Digital Transformation of Banking Industry

Published: 2019-10-28 10:00:00
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Banks are faced with numerous challenges that need to be addressed in the context of digital transformation. The main reason being at the forefront of everything that they need to do; the customers are always their privileges. The banks demographic with the specification of the younger ones become more different making the change to be faster than banks driving the course to advocate for change in the bank industry (Tapscott, 2011). Customers are in everyday adopting new technologies that have high speed and therefore, the Banks need to catch up so that they can meet the demand of the market. There have been improvements regarding the ways in which the customer has been conducting their activities like online businesses and it is escalating more and more each day.

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The survey that has been indicating that people who now use online banking have grown to 61% compared to those who use mobile banking which is around 35%. The most important aspect of the modern banking transformation, however, is the social media since it is used to express the customers preferences, frustrations and also satisfaction (Tapscott, 2008). Real and unbiased customer insight is also another thing that strengthens the satisfaction that the banking services ought to give. Social media is a platform that the banking industries use to communicate and market their services. The customer only understands the fact that being digital is being able to deliver the services at any place and at any time.

For the banks to be competitive, they do require the customers, and they need capitalization of the technology evolution within the marketplace. The bank industry needs to offer digital transformation so that they can keep up the pace with the customer. The banks need to have early demographic systems to adapt and stay updated to the current trend (Tapscott, 2008). They are entailed creating an environment where all products and services can be available to the customer whenever they might need them at any time they need them. The transformation should ensure that all the services are delivered across multiple channels beyond the branch like the web, phone, ATM and Mobile app (Solis, 2011). The employees expect to get the information quickly and instantly. When viewing the transformation internally, it is challenging to facilitate the digital transformation since the changes are driven by the external factors of banking industries.

Banking industries need to keep up with the changing digital age and to do so; profound re-set is done to follow up the customer journey into the digital banking (Tapscott, 2008). Strategies are being implemented to make sure that transactions through the internet, mobile and mobile apps are done at any place at any time.

Figure 1: Acceleration of Digital Strategies ( BIBLIOGRAPHY \l 1033 Michel, Marcu, Ullrich, Malbate and Dela, 2014)

For digital transformation to be successful and the customer satisfaction to be reached, the digital disruption should be analyzed so that the industry can seek out on the impacts that it might have to the transformation.

Models-Digital Landscape Analysis

A model that was developed by an Australian known as Deloitte entitled Short fuse; big bang is significant as it represents a framework that is used to evaluate the different industries and how they will be disrupted by the digital technology (Solis, 2014). The model indicates that the bang is the time that the period of disruption will start, and the fuse is the period when the real impact will began. There are industries with a long bang, others with a short bang while others have a long fuse and short ones too. The digital vortex is a situation where the digital models, values, and offerings are moved to the maximum extent as possible. They are used to evaluate the current and the future state that digital disruption is in. The technology involved, the opportunities, threats and also the impacts

Digital Disruption

The entire banking is the potential disruption since there is an expectation of fierce competition that is supposed to exist between the emerging technology and the banking industry. Digital disruption is causing a significant impact on the banking sector, although a lot of challenges and opportunities (Solis, 2014). Challenges that customers faces in the digital disruption make their managing behavior and relationships to be complicated. The digital disruption can be a threat in the seizing of the market share and in the regulations of the requirements that can act as hindrances for the bank industry to adapt agile technologies (Raskino and Waller, 2015). Consumers all over the world are busy adopting the digital technology, but the risks are also as obsolesce as it is to get away. The timeline given for digital technology to the surface is three to five years, and they will become a digital proficient. If the action is not taken, the risk of falling into a spiral of decline that is similar to the other industries is imminent.

Profits and revenues will be in a position to migrate and scale towards the successful use of digital technologies and in the process, the products will be made new, the process automated and the compliance measures regulated. Appreciating the magnitude of the opportunity and the gravity of the threat is, however, vital, but it is the step that needs to be taken to be the winning strategy. Digital technology increases the capabilities that can be used in value creation in banks. The change improves the customer connectivity together with the suppliers (Westerman, Bonnet and McAfee 2014). Digital draws on the big data, and the extent of refined decision making can be deployed as the most innovative banks (Solis, 2013). The customer journey is however compelled with a different combination of personalization, speed, the opening of accounts, making use of auditors, applying for loans and others. All these changes require the banks to act in quick response so as to facilitate the experience of the user interfaces.

