The future for many banks appears highly uncertain as the pace of technology-driven change in the industry accelerates, creating new risks, opportunities and competitors for legacy players.
This means mounting pressure for banks to digitally transform to avoid falling victim to this pace of change.
This urgency to transform drove the recently announced merger between the regional banks SunTrust and BB&T, the largest bank merger in a decade. As BB&T’s chief executive told the media, “we face a fundamental choice — disrupt our business or be disrupted.” The two organizations said that the move would allow them to invest an extra $100 million in new technology, including new cybersecurity, mobile and automation systems.
However, this also highlights the struggles inherent in digital transformation for most banks with limited resources. A $100 million investment in new technology is small compared to the many billions that the largest financial institutions devote to their technology budgets. Converting the final merged organizations of BB&T and SunTrust into a digital-first organization will cost far more than $100 million.
The vast majority of banks are in similar shape — they don’t have billions to set aside for new technology investments and will need to be more strategic and stretch their dollars further to achieve digital transformation. They must leverage the advantages inherent in being a smaller organization to be more agile and drive cultural change faster than larger competitors can.
Beyond technology investments, digital transformation requires a full overhaul of an organization’s everyday culture. Many in financial services already recognize this, but most have been slow to take major action. One survey released last year found that 71% of industry respondents reported changing their people strategy to reflect the skills and organizational structures necessary to succeed in a digital future. However, only 25% said they had changed their people strategies to a “significant” extent.
Cultural transformation will look somewhat different at each individual financial institution, but the goal should be the same — to foster a workforce and workplace culture that can thrive in today’s world of unending and uncertain technological change. For most banks, that will require a number of steps.
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