Digitalization in Banking: Definition, Advantages and Current Challenges (2024)

Improved Customer Experience

Digitalization in banking involves building specialised applicationsthat enable customers in resolving all of their banking related tasksin a simplified manner. By building the required technologicalinfrastructure, banking institutions can provide their bankingservice online, through their website, mobile application, or viaphone banking. Thus, improving customer experience at verytouchpoint.

Enhanced Operational Efficiency

Banking digitalization involves incorporating technology toenhance the operational efficiency of both front office as well asback office. By automating repetitive banking processes forexample manual customer data entry, and validation orprocessing documents, banks can save significant amount labourwhich can lead to more efficiency business operations.

Increased Data Security

Banks hold a vast amount of crucial customer data, from personaldetails to bank account passwords. It is the responsibility of thebank to deploy necessary security measures to protect customer’svaluable sensitive information from getting into the wrong hands.Through banking digitalization, banks can digitize their sensitivecustomer information and keep is secured behind cybersecurityinfrastructure.

Touchless Banking Processes

Visiting a bank is usually not an experience most people lookforward to, mainly because of the complicated processesinvolved and the amount of time that is wasted while jumpingfrom one counter to the other. Digitalization in banking enablesbanks to offer touchless processing of majority of bankingrelated tasks and offer self-servicing capabilities to theircustomers.

End-to End Workflow Monitoring

One of the most crucial advantages of banking digitalization is theability to track and monitor over business workflows through asingle dashboard and initiate changes in the processes as andwhen needed. Tech driven banking digitalization offer bird’s eyeview of all banking processes and facilitate faster resolutions ofblockages in the workflow.

Data Driven Decision Making

Data has become the guiding principle of all business processautomation strategies in the last decade. Banking digitalizationthrough AI driven tech helps banks make data driven decision bycollating data from various business solutions, such as CRM,accounting, loans, insurance etc. By integrating data across allbusiness operations, banks can utilise customer data moreaccurately and perform data analytics to gain insights that canhelp boost business performance.

Internal Training and Digital Skill Gap

Any digital transformation strategy should incorporate adequatetraining and mentorship for internal staff to make the most of thenew digital infrastructure. Bank employees lack the technicalexpertise to implement and sustain the digital transformation.Banking institutions should incorporate adequate resourcestowards training the staff and bridging the skill gap whiletransformation their banking infrastructure.

Complexity of Implementation

Transforming digital banking infrastructure involvesimplementation of complex technologies that require expertsupport from a technology partner. Banks that partner with thirdparty service providers to develop specialised enterprise gradesolutions for their business need internal agents to guide thedigital transformation. The complexities of implementing latesttechnologies pose a significant challenge to banking digitalizationas it can drive up the cost of the project and cause delays indeployment.

High Cost of Digital Transformation

Developing specialised enterprise grade technological solutionscan take months and involve high cost due depending on thecomplexity of applications. Banking digitalization projects can alsoincur significant costs which require extensive due diligence beforeinitiating the project. Therefore, most banking digitalizationprojects are very slow when it comes to execution due to slowdevelopment and deployment of digital solutions.

Increased Dependency on Legacy Tech

Dependency on legacy tech for extended period is among thebiggest challenges for banking digitalization’s. The digitalsolutions utilized by banks have been deployed in theinfrastructure for decades and therefore have created adependency on it. Banks that have most of their data stored inlegacy tech solutions are often reluctant to transition to newtechnological upgrades due to lack of awareness and the fear ofloosing existing data.

Organizational Siloes

Intelligent document processing software enables seamlessintegration of data across multiple systems. Thus, facilitatinguninterrupted flow of data between crucial business systems suchas CRM, accounting, Insurance Sales and Distribution Managementsoftware etc.