Digital transformation is a ubiquitous trend impacting all businesses, but few sectors have shown the same level of affinity for technology as financial services. This is thanks in part to the industry’s inherent need to stay ahead of customer needs, innovations in financial markets, regulatory change, and cost pressures amid ever tightening competition.
At the same time, financial institutions have earmarked evermore financial and human capital resources toward advancing their technology infrastructure to stay ahead. Taken together, these factors have created a perfect ecosystem to foster digital innovation over the last decade and have helped firms quickly embrace the digital-first reality of the post-pandemic world.
Asia-Pacific: Centre of Technology Leadership
The pace of change has been particularly quick among firms in Asia-Pacific. Broadridge’s recent 2022 Digital Transformation and Next-Gen Technology Survey found that the region boasted the highest percentage (57%) of financial institutions in the later stages of digital transformation (‘Leaders and Advancers’) based on our proprietary Digital Transformation Maturity Framework, outpacing the proportion of firms in both the North America and EMEA (Europe, Middle East and Africa) regions.
More impressive, perhaps, is that the pace of change in Asia-Pacific is accelerating. Financial institutions across the region are doubling down on investment and proactively advancing their implementation of next-generation technologies like artificial intelligence (AI), blockchain and cloud.
Our survey found that on average firms plan to increase spending on digital transformation and next-generation technology solutions to 14% of their total annual IT budget from 11% over the next two years. In addition, three areas were identified as critical to digital strategies, namely, re-imagining customer experiences, automating workflows in the front and back offices, and enhancing data analytics capabilities.
As the need to be technology led becomes table stakes in Asia-Pacific’s booming financial sector, institutions hoping to secure leadership will need to rethink their digital transformation strategies by putting people at the heart of their approach.
People-Centric Approach to Digital Transformation
When discussing digital transformation, it is easy for organisations to forget that there is a very human element to harnessing the benefits of innovation consistently. In my experience, far too often do firms focus their attention on the technological aspects of change management and not enough on the people being impacted. Financial institutions that remember to take a people-centric approach tend to capture significant advantages and those that don’t struggle to keep up.
With the pace of change speeding up, the human factor in digital strategies is taking on a more prominent role as a key determinant of success. It is perhaps telling that our recent survey revealed two out of the top three biggest challenges to achieving digital transformation for financial institutions in Asia-Pacific involve their people and culture. Many firms across the region acknowledged it is difficult for their staff to keep up with the pace of change and their cultures are inadequate to help manage this rising pressure. Indeed, these findings highlight just how top of mind these issues really are with leaders across the industry today.
The question then is how do you build a digital transformation strategy that empowers your people and meets the rapidly evolving needs of your customers? The answer lies in two critical aspects.
First, firms must develop a clear and compelling internal vision for their digital strategies. This requires taking an end-to-end perspective that maps business goals to technology outcomes and, ultimately, the implications for customer journeys – both positive and negative. Planning by viewing each piece in isolation risks misalignment of expectations and objectives, as well as wasted effort and resources that can quickly lead to failure before things even begin.
A clear vision developed in this way forms an important foundation for a well-defined ‘digital north star’ that allows organisations to deliver on technology roadmaps with better precision and coordination. This is partially due to being able to create high-quality, transparent communications around their strategies that encourage cross-functional dialogue and stakeholder buy-in to drive strategic initiatives forward. In addition, it helps ensure effective governance and oversight by enhancing accountability around key deliverables and outcomes.
Second, financial institutions need to change the way people collaborate to cultivate an innovation mindset. Doing so embeds flexibility and adaptability into the organisation at all levels, positioning a firm well to lead change rather than chase it. A crucial component is standardising internal problem-solving frameworks to address business challenges through quick experimentation – that is normalising a culture that embraces “fail fast, small, and often” to facilitate proactive collaboration.
The fact is digital transformation today requires everyone to be a technologist. Rapid innovation necessitates the seamless sharing of ideas, expertise and capabilities to stay ahead of change and secure its opportunities. Gone are the days when functional areas could be viewed in silos, dependent on the piecemeal delivery of individual technology projects, that together – it was hoped – bring about value-accretive outcomes for stakeholders. The most advanced technology adopters have long shifted away from this project-based mindset, and embraced digital transformation as a continuous, holistic process of enhancing critical capabilities across the organisation, rather than an ultimate end goal.
Catalysing Effect of the Pandemic
An unquestionable catalyst of recent digital transformation has been the Covid-19 pandemic. Financial institutions were forced to take a technological leap of faith to rethink operational processes from the ground up in favour of flexibility and resilience. Both customer experiences and interaction, along with employee working environments were reengineered at speed due to necessity rather than choice or a more evolutionary approach.
As we emerge from the pandemic, the reimagined digital-first relationships that organisations have formed with their customers and employees will remain – putting pressure on firms to keep innovating. On the one hand, consumers have grown accustomed to personalised experiences, boundless choice, and on-demand service, things many will be unwilling to compensate on going forward.
Similarly, employees have been empowered by the flexible benefits of the work-from-home environment. The workforce of today expects choice and the ability to construct their own working relationship with employers. Furthermore, despite these requests, the tight employment environment leans in favour of those with talent. To secure and retain such talent, successful financial institutions will need to proactively offer this flexibility and manage expectations as part of their employee proposition.
Leveraging Talent Ecosystems for Innovation
Another critical part of the digital transformation solution is aiming for greater simplicity amid complexity to cope. There is growing recognition that financial institutions must increasingly focus on furthering their competitive advantage in areas they can make the biggest impact, namely execution and distribution. In short, firms know trying to be all things to all people is no longer a winning strategy.
Over the years, organisations have been hard at work simplifying their operational infrastructure by partnering with independent service providers. This goes far beyond getting access to the latest technology solutions, however. It is part of a broader strategic move to advance digital transformation agendas by bolstering internal talent with external expertise, capacity and experience to innovate with confidence in a rapidly changing world.
Firms want to work with partners who have successfully deployed digital transformation projects before, rather than be the guinea pig that pilots something that ultimately may not scale. With the right long-term partner in place, firms can not only reduce the upfront operational costs and risks they face, but they can also complement their internal skillsets with deep subject matter expertise that quickly realises the opportunities of new innovative technologies. As a result, they benefit from mutualisation in a co-operative ecosystem that is almost impossible to achieve in isolation.
Going forward, I believe the boundaries between these flowing pools of capabilities and talent will be indistinguishable from one another. Together they will define the critical resources at the disposal of an organisation hoping to achieve digital leadership. Whether it's accelerating the adoption of new technologies like AI, blockchain, cloud and digital. or the ongoing transformation of your own business, the partners you choose to work with matter more than ever.
Ian Strudwick is a managing director and the head of Asia-Pacific at Broadridge.
This article was originally published in The Asset