Why Digital Transformation Won’t End The Need For Bank Modernization

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Why Digital Transformation Won’t End The Need For Bank Modernization

Alex Kreger, UX Strategist & Founder of the financial UX design agency UXDA, designs leading banking and fintech products in 37 countries.

The term “digital transformation” has become a buzzword in the banking sector. Its popularity has shot up over the past year, according to Google Trends. Many banks I’ve worked with envision a future where their digital infrastructure, once modernized, will run as smoothly and steadily as their brick-and-mortar branches once did.

But I believe that behind the shiny facade and corporate jargon lies a harsh reality: The digital transformation of the banking sector is an illusion, and the hope that modernization of any bank will ever end is a lie.

Why is it an illusion, you ask? Any transformation implies a destination—a point at which a subject has fully transitioned from its outdated systems and processes into a new, future-ready state. However, there are several reasons why, in the digital banking industry, this concept of digital transformation is fundamentally flawed.

The Myth Of Completion

Technology is not static; it evolves continuously. Each new advancement spawns the need for further adaptation and integration. Banks are perpetually chasing the next big innovation, whether that be cloud, blockchain, AI or quantum computing. This unending pursuit ensures that the finish line of digital transformation will perpetually recede into the horizon.

Look at the technological giants like Apple and Tesla. Much of their success lies in relentless innovation and regular updates that not only meet but anticipate user needs. I believe that in order for banks to stay relevant, they need to emulate this model. This means adopting a mindset where digital products and services are perpetually evolving. A superficial user interface (UI) revamp or a one-off digital solution will not suffice.

The Ever-Rising Bar Of Customer Expectations

Today’s customers demand seamless, real-time and personalized banking experiences. Customers expect the same level of convenience, speed and personalization from their banks as they get from tech giants like Apple, Amazon or Meta.

What satisfies customers today might be deemed obsolete tomorrow. Banks are continually enhancing their digital offerings to stay competitive, making the notion of a completed transformation a mirage. The race to satisfy ever-changing customer expectations requires that modernization efforts be in perpetual motion.

The Unseen Anchors Of Legacy Systems

Despite significant investments in technology, many banks still operate on decades-old legacy systems. These archaic infrastructures are deeply entrenched, forming the backbone of daily operations. The transition away from these systems is neither simple nor swift, and it often involves high costs, risks and time.

Banks often find themselves in a hybrid state, where new digital solutions are layered on top of old systems, creating a complex and fragile ecosystem. This patchwork approach highlights that the transformation is far from complete and perhaps will never be fully realized. Because even while you are fully modernizing one system, another can turn into a legacy.

The Moving Target Of Cybersecurity

With digital transformation comes the increased threat of cyberattacks. Banks are prime targets for cybercriminals, and the sophistication of these attacks grows alongside technological advancements. As banks adopt new technologies, they simultaneously open new vulnerabilities that must be secured. This relentless battle against cyber threats ensures that the modernization process is an ongoing effort, with no definitive end in sight.

The Fake Innovation

Banks often promote their latest digital achievements as groundbreaking. However, many of these so-called innovations are incremental improvements rather than transformative changes. The marketing spin around these advancements creates an illusion of progress while the core systems and processes remain fundamentally unchanged.

Such a marketing-driven superficial approach to digital transformation typically just perpetuates the cycle of modernization without addressing the underlying structural challenges. I believe financial institutions should embed a culture of continuous improvement and user-centric innovation into their core by adopting the mindset and agility of technology companies.

Taking A UX-Driven Approach To Digital Strategy

Why do you think the world’s most advanced technology company, Apple, puts user experience (UX) at the core of its strategy and business? Apple is a paragon of constant innovation. It seems like every six months they release major updates that redefine user expectations and market standards.

User experience is not just about making apps look good, however; it’s also about making them intuitive, efficient and enjoyable. This involves comprehensive user research to understand customer behaviors and pain points, followed by the design of intuitive, emotionally resonant interfaces.

Banking digitalization is a continuous journey, not a destination. To cope with this in the same way as technology companies, here are several strategic shifts to consider for your bank:

• Customer-Centricity: Place the customer at the center of your strategy, using data-driven insights and UX design approach to deliver cutting-edge and intuitive digital experiences.

• Innovation Culture: As a leader in your organization, champion digital evolution and establish a culture of innovation and agility. Invest in talent with the necessary tech skills, and encourage a mindset of continuous learning and adaptation.

• Technology Investment: Look at how you can further invest in your digital products’ UX design and tech infrastructure, including cloud computing, APIs, AI and cybersecurity. (Full disclosure: My company offers services in these areas, as do others.)

• Partnerships: Consider collaborating with fintech startups, tech companies and other industry players who can help you accelerate innovation, provide your access to new technologies, and allow you to leverage external expertise to drive evolution.

• Agile Methodology: In my experience, adopting agile methodologies in project management and development can enhance flexibility and speed.

Embrace The Never-Ending Story

I believe the notion that digital transformation in banking will reach a point of completion is a comforting but misguided fantasy. In reality, the modernization of the banking sector is a never-ending story. Continuous evolution is the new normal, so rather than chasing the illusion of an endpoint, focus on building adaptable, resilient systems that can evolve with the ever-changing technological landscape and constantly rising digital customer expectations.

A user-centered approach can help you continuously refine and enhance your bank’s digital customer journey. In my experience helping banks improve their UX designs, embracing this mindset can not only prepare you for the future but also help ensure your bank remains agile and competitive in a world where change is the only constant. The journey of digital transformation is real, but it will never end, so navigate it with eyes wide open, prepared for infinite innovation.


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