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Digital Disruption in Financial Services: Getting Ahead with Automation 

Written By Joanna Smartwood
Nov 28, 2023

The state of financial services today spotlights core banking digitization and the bigger-than-life disruption it’s causing in the industry.  

It makes sense that going to the bank sounds like an errand people no longer need to run. Even though 77 percent of banking consumers still use traditional banks in some capacity, 43 percent keep their funds elsewhere, and 61 percent will likely switch to a digital-only provider, Galileo Financial Technologies found. 

Advantages of digital banking over traditional banking are quickly and powerfully emerging: higher savings account interest rates, 24/7 availability no matter the location, lower fees, and more.  

Core Banking Digitization: Disrupting Financial Services 

The majority of leading U.S. banks use older platforms that were deployed in the 1980s and 1990s, creating the “Legacy Dilemma” as dubbed by Deloitte. They’re either homegrown or so deeply customized that they’ve moved away from resembling the original product purchased – a transition that makes platform maintenance even more complex. Banks know these systems are due for modernization, but not until recently have companies considered tremendous investments in time, effort, and cost, as well as the return on investment (ROI) that’s possible when moving toward digital transformation.  

A system overhaul can take years to complete and require significant resource commitment, not to mention operational risk due to the complexity of core banking transformation and potential for disruption of daily operations.  

Many banks today also deal with expiring maintenance and support contracts, which means facing poorly documented, clunky, and tangled customizations and integrations. Another issue comes from increasingly scarce and costly available resources that know, what some might call ancient, common business language (COBOL) and mainframe systems.  

The Future of Digital Banking Strategy Calls for an Upgrade 

Banks don’t have to go all in. Despite past belief that a complete core replacement was the only way to advance, any change in core systems can impact operations, as massive progressions in core banking technology supports multiple solutions.  

Banks can piggy back emerging next-gen platforms onto their legacy platforms for the majority of core banking functionality as the companies continue to innovate and address their most urgent objectives. Plus, legacy solutions are innovating too, giving banks more options for next-gen features and upgrades. 

Today’s army of new technology solutions make it easier for banks to transform their core capabilities. Choosing the best option for each company comes down to establishing its modernization profile based on sustainability of their existing platform, and then determining how much risk it’s willing to take, how fast it needs to transform, what’s needed to innovate its offerings, and the complexity of its data strategy.  

The Chief Information Officer (CIO)’s Expanding Role in Driving Digital Change 

The Chief Information Officer of today’s financial services organizations oversees their company’s IT operations and aims to enhance internal efficiency; and therefore, find and establish opportunities for IT to step up. 

Disruptions in financial services and the importance of upgrading existing technology present key opportunities for IT improvements. Automation is the backbone of doubled capacity and productivity, cost reduction, better customer experiences, and strategies that future-proof the business. With these priorities front and center, IT leaders are at the intersection where core digitization and automation meet.  

As consumers do more and more banking online via mobile app, the need for continuous, reliable service is clear, and a CIO knows the power of automation in making this happen. There’s an endless list of financial service providers that consumers can choose from. Yours has to be the one that doesn’t cause delays or to any degree, gets in the way of what they need to do in any given moment. It’s important to note that as the financial services industry goes digital, the CIO’s role must ride the change, maintain competitive edge, and elevate the business. It’s about the synergy between digital and data technologies in driving future business strategy and the CIO’s increasing ability to “talk the talk” and influence business decisions.  

If they haven’t already started doing so, CIOs will need to adapt their capabilities and elevate their responsibilities in four key areas, as to help the company operate and compete in a financial services marketplace driven by technology:  

  • Strategist and visionary  
  • Driver of bridging the gap between past and future 
  • Ecosystem orchestrator 
  • Start-up leader 

Three Ways Automation Shapes the IT of the Future  

There’s a sharp, rising demand for conveniently developed apps for completing personal necessities, as the number of digital banking users in the US reached 197 million in 2021; expected to reach 217 million by 2025

The trends that come with core digitization in banking, coupled with this kind of demand, drive a real sense of urgency to take on more challenges while ensuring smooth operations. Increasing this capacity augments the need for automation. Three examples of automation’s role in shaping the IT of the future include:  

Ecosystems and marketplace: Financial services institutions are turning their applications into ecosystems that meet all users’ needs.  

In-demand mobile banking app features: 24/7 access, money transfers, security, fraud alerts, customer support, cashback, loan payments, bill payment alerts.  

Demand for maximum variety of digital payment methods: contactless payments, e-wallets, online payments, simplification of converting digital currencies for faster transactions worldwide.   

Taking Automation Action: Opportunities for IT Leaders 

A bank-wide robust data management strategy is no longer just a way to get ahead, but it’s something banks need to survive.  

Emphasizing its importance will facilitate a smooth, one-time data migration and ensure future integrations run as planned, taking into account organizational discussions on core modernization and digital transformation, “particularly when multiple lines of businesses, channels, and products exist with significant overlap and varying levels of data quality,” Deloitte said.  

