Embracing Digital Transformation: The Future Of Banking

Falk Rieker

The face of the banking industry has changed in the last few years.

Financial technology companies (fintechs) have begun disrupting the market with cryptocurrency, bitcoin, blockchain, and more. In the United Kingdom, a new breed of banks called “challenger banks” have emerged, focusing on delivering digital-only services and exceptional customer interactions. In the United Kingdom alone, there are currently more than 20 challenger banks.

Forward-thinking banks have responded to these market disruptions by expanding their in-house capabilities. Others have partnered with fintechs to develop new digital offerings. And some simply acquired their competitors.

Banking goes digital

Digital transformation looks different in every industry and every company. In general terms, it is the integration of digital technology into all areas of a business. That integration leads to fundamental changes in how the business operates and delivers value to its customers.

Banks running on a digital core can see reduced costs and streamlined processes. This end-to-end integration also helps provide a more seamless, engaging customer experience. And it makes room for further business transformation with new digital technologies like blockchain and artificial intelligence.

Going digital has also affected the banking workforce, with automation sometimes resulting in layoffs and staff reductions. But there is a growing demand for data scientists with banking experience—a skill set not easy to find in today’s market. It is time for the industry to develop a new workforce model to educate existing staff and recruit new talent.

Big Data and its impact on the customer journey

The banking industry is among the most data-driven of industries. Regulatory and insurance requirements mean banks must store many years of transaction data. The challenge is knowing how to translate that information into meaningful insights.

Big Data provides significant opportunities for banks to outshine their competition. Moving data onto a cloud platform provides a 360-degree view of every customer. This deep insight shows banks where they can provide a higher level of service and create more value. Big Data also allows the use of disruptive technologies like artificial intelligence, blockchain, and IoT to map the customer journey and gain a competitive edge.

Leveraging technology to reinvent the banking business model

New advanced technologies allow banks to strengthen customer engagement with personalized, innovative offerings. The industry already leverages IoT with mobile apps, swipe cards, ATMs, card readers, and sensors. It also provides a new opportunity for real-time asset financing.

Some banks are already using blockchain technology to transform their business processes, as it offers secure, convenient alternatives to traditional bank processes. Lately, blockchain has been in the spotlight because of its ability to reduce fraud in the financial world. Blockchain is already used in the financial instruments areas of banking, including payments (cross-border, peer-to-peer, corporate and interbank); private equity asset transfers; tracking derivative commodities; the management of trading, spending, mortgage and loan records, microfinance applications, and customer service records.

Looking at cross-border payments, for example, blockchain can be used to reduce processing time to minutes from standard times of three to six days. This elevates the customer experience to a new level with lower cost real-time transactions. Stack processes improved by blockchain include clearing networks; international transfers; clearing and settlement; auditing, reconciliation, and reporting; and asset ownership.

Other technologies, such as machine learning, can help automate manual processes, of benefit to trading, fraud management, and customer segmentation activities.

Banking on the cloud

Banks are racing to take advantage of market opportunities available through digital transformation. At the same time, they must manage the risks created by the new digital economy. There is a critical need for affordable computing platforms that provide greater agility.

There is no doubt new digital technologies are changing the banking industry. Banks that embrace innovation and adopt new technologies have unprecedented opportunities to change and improve how they provide financial services including offering the ability to:

  1. Collaborate with financial technology partners to develop digital products.
  2. Provide customers with seamless real-time, multichannel digital interactions.
  3. Simplify and optimize business processes through standardization, optimization, and adoption of cloud solutions.
  4. Build an open and agile platform that makes it easy to meet regulatory requirements.
  5. Innovate with disruptive technologies like artificial intelligence (AI), IoT, and blockchain.

Restructuring the business model and processes is critical to any bank’s successful digitalization. Leveraging innovative capabilities in a cloud deployment can not only speed up digital transformation initiatives but also deliver business-wide process improvements as well.

For more insight on digital leaders, check out the SAP Center for Business Insight report, conducted in collaboration with Oxford Economics, “SAP Digital Transformation Executive Study: 4 Ways Leaders Set Themselves Apart.”


Falk Rieker

About Falk Rieker

Falk Rieker, Global Vice President and Global Head of the Banking Business Unit at SAP, is a senior level financial services professional and SAP veteran with over 20 years’ experience. He is responsible for leading the SAP banking solution strategy and connecting bankers with the technology they need to succeed in today´s workplace. As a thought leader in the banking space, Falk frequently speaks at international banking conferences and has been published and quoted in leading industry publications like Forbes, American Banker, IDG and Wall Street and Technology. Follow Falk on Twitter (@FalkRieker), LinkedIn, Youtube, and Instagram.