How Banks Approach Digital Transformation

Simon Chmielewski

Almost all banks are engaged in some form of digital transformation initiatives, but there is a wide variety in the focus of these initiatives. Are they focused on customer-facing or back-office domains? Is digital transformation managed as an organisation-wide strategy or as separate initiatives focused on individual objectives? How are the banks engaging with external partners and fintechs?

Studies of banks and their digital initiatives are often focused on identifying a best practice for transformation: What should an ideal strategy comprise? It would be interesting to identify differences in focus (if any) between banks in different regions of the world. Can the regions learn anything from each other?

A recent report from IDC, The Future-Proof Digital Bank (sponsored by SAP), provides some insights into the execution of digital strategies by banks around the world. More than 500 banking respondents worldwide participated in the study. Here are some insights.

IT budget allocated to digital transformation

Banks in North America are allocating more of their IT budget to digital transformation initiatives than their counterparts across the globe. One in five North American banks is investing more than a quarter of its IT budget in digital transformation initiatives, which is more than three times greater than EMEA and four times greater than Asia/Pacific. No banks in Latin America are allocating more than a quarter of IT budget to digital transformation initiatives.

Globally, 8% of banks said they allocate more than 25% of IT budget to digital initiatives.

Digital transformation as an enterprise-wide strategy

The pattern in IT budget allocation is reflected in the treatment of digital transformation as an enterprise-wide strategy as opposed to a series of fragmented initiatives.

In North America, 40% of banks take an enterprise-wide approach, compared with only a quarter in Latin America and EMEA. The result for North America is not surprising given the higher IT investment in such initiatives

Banks in the Asia/Pacific are more likely to drive a strategic approach to digital transformation than EMEA and Latin America.

Globally, 28% of Banks said that digital transformation is treated as an enterprise-wide strategy.

Front office vs. back-office focus

It’s probably not surprising to learn that digital initiatives, which are primarily focused on the front office (39%), outweigh back office initiatives (20%). But the variance between the different regions is interesting.

North American banks have a substantially lower front-office focus and a much closer balance with back-office focus compared to other regions. This reflects the greater focus on enterprise-wide digital strategies that brings otherwise fragmented digital initiatives together.

The focus on front-office initiatives is greatest in EMEA, and the focus on back-office initiatives is greatest in Latin America.

The gap between front-office and back-office initiatives could create tension as these two core elements are not combining into a cohesive, organization-wide digital transformation strategy.

Fintechs: threat or collaborative opportunity?

The growing importance of fintechs in the banking value chain belies different attitudes toward them as partners and/or competitors.

Banks in North America and Asia/Pacific are less likely to view fintech companies as competitive threats or rivals than in EMEA or Latin America. But at the same time, EMEA and Latin American banks are more inclined to view fintechs as potential collaboration partners than in North America and Asia/Pacific.

With regard to acquisition and investment, North American and Asia/Pacific banks tend to prefer acquiring a fintech company rather than developing a solution themselves, compared to EMEA or Latin America.


Banks are becoming more focused on both front- and back-office digital transformation initiatives to renew their business and grow their customer base. They will need to show leadership to join these initiatives together for an organization-wide strategic approach. North American banks appear further down this path than other banks, including banks in EMEA, and this reflects their greater IT investment in digital transformation initiatives.

An infographic of the IDC report (sponsored by SAP) can be found here.

Simon Chmielewski

About Simon Chmielewski

Simon Chmielewski is focused on growing SAP solutions in the financial services industry, covering banking, insurance, and wealth management. He is a member of the industry value engineering team, which works with the broader sales and services teams to showcase to customers the business value of and the road map for SAP solutions to guide them in the relentless transformation to digital in the financial services industry.