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Home Fintechs The Struggle of Digital Transformation in Banking: An EY Report

The Struggle of Digital Transformation in Banking: An EY Report

In today’s rapidly changing digital landscape, banks have been struggling to transform their operations for multiple years. Despite the significant amount of effort put in, many banks have still failed to meet their desired performance outcomes.

A recent Banking Transformation Report by EY found that 38% of global banking transformation leaders believe their transformations underperformed against key performance indicators (KPIs), and 67% experienced at least one underperforming transformation in the past five years.

However, a similar percentage of executives also recognize the critical importance of transformation to the long-term survival of their organization. So, where is the disconnect?

The Problem of Misunderstanding

Jan Bellens, EY’s global banking and capital markets leader, believes that many banking executives do not fully comprehend the concept of transformation and are primarily driven by cost-cutting or regulatory compliance goals.

Instead, the report suggests that transformation should be viewed through the lens of customer experience, both internal and external.

Redefining Transformation

EY offers five key questions that banks should consider as they look to redefine transformation:

  1. Is our transformation strategy bold enough?
  2. Does our transformation strategy preserve or improve margins and operating leverage in uncertain times?
  3. Are customers, employees, and business partners at the forefront of our transformation plans?
  4. How do we create a culture of continuous transformation?
  5. Are we providing our leaders with the necessary training and coaching to succeed?

The report also highlights a common cause of unsuccessful transformation: an unclear vision.

Less than half of employee respondents said they understood and believed in their organization’s transformation vision and strategy, largely due to a failure by executive management to agree and effectively communicate a transformative vision aligned with the bank’s strategy.

Overcoming Barriers to Success

Securing adequate financing is another major barrier to delivering successful transformation. Only 41% of executives said that funds were made available to fund new innovations and ideas.

EY suggests that banks must rethink their approach to evaluating and funding transformation.

Six Tips for Success

EY outlines six tips for success in transforming an organization:

  1. Redefine transformation with a focus on improving customer and employee experiences
  2. Inspire and lead from the top to ensure that executive management communicates the bank’s vision and strategy
  3. Rethink transformation ideation and investment evaluation, considering the impact on customer and employee experience
  4. Reposition for agility at scale, focusing on core technology, culture, team structure, and governance
  5. Reorchestrate talent and invest in people, paying attention to diversity and employee value proposition
  6. Re-evaluate tracking and performance monitoring, using multiple financial and non-financial metrics

According to EY, the transformation process should never end. Banks must grasp the holistic nature of the change they must undergo to truly succeed.

By redefining transformation and focusing on customer and employee experiences, securing adequate financing, and continuously tracking and monitoring performance, banks can successfully navigate the digital transformation journey.

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