Gartner defines digitalization as “the use of digital technologies to change a business model and provide new revenue and value-producing opportunities; it is the process of moving to a digital business.” The analyst refers to “digitization is the process of changing from analog to digital form.”
The term “digital” therefore as applied to banking, in my view, is a failure in semantics. Let’s face it, for over 50 years banks have relied on digital technology to enable banking services. How technology, particularly the emerging kind, is being applied today relative to ten years ago is arguably where the difference lies.
It is not too difficult to construe that many banking products and services offered are enabled by information technology.
Arguably what is different is the length of time it takes to launch a new product compared to two years ago. There was a time when the answer would be around arguably at least a couple of years following extensive market studies. The new benchmark seems to be six to nine months as in the case of Hong Kong’s new eight virtual banking licensees who all seem to promise to launch new services six months following granting of their licenses.
For banks looking to undergo digital transformation confusion would probably be the order of the day – at least at the start. On the one hand, some would suggest that banks undergo transformation – a piece at a time. Start with a small department or process, digitize, and once the kinks have been removed, move on to the next. The intent is to make sure business is uninterrupted for the duration of the transformation.
A second school of thought is the “big bang project” – one that involves a wholesale rip and replace of existing core applications and systems in favor of the new platform. However, it is understood that such a process, while presenting an ideal scenario, is wroth with risks and will be a painful, and potentially disruptive process. But once completed, the result is a new banking platform that may be more aligned to the new way of banking, and new way of work.
Tan Bin Ru, ceo of OneConnect Financial Technology, shared her views on what makes for a successful digital transformation at banks. “At OneConnect, our observation is that adoption only takes place when you have a process 100% digital. When you manage to digitize 90% of the process adoption never picks up because of the missing 10%.”
View the full video to pick up points on core banking modernization strategies. Watch Tan’s response on the following:
Why banks are interested in digitizing core banking: 0:05-1:17
Major challenges in digital banking journey: 1:17-2:29
Regulator’s stance on core banking system modernization: 2:29-3:20