A Citibank analysis makes an interesting observation that while digitization could lower incumbent banks’ costs by 30 to 50 percent, largely by reducing headcount, it could also take away 10-30 percent of their revenues and give it to their even more digitized (new) competitors. This statement is referring to a scenario when the banking vertical layer will unbundle to digital disruption, laying open any inefficiencies for new age service providers to exploit. It conveys the extent to which digital is disrupting, pervading and transforming business; an extent that many organizations are yet to come to terms with. In banking, for example, digital has eroded the (incumbents’) advantages of reach and capital and completely commoditized products and services. With price, incentive and advisory also losing their potency as differentiators, banks are in search of that elusive unique proposition that will be valued by customers. Meanwhile, the agents of digital disruption new digital players (big tech, Fintech etc.) powered by modern technologies – Cloud, Artificial Intelligence, Blockchain, Mixed Reality, and Internet of Things – are steadily disintermediating incumbents from those very customers.
The way out of this grim situation – and it’s not an easy one – is to scale digital transformation throughout the enterprise. Most banks understand this but are unable to carry it through: in the latest Efma – Infosys Finacle ‘Innovation in Retail Banking’ survey, only 17 percent of respondents confirmed deploying digital transformation at scale.
Our conversations with banks around the world reveal a growing impatience to get past the challenges of legacy technologies, integration and culture, which are the biggest barriers to transformation at scale. Actually, incumbent banks have no time to lose, because each day is bringing a new competitor that is digital-native by design. Hence in 2020, we hope they will focus on five actions to achieve digital transformation at scale:
In 2020, Infosys hopes to help banks scale digital transformation throughout the organization. Our trends forecast also covers the shifts impacting this agenda.
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