Financial services organizations are at crossroads. Not only do they have to respond to changing customer expectations, higher operating costs, new technology and an evolving regulatory landscape, they also have to respond to challenges created by Covid-19. We believe transformation of legacy banking platforms will now gain sharper focus.
The economic consequences that are unfolding rapidly and unpredictably mean that banks must double-down on both their efficiency and customer experience agendas. Transformation is now non-negotiable if banks are to remain strong and stable and make real progress. The question is, therefore, how can banks pursue their transformation agenda while addressing the very real risk that modernization of legacy banking platforms presents?
Link transformation strategy with value
Traditionally, financial institutions take many different approaches to transformation. These range from developing sleek new customer experiences to compete with the neo banks, to developing new platforms and partnering with fintechs. Achieving success for more mature banks is further at risk given the challenge presented by their legacy platforms.
Above all, we believe transformation should be viewed through a value lens rather than being the domain of the IT function. Financial services organizations have a huge opportunity to create greater value from existing operations as well as new untapped demand from innovation in product and service.
Drawing on Cognizant’s experience of shaping and executing the definition and delivery of banking transformations, we see four key principles that must be considered:
- Business strategy must inform every step of transformation. Ensure that the approach to platform transformation is tightly aligned to the wider business strategy. That means ensuring that the strategy is clearly articulated and understood and that any decision and investments in platform modernisation are scrutinised through that strategic lens. Because every bank’s strategy will vary according to their markets, customers, products and competitors and what kind of business they want to be, there’s no single technology approach that will suit all purposes. Early and continued collaboration between the business and technology teams is essential to secure the right outcomes and avoid the technology tail wagging the business dog.
- Design a strategy-aligned roadmap for delivery. A transformation roadmap should clearly set out the logical order in which business outcomes will be delivered. Here again, that needs to align with the value that the organization is seeking to achieve, with incremental progress determined by business priorities. That means making appropriate use of modern delivery methods, e.g. agile, and making sure that everything that is done satisfies and is frequently assessed against the relevant value criteria.
- Assess technology selection against business value. Organisations often undertake detailed and exhaustive market, functional and technical assessments when assessing new products and suppliers. More often than not either the technical assessment dominates proceedings and /or new technology platforms are selected without a clear line of sight to the value required. As a consequence, poor product selection is a risk as well as a lack of understanding of how products should be deployed to inform the sequence of delivery required by the transformation roadmap.
- Assess your readiness for change. Unsurprisingly given the sheer scale and velocity of change that business leaders have to deal with, resistance to change is often a key reason given for the failure of a banking transformation project. However, it’s crucial that the ability of the organisation to deliver and adopt the operational, technical and cultural changes required to support transformation is comprehensively assessed and done early. When assessing readiness, it’s also important to do so in light of the complete change portfolio. When building the case for change, this means asking tough questions (and being ruthlessly honest in the answers) such as: Do we have the capabilities required to deliver?, Do we have the capacity to cope?, and Can we afford the true investment required?
The approach to delivering a successful banking transformation, underpinned by a modernized platform, will vary dramatically from bank to bank. However, sticking to the basic principles above and ensuring that business value drives every aspect of change, will help you realize your transformation.
For any inquiries regarding Banking and Financial Services, please reach out to Gunnar Brennekåsa, mobile +47 4148 9000, e-mail: firstname.lastname@example.org
For more information, please visit our Covid-19 response page.
Download the article about Banking Digital Transformation Post Covid-19 by submiting the form below: