Digital Transformation in Retail Banking and the Role of Data

Digital Transformation has become a major agenda item for many Retail Banks. In this blog, I wanted to explore some of the reasons behind this. We will explore what Digital Transformation might mean for a Retail Bank. We will also look at the importance of data in supporting of these types of programs.

Banks are having to change

Especially in the Retail sector, Banks are having to consider what they do. I think some of the reasons for these changes include:

  • The need to understand who the customer is and what they’re expectations and needs are. Consider the different behaviors between ‘Grandparent, Parent & Child’ demographics?
  • The Millennial generation have higher expectations of providers including omni-channel access, real-time processing and mobile everything.
  • Players, from other industries, are coming into the market and bringing a different mind-set and experience. Telecommunications and Retailers are two examples.
  • The need to compete better and drive operational efficiency means Banks are looking at ways of reducing costs and improving service by using new technologies including Blockchain, artificial intelligence and machine learning.
  • Regulation and compliance is still a major issue, so how to deliver these requirements both effectively and efficiently.
  • The move to the cashless and contactless society is putting pressure on Bank infrastructures to support new modes of engagement.

I think the question many Banks are asking is ‘How do we build a value-add relationship with Customers, to secure their business today and tomorrow?’ I think that Banks are trying to move from being a ‘service provider’ to more of a ‘relationship partner’. To do this, I think Banks are seeing Digital Transformation as a change in their business model. That change could include:

  • Putting the ‘Customer’ at the heart of the business:
    • Consumers
    • High Net Worth’s
    • Small Medium Enterprises
    • Corporates
    • Other Financial Services institutions
  • Moving added value interactions to digital, as it can:
    • Reduce Costs
    • Provide a better service delivery model
    • Enable Self service
    • Support Advisory services
    • Enable new Data services
  • Digitalization of the Value Chain, as it’s about
    • Connecting to the Customer
    • Improving process automation
    • Delivery and service of old & new products
    • Supporting human interaction when and where needed
    • The changing role of the Branch & Account Managers

So why are Banks investing so much in Digital Transformation?

I think the reason for this is that:

  • Many Banks can’t innovate fast enough to keep themselves relevant and nimbler players are eroding market share and margins.

One challenge I have seen is that often there isn’t a single, consistent definition of what Digital Transformation is. So, to add to that problem, here’s my definition:

  • Digital Transformation for a Bank, is the application of digital technologies and solutions to drive the adoption of disruption and innovation as the basis of change.

You may decide that you have a better definition of Digital Transformation. If so, please let me know? For now, assume that’s the definition used throughout the rest of this article.

So why is Digital Transformation so challenging?

I think Banking still has many data challenges, which makes Digital Transformation difficult when data is THE asset and potentially THE differentiator. Some data challenges are shown below.

 

Some common Retail Banking data challenges

 

Digital Transformation capabilities

To understand this better I decided to map out some of the capabilities a Retail Bank might need as part of a Digital Transformation programme to understand the role of data. A sample of some Digital Transformation capabilities are shown below.

 

Some common Digital Transformation capabilities in Retail Banking

 

My conclusion was that to deliver these capabilities there is a high dependence upon the data they each generate and consume. I also concluded that any single Digital Transformation capability may be dependent upon other Digital Transformation capabilities, to deliver expected benefits. This suggests there is a significant impact upon the success of many Digital Transformation capabilities from all the data they require to operate correctly.

So I mapped out what data capabilities might be needed to deliver the Digital Transformation capabilities outlined earlier. Some of the major data capabilities required are shown below.

 

Common Data Capabilities for Digital Transformation

 

Then i mapped out which data capabilities were required for each of the Digital Transformation capabilities I’d mapped out earlier. I did this for a number of Digital Transformation capabilities, but for practical reasons I’ve included just one example below. It’s for the ‘Mobile & Apps’ Digital Transformation capability.

 

Example of data capabilities required for Digital Transformation

 

What I started to notice is that as I mapped out which data capabilities were required for each Digital Transformation capability; the overall set of data capabilities required became quite extensive.

An example of mapping out the data capability requirements for just 3 Digital Transformation capabilities, highlights their dependence upon a wide range of data capabilities that span a number of technology disciplines. A small example is shown below.

 

Relationships of Digital Transformation and Data capabilities

 

So, what does this all mean?

The overlap in data capability requirements leads me to conclude that delivering all these Digital Transformation capabilities, with the right data at the right time, requires a platform approach to managing data.

Informatica developed the Intelligent Data Platform (IDP) to provide the data platform capability that could support many different types of Digital Transformation program.

Have a look at this review of IDP and see if this is something that might help your organisation deliver your Digital Transformation program.

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