The global banking industry has grown in leaps and bounds. Indeed, there is cause for celebration. It is more profitable and much more resilient. Africa’s banking in 2012 and 2017 amounted to $86 billion with a projection of 129 dollars in 2022. However, facing the next stage of growth, everyone from startups and established banks are at an inflection point. What they do now to scale will determine how they capture the next-generation of customers.
Digital innovation has to be a key driver of that growth. The banking industry is ever changing. Regulations are shifting, customer demands change and the global economy is ever dynamic, creating the need for banks to be able to swiftly adopt to remain competitive.
The risky nature of the transformation however means that technology has not been equally spread among financial organizations. For example, larger entities such as Bank of America and JP Morgan have been able to outpace technology investment rivals – a UBS study notes that these kinds of entities see innovation as the center of digital banking activities.
African banks may not have the level of financing of a JP Morgan, there still exists vital lessons to be learnt from these innovative organisations. Here are the most paramount.
Transform all business lines
While a great deal of attention has been paid to AI, blockchain and other emerging t e c h n o l o g y f o r c u s t o m e r – f a c i n g applications, because each version provides ever more advanced personalized service and perspective . African banks need to ensure that even their most basic structures and processes are mapped to the path of digital transformation.
Most banks still invest substantial resources on IT maintenance and see any broader transformation as expensive and vulnerable to failure. But the potential long-term gain of improved enforcement and organizational streamlining is well worth any potential risk when transforming anything from protection to pricing. This is in addition to the possibility of not addressing clear processes – the lack of competitive advantage and the security vulnerabilities in outdated technology.
That said, technology cannot exist in solitary confinement. Depending on small, isolated projects across the organisation can lead to security and management problems. Together, these individual projects may also cause excessive costs.
Innovation and any consideration of emerging technologies must run through the organisation and have an impact on every area of the enterprise, not just core or customer-facing applications. This is particularly the case given that a companywide plan would prove the bank’s future, and enable the organization to be prepared for rapidly evolving technology to remain ahead of the competition.
Business teams Must Be on Board with Technology
Technology has to connect with business teams, this is easier said than done to integrate across an organization. In reality, one McKinsey study found that only 30 percent of change initiatives succeed.
Where innovation is not a total overhaul, the most effective integrations and transformations are those that can mitigate the effect of future change. Instead, organisations opt for technologies that can adapt their current processes and incorporate best practices from the industry. This does not only reduce the organizational change management needed, but also makes a smooth transition paving the way for onward growth. Aligning with the business teams also positions digital transformation to address systemic problem, rather than being limited to certain areas.
Celent found that 73 percent ended up flowing to existing approaches, even with large IT budgets for reducing error rates and changes. This stifles innovation altogether. The problem is that banks frequently prefer approaches that fix one aspect of a transaction or another, but often don’t take a holistic view of how a bank is doing business.
When a solution does not fit with how a bank does business, it may skip the procedures, potential data sources, and potential application that adds value to the bank and creates progress within an organisation. The consequences are substantial; without this experience and good knowledge of the industry, solutions end up being a step back from human expertise and intuition which drives good banking processes and ties.
Technology Integrate with business growth strategy
The effective incorporation of technology not only takes into account what can be done to streamline the business, but also how to exploit the technology itself for revenue growth.
Any introduction of any technology, for instance, opens up the door for increased data collection. Although this seems easy, getting any single piece of data in isolation runs into the same silo and organizational problems.
A top-down approach across the enterprise needs to leverage the potential value these data will generate that will effectively turn data into information – these are the insights that would enable further streamlining of processes and improve overall service. The next move is being able to retain competitive advantage by deriving trends and evaluating where market differences may occur and actually designing products and services that affect the industry – this is where an organisation can create a revolution. For banks of all sizes in Africa, these actions will be increasingly necessary to consider. Executives cannot afford to work independently of their technologies any more. Banking innovation is not solely the responsibility of an IT department for those companies dedicated to innovation. Every executive and business decision-maker must position themselves to pioneer in technology.
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