03.03.2021

How does my financial institution start the digital transformation journey?

Financial Institutions (FIs) face growing competition from Telcos, Fintechs, Big Techs (Alibaba, Google, Apple, Facebook, and Amazon) and an influx of innovative, flexible, and customer-oriented products and services. If FIs want to serve their clients well and survive in this increasingly competitive market, they must take advantage of the opportunities digital finance offers. Therefore, they must introduce products and services that are tailored to the specific needs of the underserved population, a process collectively known as digital transformation. 

Some Key Definitions: 

Digitization: is changing from analog to digital i.e. it’s the information you’re digitizing. For example, replacing pen and paper registration with a Digital Field App / tablet. 

Digitalization: is the process of employing digital technologies and information to transform business processes and operations. An example is changing from manual data entry into the Core Banking System (CBS) to a DFA that automatically updates the CBS. 

Digital Transformation: is not limited to digital projects but a broader term revolving around being customer rather than transaction-driven. It requires cross-cutting departmental change. Initiatives will typically include several digitization and digitalization projects, underpinned by a digital transformation strategy. This strategy should be aligned to the global business plan.  

Working as a consultant in digital financial services for the last 15 years, predominantly from a capacity building perspective, I am increasingly surprised that the conversations around digital transformation are still along the lines of… “we have invested in a new technology” - there being an assumption that technology by and in itself is “the solution” rather than an enabler.  

With this as a background, LFS Advisory developed a proprietary digital transformation gap analysis tool which has a set of 132 weighted questions over 10 categories and gives a holistic overview of a FI’s digital readiness.

 

 

  1. Digital Financial Services Ecosystem (country level) 

  1. Existing Strategy 

  1. Markets, Products & Channels 

  1. Project Management 

  1. Plans & Procedures 

  1. Risk Management 

  1. Information Technology 

  1. Data Collection & Management 

  1. Financial Capacity

  1. Customer Centricity 

The output of the gap analysis is a report that helps identify where you should make new investments and capabilities to fully leverage the possibilities and opportunities that new technologies offer while ensuring flexibility and adaptability for future innovation. Specifically, the digital transformation gap analysis report can: 

  1. Give management a systematic assessment of DFS readiness in various categories and identify areas for improvement, including non-technological and non-project-specific improvements.  

  1. The quantified outputs can reduce complexity and help to prioritize and assign resources. This can be particularly useful in presentations to executive, board, or group-level audiences. 

  1. Can be updated periodically (e.g. once a year) to track progress.  

  1. Highlight the organisation’s current status versus international best practice. 

  1. Help benchmark performance against FIs in your country, region, or network. 

 

 

In summary, as you start your digital transformation journey, it is important to analyse your current capabilities and see where there are gaps, so that you can identify, articulate, and then execute your digital transformation strategy and achieve an increase in your competitive advantage. 

For further information, please follow the link: https://www.lfs-advisory.com/digitalfinance