Digital transformation is getting difficult for retail banks. This is an encour- aging sign for consult- ants and, even more so, for retail banks. During the past decade, most banks dipped their toes into digital transformation by focusing on the front end of their operations. They revamped web sites, created new
mobile phone apps and explored ways to emulate
the “Fin Tech” start-ups piling into their sandbox.
More recently, traditional banks appear to have
reached digital-transformation turning point.
As recently as 18 months ago, many retail
banks “hadn’t really gone full-throttle into digital transformation,” says EY Financial Services
Advisory Digital Leader David Deane. “In the
last 12 months, that’s changed quite markedly.
We’re now doing a number of transformations
for some of the largest retail banks.” Other consultants who work in the space also confirm that
clients are eager to commit the resources and energy needed to conduct genuine, “Big T” transformations centered on new digital capabilities,
products and businesses.
To be sure, emerging technologies represent
both a crucial driver and enabler of this shift.
Robotic process automation (RPA), artificial
intelligence and related advancements can auto-
mate large volumes of work in the middle and
back office that was too ambiguous, unstruc-
tured, and complex for previous technology to
automate. “I’ve spoken to experts who talk con-
fidently about being able to take 60 to 70 percent
of cost out of some middle and back office bank-
ing processes—while simultaneously delivering
exponential increases in speed of service, reports
ALM Intelligence Associate Director, Lead for
Digital Consulting Research Brendan Williams.
“Imagine loan decisions that occur within hours
or minutes rather than weeks. And this is with
today’s proven technology.”
Achieving these types of results, however,
often requires major amounts of related work,
including activities related to strategic planning,
process re-engineering, customer experience
(CX) management, talent management and cul-
tural adaptation and change management.
“A lot of [retail] banks are striving to change
their DNA,” notes Eric Piscini, the leader of
Deloitte’s digital transformation and innovation
offerings in the financial services space. He
points to a large bank that hired roughly 2,000
software engineers last year without adding
a traditional banker to its sizeable workforce.
“That gives you a sense of where these banks are
investing,” Piscini continues, “and of what they
think will make the difference going forward.”
Defining ‘Digital’ and ‘ Transformation’
Not all digital transformation work inside
retail banks rises to the level of DNA replace-
ment. But exactly what qualifies as “digital
transformation” raises timely questions. “Eve-
rybody and their cousin are claiming to do digital
in terms of consulting,” notes Tomek Jankows-
ki, ALM Intelligence Senior Analyst, Lead for
Finance Management Consulting Research.
“The definition is difficult to nail down.”
Many banks have experienced some difficulty
distinguishing between digital transformation
and basic digitization, Williams notes. Digitiza-
tion might involve taking a paper mortgage ap-
plication or an invoice and scanning it. “Basic
digitization is a necessary first step, but on its
own, it often only results in modest improve-
ments in performance,” Williams explains.
“Going one step further and inputting the data
digitally from the start is a help. But you’re
still managing a process that was designed for a
world of paper forms. You haven’t taken advan-
tage of most of what digital has to offer. Chang-
ing the business processes will be a big step for-
ward. And then automation comes in, and starts
to replace the people, and the processes become
more and more autonomous, resulting in signifi-