking at JPMorgan Chase. “Do we make customers’ lives easier? Are we making it easier for them to manage their financial life in one place? The firms that do that seamlessly across products and across experiences in a way that removes the work from the customer, that’s anticipatory, that’s personalized, are the ones that are going to win.”

Support tech with new ways of working

Many banks are now realizing that digital transformation is about so much more than technology renewal. New tech tools help them to change, but they have to be implemented alongside new skills and cultural change.

"Banks need to work in new ways," says Sonjoy Phukan, Chief Operating Officer at Bank of Singapore. “We can invest in technology for technology's sake,” “but building the culture, the understanding of data and design thinking, and prioritizing use cases are more important.”

Research suggests that banks have some way to go. While 81% of the respondents say their organization takes a proactive approach to improve technology, 72% also say that the bank is more likely to prioritize investment in technology itself than in the talent and skills required to make use of it.

Many banks now recognise the need for greater agility, but are not following through and less than half the banks questioned (47%) said they have an operating model that is fully agile.

Less than half of all banks polled have a fully agile operating model in place.
“It all comes back to customer simplicity. Do we make customers’ lives easier? Are we making it easier for them to manage their financial life in one place?”

Allison Beer

Chief Product Officer and Head of Customer Experience and Digital for Consumer & Community Banking

JPMorgan Chase

Between next and now is how

All of this is daunting and it can be simpler to purchase a new piece of technology than to reorganize business models that have evolved over many years, or to encourage staff to work in new ways. But the challenge can be met head-on by prioritizing how transformation takes place and ensuring efforts reach beyond technology to every aspect of how a bank operates.

“We have engineers, architects, customer journey experts, AI experts, or coaches, agile coaches,” says ING’s Global Head of Digital Transformation, Marco Eijsackers. “I don't hear a lot of banking in these words anymore. There are always new jobs to be done, new risks to take and new things to be aware of. To meet these, you definitely need new talent, new skills and new perspectives.”

In part 3 of our Global Banking Benchmark Study series, we explore the mindset and behaviors that are helping‘ transformation leaders’ become digital-first.

    More insights from our Global Banking Benchmark Study series:

  • Leading banks bet big on innovation, tech and talent

    What sets today’s leading banks apart from the rest? It’s not just that these leaders have moved faster and further with transformation, but that they are working hard to identify the barriers preventing them from being truly digital-first and working to overcome them.

  • Four ways banks can become digital-first leaders

    What lessons can be learned from those who are confronting the challenges of digitization, the threat posed by digital-first challengers and who have embraced opportunities for change? A focus on customer and operational leadership.

  • Are banks ready for a digital-first future?

    Incumbent banks are embracing digital in their transformation efforts – but are they moving fast enough to put digital and customers first? For banks that had been grappling with digital transformations, the impact of COVID-19 was an unexpected reckoning.

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About the research

Data in this article comes from a global survey of 1,041 senior financial services executives conducted by Publicis Sapient in collaboration with Longitude, a Financial Times company.

In addition to the quantitative research, a series of in-depth qualitative interviews were conducted with senior executives from six globally leading financial services firms.