The top barriers financial institutions face in their race to digital transformation

By Shiv Kumar Bhasin, Chief Technology and Operations Officer (CTO/COO), NSE

Why are digital business transformations failing to deliver value? Low double digit percentage of IT leaders have seen sustained performance improvements from transformation efforts, and successful at sustaining change.

So, what’s driving this? Financial institutions staffs are too busy managing the third-party and first-party data and the associated tech complexity to implement the use cases they had in mind for the financial institutions’ digital business transformation.

If most resources are required just to stay upright, then financial institutions’clearly need help in their transformation. Why don’t they get more help? When asking financial institution CIOs, the reasons in rank order are insufficient personnel, then digital skills, and funding, followed by fourth in the list, “unable to source needed digital capabilities from vendors or contractors”. This last one caught my attention since implementing these digital capabilities yet given item three on the list is the lack of funding this budget for vendors may be moot. The CIOs are first overcoming these barriers through stakeholder engagement. Way down on the list in seventh place is by engaging more consultants. I’d like to argue that this is a mistake. Self-serving perhaps. But not just consultants to build digital capabilities, but also consultants to help foster cultural change.

I picked this image, imagining a financial services CIO keeping objects spinning in the air while on a tightrope ‘crossing the chasm’—an all-engrossing and near-impossible task—to convey how this role does not currently allow for driving growth. While the resource barriers cited are significant, I believe the focus should be equally on the culture and mindset barriers to digital transformation.

Business culture blocking change
If your financial institution culture blocks change, start by asking why. Evidently, humans do not like change. Surprise! Financial institutions are conservative cultures that reward consistency, predictability, and careful risk management. This has become a verb— “financial services on it”. This kind of culture is going to attract people that self-identify with these qualities and want to be recognized and rewarded for them. People don’t change much, so this quality is a fixture of financial services.

Financial Institutions’need to convey how these very qualities are necessary for a successful transformation if a financial institution is to deliver consistent, predictable results, manage risk, and sustain the conservative and reliable quality that allows customers to trust the bank with their money. Communicating this counter-intuitive idea could help align teams to embrace change.

Key reasons include:
1. Weak management understanding of digital business
2. Weak change leadership, planning or execution

Organizationally we are not innovative enough
Can a financial institution import the right culture? If anyone choosing financial services is inherently change-averse, can a financial institution acquire a fintech to tip the balance towards change-makers and risk-takers?

How about hiring change agents to lead the financial institution through its transformation? This could help with items three and four on the list of barriers—boosting understanding of digital among management and strengthening leadership. Financial institutions face significant challenges in recruiting for these roles. These are unicorns, so non-traditional candidates may be more effective.

Leadership is key to cultural
Given the allergy to anything new, allies among the establishment are critical. If a member of the old guard is at the forefront of change, this will influence holdouts. Typically, those leaders are close to retirement age, not wanting to rock the boat, and more likely to maintain the status quo. What would be their motivation? I struggle here. Should it be the intellectual challenge of being an old dog learning new tricks or the pride of ending a career as a dynamic leader? Can it be financial incentives, with executive retirement packages having more strings attached to performance in the final years?

While financial institution leadership readily answers a survey acknowledging cultural barriers to change, this is not their core competency, in fact, it is an area in which to ask for help. Start by appointing a Chief Culture Officer, with Investors financial institution as a model for success. A financial institution created the role and found that helping execs experience the merit of kindness and empathy in their own personal development was then something they wanted to scale. A culture of kindness actually drove business efficiency as employees in this environment more quickly came to an agreement. The softer quality of cultural barriers means they get less attention and funding than the more concrete demands. Demonstrating the business value of a strong culture can help change that.

Must Adopt an Outcome Focused Approach
CIOs must adopt an outcome-focused approach to digital strategies and investments as digital societies progress. Digital functioning will not develop in isolation, and digitally augmented ecosystems will continue to emerge and evolve, placing new expectations and pressures on financial institutions to provide access to data and digital services that are easily consumed. CIOs must continuously communicate a sense of urgency and ensure organizational readiness so that their digital innovation keeps pace.

Leveraging Data for Digital Transformation and Innovation
Data is at the heart of the digital transformation of financial institution. Financial institutions are looking to data and analytics to reliably and accurately detect and predict shifts in risk, opportunity and outcomes prior to their occurrence. Financial institution must look to data to drive innovation through improved management, targeted data sharing and AI-augmented data analytics capabilities.

Skill Challenges
The pace of technological change will continue to accelerate, forcing organizations to invest in acquiring the skills necessary for digital transformation. Machine learning (ML), artificial intelligence (AI), cloud, DevOps, security and many other technologies impact every IT role.

Technical professionals must focus on quickly understanding, integrating and operationalizing new technologies. Acquiring the right set of skills to undergo digital transformation is imperative.While the pace of technological change is accelerating, the demand to deliver solutions more quickly is also increasing. To succeed, technical professionals must focus on increasing agility across the IT organization.

Operational Readiness Challenges
Agile and DevOps is the de facto approach to develop and deploy applications to enable continuous delivery. IT leaders, along with application developers, must operate as product teams, deliver self-service platforms, and design for resilience to drive digital business innovation. Automation of Operational readiness is key for successful digital transformation. SOP (standard operating procedures) must be in place for handling different scenarios to sustain production systems’ uninterrupted service at every situation with best ITIL compliant automation tools deployment and best monitoring tools deployment.