Future of digital banking is inevitable

1/11/2022

(5 min)

Managing Director

The financial market has a small margin, fierce competition and a constantly decreasing level of customer loyalty. In this situation, the worst thing that classic financial players can do nowadays goes with the flow. The digital transformation process is inevitable in order to be a competitive in the banking sector. Notably, the industry is trying to adapt to the new business challenges by a combination of the new technologies and transformation of the old leadership system.

Nowadays, a lot of new players appear in the financial market, including financial, technological and telecommunication companies. All of them are eyeing the most attractive segments of the financial industry. As a result, in order to maintain competitiveness, banks should devote much more attention to converting their services to digital form and not forget about the most important factor of their success – about customers and their needs.

In most cases, technological transformation involves the implementation of large-scale changes that may take years to build a new customer-oriented banking system. It is a complex process of change, which includes the total destruction of the organization’s outdated structure and the execution of new strategies, skills, and technological advancements. The basic idea is moving from a product focus to a consumer focus.

For that reason, the digital transformation of the banking system is more influential when all updated processes improve the customer-facing engagement including direct communication, products and services, marketing strategies and support customer services. The prominent feature of the digitalization is creating a productive and successful interaction through multiple channels.

What are the main features of the Digital Organization?

First and foremost, such companies use their customers as a prior focus. It means that the firm should simplify interaction with customers through all the channels and track the customers’ experience at every contact point.

Secondly, the firm should update its corporate policies and the rules of conduct among staff. This point is closely related to the fact that the banking system always has a lot of employees who interact not only with each other but with external clients too. That is why, it is important for the distribution of roles, placing the structure and defining the responsibilities of employees.

Thirdly, corporate culture reinforces the company’s new technological innovations and helps implement its digital strategy. At that point, we can define the emerging new digital culture and its culture shift in the financial sector.

Why is digital culture important?

Culture is an integral aspect of influence in the process of the technological transformation of banks. Culture directs employees to productive work in accordance with the rules and the main meanings of the brand strategy. This helps to maintain brand integrity within the customers, as well as strengthen the internal team within the company. Digital culture manages the banking system to become more flexible, to show results and quickly make decisions due to the fast flow of the data within multiple channels. Furthermore, companies with digitalized culture have advantages over potential job candidates. Since the new generation does not agree to engage in tedious routine work, they want interesting projects, innovations and various bonuses within the company. The reputation of a digital leader is a magnet for talent. Millennials, as a rule, are drawn to digital companies with their promise of a collaborative, creative environment and greater autonomy. Such benefits can be offered only by companies that are constantly introducing technologies and developing their brand performance. Moreover, financial firms should receive high profits from the chosen strategy.

Six key elements of digital culture

Since the importance of the digital culture phenomenon in modern financial companies is growing, it is worth noting the main components which contribute to its development.

1. Collaboration matters more than individual efforts.

Success in digital culture comes from teamwork and the exchange of information between departments, units, and functions. The iterative and fast pace of digital work requires a much higher level of transparency and interaction than in a traditional organization.

2. Focus on action.

In a fast-paced digital world, planning and decision-making must shift from a long-term to a short-term process. Digital culture supports the need for speed and promotes continuous iteration, rather than improving a product or idea before launching it.

3. Encourages external rather than internal orientation.

Digital culture helps orient employees outside and interact with customers and partners to create new solutions. A striking example of external orientation is the focus on the customer journey; employees shape product development and improve the quality of customer service, putting themselves in the shoes of the customer.

4. More courage, less caution.

In a digital culture, people are encouraged to take risks, quickly cope with failures and learn from mistakes, and they are not advised to maintain the status quo because of habit or caution.

5. Delegation

Digital culture extends decision-making deeply into the organization. Instead of receiving explicit instructions on how to do their job, employees follow guidelines so that their opinions can be trusted.

6. Leadership

All high-performing cultures, especially digital ones, require strong leadership and involved employees. Companies can leverage leadership by creating everyday opportunities for leaders to serve as role models to instill behavior.

Digital culture is a challenge. A traditional culture based on hierarchy and teams or units competing for resources is largely contrary to digital culture with its emphasis on delegation, collaboration, and speed. However, if companies do not change their organizational context — basic systems, processes, and practices — it’s almost impossible to expand and implement new behavior throughout the organization.

For the successful implementation of a new culture, companies need to anticipate what they need to do outside of the pilot launch. Firms should rethink their operating model. They also may think to implement new practices by analyzing each of the areas of organizational context – leadership, organizational design, performance management, people development methods, resources and tools, vision, values and informal interactions – and also making specific changes that stimulate proper behavior. To conclude, cultural change is a determining factor in successful transformation.

Peter Shubenok

Managing Director

book a call