Digital Banking Transformation

Leor Melamedov

What is Digital Transformation in Banking?

Digital transformation practices enable industries, businesses and individuals to digitize their products, services, and communication channels. Digitization has impacted a wide range of industries, including the financial sector. However, while consumers demand digital-first services that are personalized and instant, many banking institutions are struggling to balance  data protection requirements with consumer demands and FinTech disruptions.

          1. What is digital transformation in banking?
          2. Advantages And Disadvantages Of Digital Transformation In Banking
            1. Advantages 
            2. Disadvantages
          3. Technologies for Digital Transformation
            1. Artificial Intelligence 
            2. Blockchain
            3. Internet of Things
            4. Cloud Computing
          4.  The Pillars of Digital Transformation 
            1. Reinvent the consumer journey
            2. Leverage the power of data
            3. Redefine the operating model

Advantages and Disadvantages Of Digital Transformation in Banking

Digital transformation enables banks to simplify management tasks for both employees and customers and offer 24/7/365 service. However, not all banking services are available online due to security concerns.

Here are key advantages of digital transformation in banking:

      • Easier management—digital transformation enables banking institutions staff and customers to easily and simply manage bank accounts, online and offline. Instead of handling paper records, customers can directly transmit information or quickly get assistance from online representatives. Additionally, since all information remains within the systems, there aren’t duplicate entries of data.
      • 24/7 services—digital transformation enables banking institutions to offer 24/7/365 services. Online services significantly reduce wait lines in brick and mortar offices and ensure a positive customer experience. It also enables banks to open offices for certain operations and increase employee productivity.
      • Convenience—when bank accounts are made available online, customers of the private and business variety can gain access at any time, from any device and any physical location with an Internet connection. Customers can then better keep track of their financial transactions and also easily manage their information, without having to go to the bank just to change an email address.


Here are key disadvantages of digital transformation in banking:

      • Security issues—all businesses are required to properly secure their digital assets and ecosystem, whether for the sake of their own assets and their customers or because the company needs to meet compliance requirements. However, financial institutions need to enforce tighter security measures in order to safeguard the data and money of their customers.
      • Transactions—banks are often required to perform complex transactions for customers, which might require customers to be physically present in the bank, to ensure validation and other security concerns. For example, not all banks offer digital transactions of international transfers.

Technologies For Digital Transformation

Digital transformation strategies for banks should leverage technologies that add the most value. However, not all technologies suit all purposes. Below are key technologies that can help banks successfully implement digital transformation:

Artificial intelligence (AI)
There are many ways to leverage AI technologies. Chatbots, in particular, can help banks provide online services for customers. For example, when the bank is closed, a chatbot can answer the information needed to perform certain transactions, until a human representative is available. AI can also help automate processes, analyze data and security activities, identify fraud and violations, and provide insights for improvement.

Blockchain
Blockchain technologies can help improve the security of online transactions. Initially used for security Bitcoin transactions, blockchain is now implemented in a wide range of sectors, including FinTech. Blockchain technologies can help add transparency into transactions and facilitate collaboration.

The hope is that blockchain will remove mediators that cause bottlenecks and create a smoother transaction pipeline. In addition, since blockchain essentially decentralizes transactions, it can ensure a higher level of security, protecting the data and funds of banking institutions.

Internet of Things (IoT)
IoT technologies can perform real-time data processing and analysis, and then deliver personalized content quickly and efficiently. The result is often a positive user experience. In addition, wearable IoT devices enable customers to make contactless payments. To ensure the security of financial transactions, IoT can be enhanced with sensors for biometric authentication.

Cloud computing
Moving banking to the cloud enables financial institutions to leverage a wider scope of technologies. On the basic level, cloud-based banking can ensure customers and staff gain access to services from any location, enabling remote transactions and remote work, without the overhead typically associated with on-premise data centers. Banks can also leverage cloud vendor resources like, eSignature, ID Verification, AI, IoT, security, management, blockchain, and more.

The Pillars of Digital Transformation in Banking

Reinvent the Consumer Journey

Like any other business, banks need to assess the customer journey, identify the most critical points, and continually improve the user experience. However, while some banks digitize only certain services, it is possible to to digitize the entire customer journey. The more services are digital, the more data a bank can collect and analyze. This data enables banks to constantly reinvent the customer journey and better serve customers.

Leverage the Power of Data

Data analytics practices and tools enable banks to leverage data to improve potentially any aspect of the business. Data analysis can help ensure secure transactions, prevent fraud, identify business opportunities, increase productivity, and reduce overhead. Banks can leverage data analytics to predict behaviors, anticipate needs for loan defaults, assess risks, prioritize leads, establish connections between clients, and more.

Redefine the Operating Model

Today’s consumers want not only fast and seamless digital experiences but also human assistance when they need answers to complex issues.

Here are key digital operating models, which were discovered by the Boston Consulting Group and are implemented by many financial institutions:

      • Digital as Business as Usual Plus—this model prioritizes gradual improvement, letting the management team stay in place. The benefit of this model is that it can yield quick wins. However, it is difficult to implement changes to siloed teams and legacy systems often cause issues.
      • Digital as a New Line of Business—this model enables a bank institute or credit union to create a new business entity with a head of digital. This model can be easier to scale, buy can lead to more complex management workflows. It also puts the responsibility over digital operation, including IT, in the hands of other business units.
      • Digital Native—this model means the bank creates a new, digital-first bank with its own technology stack, and doesn’t need to deal with legacy systems. This bank entity typically prioritizes acquiring new customers, which means the bank can gain new economies and capabilities with quick impact. The disadvantage of this model is that the bank needs to work hard to encourage existing customers to make the move.

It is possible to implement all three models for different locations, industries, and markets.

Digital Banking Transformation with Lightico

Lightico can help bring about a better, more robust digital transformation through its customer-facing suite of digital interaction tools. Through Lightico, banks can leave paperwork behind and transition to a digital platform based on eSignatures, eForms, digital document collection, and automated ID verification.

Lightico’s platform is intuitive for both the agent and end-user. Project managers can configure workflows based on conditional logic so customers glide seamlessly through their banking task, whether it’s onboarding or servicing. To learn more about how Lightico can expedite a digital banking transformation, try the interactive video here.