Regardless of how modernization plays out, banks must understand their current state and roadmap for how they envision their data assets to flow within their enterprise and that managing data effectively presents an opportunity in terms of richer customer experiences, better cross-selling opportunities, and other external monetization revenue streams that banks must consider as they aspire to achieve a maximum bang for the proverbial buck. 

A solid data and digital banking strategy will also enable banks to add advanced analytics capabilities to their IT environments, as well as get real-time insights to drive sound decision-making. 

Creating and executing a digital transformation strategy takes more than a single conversation and a simple green light. Without a substantial starting ground or digital-first mindset, transformation plans and efforts can easily fail, and so it’s of great importance — and benefit — to be aware of the popular pitfalls. As discussed by McKinsey & Company, some of the most common mistakes include:  

Failing to Fully Understand Complexity and Cost 

A sizable 70 percent of digital transformations exceed their original budgets, and 7 percent end up costing more than double the initial projection. It’s important to ensure the forecasted time and effort needed to complete a project is realistic.  

Miscalculating Technical Debt 

Digital transformation project budgets should include technical debt, which takes into account cleanup of legacy tech stacks, unused applications, and excessive infrastructure.  

Inaccurately Quantifying and Tracking the Digital Strategy’s Impact 

To achieve maximum financial benefit from a transformation effort, banking leaders must identify the most important metrics and the baseline of the current state, and at multiple points of the project, keep track of the impact.  

Lagging Behind Competitors on Innovation, Speed, and Productivity 

Digital transformation success is often hindered when banks rely on traditional operating models and they’re limited on adoption of agile ways of working. Fintechs and neobanks release new product features every two to four weeks on average, McKinsey & Company found. 

Lacking Talent Needed for Digital Transformation 

Banking might not be the first industry that comes to mind when considering tech talent, but these skilled employees are actually a prerequisite for doing digital transformation right. Getting tech talent can come from redefining the employee value proposition as to become more attractive as an employer. 

Maintaining Organizational Silos 

Last but not least, business silos in banks leads to misaligned priorities, unclear direction, and a fragmented plan for execution. Digital transformation; however, requires close collaboration and unity of organizational teams.  

Automation Accelerating Digital Transformation: Two Common Examples 

Resource Provisioning  

Nothing can do what automation can when it comes to consistent resource provisioning. The rising diversity of infrastructure requests has made day-to-day management very complex.  

Running behind the scenes to execute each step of resource provisioning meticulously, and according to the approved IT runbook, automation takes care of all tasks needed to provision requested resources, only requiring human intervention if approvals are involved.  

The Resolve platform can be designed to build unique processes, link together tasks, and integrate with just about any other tool that has a digital footprint. Common use case examples include: 

  • VM provisioning/Deprovisioning: Spin up all supporting infrastructure components and create compliant VMs. 
  • Environment/App Provisioning: Create customized application configuration for automatic deployment. 
  • Pre- and Post-Check Validation: Drive organizational compliance and resource integrity with automated checks.  
  • Configuration: Make infrastructure and network configuration changes with confidence 
  • Self-service Provisioning with Centralized Controls: All employees to self serve resources like VMs, disk space issues, and more within a pre-determined allowance. 
  • User Provisioning AD/Applications: Provide a better experience to employees with automated user provisioning.  

Application Performance Tuning and Troubleshooting  

No application is immune to performance problems. Companies work hard to provide and maintain top-notch experiences for employees, customers, and suppliers, and would find great benefit in the power of automation to get in front of application issues.  

When applications run too slowly, for example, IT teams get very little information about the problem, where it’s coming from, what’s causing it, and so forth. But there’s a proactive approach to help guarantee optimal performance — regular, ongoing health checks. Performance downfalls will disrupt IT operations if they’re not caught in testing. And they’re often difficult to remedy and repair. Resolve helps IT teams ensure the right resources are allocated to the application, disk space is cleaned on-schedule, see a reduction in IT tickets, and more, including the following examples:  

  • Services Stop/Start/Reset: Ensure enterprise applications and systems are always running smoothly. 
  • Server Restart: Minimize service disruptions to the business. 
  • Observability – Event Automation: Execute remediation triggered by events and monitoring alerts.
  • Disk Space Cleanup: Keep devices running at optimal performance.  
  • Backups and Snapshots: Always be prepared for business continuity. 

Financial services IT leaders are embracing core digitization in their quest for digital transformation, but it doesn’t stop there.

Learn about key trends, how automation modernizes your organization, the mindset needed for long-term success, and more in our newly released eBook,
Building an Automation Strategy: A Guide for Financial Services Organizations.” 
 

About the author, Joanna Smartwood :

About the author, Joanna Smartwood :

Sr. Director of Demand Generation

Joanna Swartwood is Sr. Director of Demand Generation at Resolve Systems. With 20+ years’ experience in developing and running high-performing marketing campaigns, Joanna is passionate about curating demand gen strategies that deliver pipeline and revenue growth. Demand gen in the B2B SaaS tech space is Joanna’s career calling.