Customer centricity and agility driving digital transformation in banking

27 November 2022 Consultancy.com.au 6 min. read
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Publicis Sapient has released the 2022 edition of its Global Banking Benchmark Study, shedding light into some of the top trends and developments sweeping through the sector. Shaurya Sharma, Senior Client Partner at Publicis Sapient in Australia, outlines some of the key findings among banks in the nation.

The Australian banking industry is on the precipice of disruption, with the pandemic accelerating the drive to online banking and digital transactions. The Australian Banking Association found that currently around 80% of Australians prefer to transact online.

As a result, digital transformation efforts are pivoting toward creating personalised customer experiences and using granular data to better understand customer needs.

BANKS BELIEVE CUSTOMER-CENTRICITY AND A CLOUD FOCUS WILL ACCELERATE TRANSFORMATION FASTEST

According to the ‘Global Banking Benchmark Study 2022’ by Publicis Sapient, over a quarter of Australian banks are prioritising improving customer experience to drive forward their digital business transformation.

In order to transform from a product-centric to a customer-centric organisation, banks need to “scale at speed” by developing agility in their organisation.

A number of key initiatives are driving this change, including structuring teams differently, investing in the cloud and making better use of data. In spite of this, only 20% of Australian banks report having a fully agile operating model.

THE MAJORITY OF BANKS DON’T HAVE A FULLY AGILE OPERATING MODEL

The hurdles to digital transformation

Many Australian banks face a range of challenges, from legacy systems to operational issues, which are hampering their digital aspirations.

A third of banks cite regulatory challenges as the biggest barrier, with a similar number struggling with legacy IT systems. Many report that the increased use of digital channels has put a strain on their IT infrastructure. Skills shortages are another problem that hampers innovation in developing core banking solutions and personalisation.

C-SUITE AND SENIOR MANAGEMENT DISAGREE ON DIGITAL BANKING CUSTOMER EXPERIENCE CAPABILITIES

Operational agility is also a key imperative for Australian banks, ranking as the second-most significant barrier to digital transformation in the past 12 months, behind only Covid-19. Of course, agility comprises many components. It allows banks to scale at speed and eliminates siloed legacy technology, stimulates change and collaboration between different teams, and fosters a culture that promotes experimentation and adaptability.

These factors are hampering digital aspirations, with 58% of Australian banks yet to make progress in executing their transformation plans. While enhancing customer experience may be a top priority for banks, it’s not often a requirement that banks are able to meet easily.

Furthermore, banks are faced with rising competition from digital-first challengers, including their financial services peers, telecommunications companies, the retail sector and others, who have set the bar high when it comes to meeting rapidly evolving customer expectations.

INCREASED COMPETITION REPLACES COVID-19 AS THE TOP BANKING DIGITAL TRANSFORMATION DRIVER

Addressing the barriers to digital transformation

Banks are addressing these challenges in a range of ways. Even though some banks are put off by the large investment needed to transition to cloud-based banking, they recognise that it is critical to fulfilling their digital transformation objectives. Some banks are prioritising cost reduction to enable their digital transformation, looking for operational efficiencies.

When it comes to legacy IT infrastructure, the trend is to modernise antiquated systems rather than replace them. Whether this approach will be adequate remains to be seen. With rigid and complex legacy core banking systems slowing the pace of transformation and preventing meaningful improvements in the customer experience, there may be limits as to how far they can be upgraded to be fit for future needs.

BANKS EXPECT TO TRANSFORM OPERATIONS THROUGH CLOUD-BASED CORE SYSTEMS AND INTELLIGENT TECHNOLOGIES

To address the skills gap, four in 10 banks are prioritising developing their existing talent to transform operationally. But talent development still ranks only as a mid-order priority. Half of the banks believe that their organisation is more likely to invest in new technology than in the talent and skills necessary to use it.

Given the expertise required in deploying cloud-based core banking systems and intelligent technologies, banks may need to revisit their approach to address the gap.

The road ahead

Australian banks must continue to digitalise and harness new technology to stay competitive. As the macro environment tightens, it is imperative for banks to prioritise their plans and accelerate initiatives that focus on customer value and experience.

The banks that come out on top will focus on creating differentiators in channel and product experience for their chosen customers. Banks can do so in a number of ways:

  • Create rich customer profiles using internal and external data. By deploying Customer Data Platform technology, also known as CDP, banks can create a 360-degree view of the customer. Using this information, financial institutions can drive personalisation of experience and campaigns to improve customer experience.
  • Digitalise into modern core banking systems to break the rigidity and complexity of legacy core banking systems, which slow the pace of transformation and prevent meaningful improvements in customer experience.
  • Rethink team structures by creating teams focused on improving a specific customer journey, such as opening a new bank account or applying for a mortgage. These teams should incorporate individuals from the back- and front-office and across multiple functions and meet regularly to discuss progress on key initiatives. These ‘end-to-end’ teams can deliver change much more rapidly as all necessary stakeholders are involved from the outset.

For banks to succeed and to stave off the competition, innovation and providing quality customer experience are key drivers to increasing the customer base and ensuring steady business growth.

Publicis Sapient's Global Banking Benchmark Study 2022 research survey was carried out across 13 markets, including the US, the UK, Germany and Australia.