The change makes some of the data to be unused, although there still might be significant values that can be used to create cross-selling and up-selling. Rapid experiments and agile development are adamant since the banks need to have knowledge on how to mitigate high-value initiatives while they show tolerance of failures in all those trials (Westerman, Bonnet and McAfee 2014). Their delivery needs to be more accurate and fast. Being aware that there is a need for change is the greatest challenge ever that the banking industry faces. The other challenges include the need to provide leadership programs in addressing the applications that might be necessary for the tests to take place.

The scope of the changes seems to note the fact that digitalization is a tough journey and a complicated one that needs its opportunities to be captured and providence of opportunity to plan, coordinate, make decisions and invest (Fidelman, 2012). There are however some impacts that are brought about by some aspect of the social media, mobile, big data, the internet, cloud and other disruptive technologies.

The diagram is adopted from http://www.whiteboardmag.com/short-fuse-big-bang-4-ways-that-digital-disruption-will-change-your-industry/

Figure 2: Digital Product Disruption; the past and the present:

Impact of the Disruptive technology to the Banking industry

Industries have been transformed by IT-enabled disruptive innovation, which includes not only the information-based industries like the media but also other aspects. The pace in which the customers are moving at is making the banking industry to embrace on yet a tight embrace with convergent disruptive technologies that erode the boundaries that separate them (Hinchcliffe, 2012). Business is becoming more agile and technologies like social media, mobility, big data and cloud computing work together so that they can control the unlimited opportunities for all the stakeholders involved. The disruptive technologies have been taking the lead in the business ecosystem over a period.

Social Media

Social media strategies as become a mandate in all the industries be it governments, retailers or even banks. Social media is a tool of knowing the products that the customer might want to buy (Afshar, 2012). With more than one billion individual people logged in to various social media, banking industry can regulate their customers and make social media a tandem with its services in mind. The industry will make it easier for the customer to give their suggestions and also post their dissatisfaction (Hill-Wilson, 2013). It will, therefore, allow the industry to collect the data faster and generate a fast remedy for the challenges posted.

Mobility

Peoples ways of access to the banking industries have been changed by the mobile devices. The use of smartphones, tablets, and the likes have caused precious and digital content to the fingertips of the customers. The emergence of mobile banking has been one of the most innovative products in this industry (Scott, 2013). Mobile banking has been brought by the online solutions that have existed since the turn of the century and has led the banks beyond the multichannel strategies since the access of the internet has become ubiquitous and heavily used.

The spread of mobile banking creates new golden rules for retail banks since the banks want to keep up with the pace to meet the customer expectations. The impacts of the mobile banking necessarily bring simplicity whereby the mobiles only require visual, smart and easy to use interface and services making a lot of customers to access (Scott, 2014). It helps to cultivate the development of emotional relationships with the customers through social media. It enables the banking industry to generate app traffic to increase the sales and most importantly, it speeds up the innovation and keeps up the trend of the new technological development. Some apps are developed in phones like Apple and others on watches and other wearable devices.

Cloud Computing

The power of cloud computing helps in fostering innovation and improve productivity that is accepted by the IT vendors and the customer. Its existence has enabled the telecom player to emerge providing efficient cloud computing (Frank, Roehrig, and Pring, 2014). Cloud computing erodes the boundaries that exist between the IT and the vendor. Cloud computing came as a result of the proliferation of the internet. The services are provided through the public cloud, private cloud, and the hybrid cloud. It is the technology that is expected to offer information technology services over the internet.

Big Data

Big data usually develops within the financial services whereby it depends on two types of data, the On-grid and off-grid. On-grid contains all the customer's data that the bank has and all the insights it receives from the customer be it the social media feedback and web interactions. The on-grid data allows the banking industry to know what the customer wants and therefore are able to focus on the future opportunities (Mayer-Schonberger and Cukier, 2013),. Analyzing the data from the client's panel can take a lot of months, but the big data provide insightful results in a matter of hours. The outcomes can be analyzed afterwards and a solution provided quickly making the customer satisfied.

Part II

Digital Bank of Singapore (DBS) is one such bank that has embraced business digitalization, terming it as the key factor in its future development. DBS adopted the digitalization of its operations due to the competitive landscape in the industry and as a means of responding to digital opportunities and threats in Asia. The researcher chose DBS as the case study in order to assess how bankin...

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