For incumbent banks and financial services firms, digital transformation is now at an inflection point.  Digitization has shaken up the old order, and is rewriting the rules of how banks compete. Banks are no longer just competing with other banks and fintechs, but also the likes of Apple, Amazon Prime or Uber as far as digital interactions and elevated expectations go.

But, driving a digital transformation is a long and complicated task. The challenge is not so much in becoming ‘digital’ as in delivering the level of customer-centricity and value that the modern customer finds worth trusting and paying for.

At its core, digital transformation is about elevating the customer experience and adapting to their changing expectations by creating new ways for them to bank, however and whenever they like. It means rethinking the customer journey inside out by understanding where pain points exist, and identifying ways to make every step and touchpoint in the customer life-cycle streamlined, consistent, and contextualized.

To achieve this, banks need to go far beyond building digital capabilities on the front-end. They also need to actively leverage emerging technologies on the back end so that they can streamline processes, massively scale their operations, employ smarter analytics, remove silos, and innovate to create the type of personalized experiences that customers expect. Such capabilities make it possible for the bank’s customer-facing representatives to zero in on information relevant to a customer’s profile- information that had previously been dispersed across a wide range of separate internal databases, and engage with the customer in a more contextualized fashion.

In addition, banks increasingly realize that they need to embrace the habits of digital-native companies: for instance, pursue agile development, host hackathons to foster greater digital collaboration or open up their application programming interfaces to survive and thrive in an open banking ecosystem.

While developing all the capabilities is imperative for banks now, the centerpiece of digital transformation is really a mindset shift. That calls for adopting a culture similar to that of successful digital organizations when it comes to everything- from establishing a winning digital strategy to developing new data capabilities and opting for a test-and-learn approach with quick iterations.

It is also important for banks to acknowledge that not every aspect of banking processes and products needs to be revamped. Some areas would need more radical investments than others. It is necessary to focus on the important wins first– for instance, the few that involve the greatest capacity consumption or have the potential to deliver the most impactful business outcomes. An old application that is leading to the most serious bottlenecks may need to be retired first, it may be necessary to opt for application re-engineering in select processes, or focus on application integration to remove existing silos and allow your existing systems to collaborate better.

It requires an unusually high level of planning, resource allocation and collaboration spanning the whole enterprise to simultaneously address the culture, systems, and capabilities required and succeed with digital.

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