Smartly connecting business and technology to unlock banking value

For many years, financial services companies were incredibly wary of new technology – and for good reason. Multi-year IT transformation projects would routinely take longer than expected, end up millions of dollars over budget and ultimately fail to produce the desired results. Instead of disruption, the job of most CIOs and other in-house technologists was to simply maintain the status quo as much as possible.

But that mindset is firmly in the past. Today, IT executives realize there is no end to modernization. Their legacy is no longer defined by consistency, but by what new capabilities and outcomes they can continually unlock for the business – and how well they can future-proof the foundation for the next leader.

A study by Bain & Company found that “banks leading in technology deliver an average of 5 percentage points higher total shareholder return, 10 percentage points lower cost-to-income ratio, and 12 points higher Net Promoter Score than their peers.”

As a result, banks and credit unions are taking a more dynamic approach to innovation, one defined by constant iteration and improvement. They’re working across IT vendors to try to ensure deeper connections between software programs to maximize the value of their whole technology stack and deliver an end-to-end experience for employees and customers alike. And some are becoming pioneers in using data and artificial intelligence (AI) to improve key operations, like fraud detection and customer personalization.

However, that’s not ubiquitous across the industry. Many banks and credit unions continue to struggle to ensure their technology investments pay off, preventing them from pursuing new capabilities. Every year, they must spend more money keeping legacy systems afloat. And ultimately, they’re unable to delight customers with the same caliber of seamless, digital experience as more technology-adept rivals create churn.

It’s not enough to just buy a new software solution. Instead, it’s about figuring out the outcomes the business wants, then determining the IT partnerships needed to get there. Here’s how to make technology an enabler, not a driver, of the broader business goals.

Eliminate cultural barriers 

For technology transformations to be successful, the culture of the organization must shift alongside the IT stack. But in the rush to move as quickly as possible, this step is often overlooked. However, cultural silos are often more harmful to the future success of the business than issues with the technology itself.

Today, many banks and credit unions operate in silos. There’s little communication between different divisional leaders – let alone between the business and the IT department. But breaking down those barriers is key to driving more return from technology investments.

By understanding the current pain points and opportunities that different functions face, companies can start to figure out solutions that, together, will help achieve their larger goals. For example, a company might want to increase customer acquisition by certain percentages. This involves many different teams, from sales to product development. By evaluating related processes, like getting leads into the hands of salespeople, businesses can pin-point roadblocks and start to use technology to solve them.

It’s why so many CEOs are now building closer partnerships with key in-house technologists that can help take the broader vision and work across the enterprise to figure out the solutions needed to achieve it.

It’s all about the platform 

In the past, technology investments were often treated like heart transplants. Companies would lift-and-shift whole systems. They’d work for months, sometimes years towards a “go live” date that would continually get pushed back. And things rarely went smoothly. It’s why technologists were so risk-averse.

While businesses continue to take this approach, they’ve been able to refine it to reduce some of the risk. However, it still presents considerable threats to company operations – and the CIO’s legacy. Others deploy what is commonly called a “greenfield” approach, where they create a whole new IT environment and gradually move to it. While less risky, few businesses opt for this route.

Increasingly, businesses try a third strategy, one focused on iterative updates that are linked to clear business goals and produce immediate value. While potentially transformative, this approach requires an underlying platform that will enable companies to quickly and efficiently deploy modular upgrades.

For example, one global bank with a rich history in their respective region was struggling to capture enough business from younger generations. The institution’s legacy was at stake. But its dated tech stack was prohibiting them from launching innovative and engaging new products fast enough. And many of its processes were reminiscent of a pre-digital era.

However, by re-architecting their underlying IT foundation, the company was able to accelerate development of new features and improve existing features, like cutting the onboarding process from days to minutes. And once the bank realized how important social responsibility was for millennial customers, it was able to quickly deliver corresponding products. In just six months, the institution had thousands of new clients.

A make-or-break legacy 

Shifting to progressive IT modernization means work never ends. Companies must continually evaluate the success of prior initiatives, as well as continually pin-point new opportunities, then quickly execute on those.

It’s why creating a culture where business and technology leaders operate in sync is so important. As the relationship deepens, it becomes easier to spot the investments that will make the most impact in the near-term. Collectively, those projects will be the catalyst that help banks and credit unions deliver the unified experience that customers are demanding.

Technology isn’t slowing down. Companies must quickly figure out how they will keep up with the pace of progress. Their legacy depends on it.

Alex Jimenez is Lead Principal Consultant at Backbase.