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Digital Transformation: The necessary evolutionary step for BFSI companies

As Fintechs, AirBnBs, and Ola-Ubers continue to enter the market, businesses are witness to a definite consumer mindset change. With this change, businesses are mandated to offer better efficiency, accuracy, and efficient business transaction channels.

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While just about a couple of years ago, paper was the necessary mode of transaction, today being digital has not only become a business imperative, but a necessary lifeline. BFSI companies are no exceptions; they too should adopt Digital Transformation, or face competitive displacement, and ultimately extinction. A recent example is that of a leading bank in India, which chose to transform itself in keeping with changing times and tougher competition from Fintechs.
Today, tab banking and mobile banking are their primary modes of conducting business with the conventional modes taking a mere 15-20% share of their operations.

What should be Digitized?

A digital transformation initiative is primarily directed towards safeguarding and monitoring the business outcome, within the ambit of regulatory compliances, using a framework of well prepared and managed data, streamlined Operations, Data Analytics and Risk & Compliance. This goal is primarily hosted on four pillars:

• Digitization of Products: It helps to generate value and increase the reach of the products. Where a product sale took 2 – 4 weeks for commencing monetization, it can now happen at the click of a button. This rings a bell with how the T+5 settlements changed to T+2 thus changing the shares and mutual funds landscape and the associated revenue generation for the better.

• Digitization of Consumption: Hosting products on web portals with easy self-service features can help accelerate market penetration to a significant extent. Chat bots or Robo Advisors can also be used to help customers assess their financial needs, and connect them with the relevant products or services quickly, thus expediting the lead-to-sales cycle.

• Digitization of Service: A pick and choose Do-It-Yourself option for consumers, segmentation through data analysis, or differentiated strategy for effective engagement go a long way in providing a personalized experience. A single view of customers across all touch points helps in providing an omni-channel experience.

• Digitization to offer Unique Customer Experience: Creating a positive change in the customers’ life goes a long way in sustaining and growing a business relationship. Driving customers to use fitness apps or prompting them to drive carefully by rewarding positive scores with discounts on premium is fast catching pace in the insurance industry.

How should we become Digital?

As with any journey, one must get all the help possible to navigate through what could be complex and perplexing process. Here are 5 golden rules that can serve as an internal compass to guide a business towards digital readiness and keep it on the right path:

• Intellectual Honesty: Perform an internal evaluation about where the business stands on the digital spectrum. This includes all the players in the business ecosystem, including channel partners, intermediaries, and local branches. If a business is on the lower side of the adoption curve or yet to initiate the journey, it would be best to partner with a systems integrator, who can guide about prevalent best practices and design professional front-end experiences, rather than recreating the wheel.

• Management Determination: Get management buy-in and assess their determination for a short term, long term, or a staggered overhaul. Remember, a digital journey is always a couple of failures before hitting the pot of gold!

• Change Management: A digital transformation is all about people across the hierarchical pyramid. Be it a success or a failure, it has to be shouldered by one and all. A properly thought-out Change Management approach helps in ‘adoption-on-the-floor’ by mitigating the pitfalls of a large scale transformation project.

• Revenue focus: Gauge the direction of the effort, whether it is towards capturing the market share or towards creating a new customer segment. The transformation will help the business achieve results in that particular route. Asking what is the intent of transformation – selling 10 One Crore policies or a single Ten Crore policy, selling 10 One Crore policies to individuals or selling 1000 One Crore policies in ten corporates goes a big way in streamlining the effort.

• Financial Health: Assess the risk appetite as well as financial capacity and assign the budget for the transformation. If required, be prepared to attempt gain with a new strategy on the same journey. The learning during the journey is usually always worth it, and prepares the business better for the next more evolved steps.

Invoking a Disciplined Culture

Ultimately, transformation is all about the people, who are the foundation for any Digital Transformation. To accomplish a successful digital transformation, one must establish Cultural Rigidity, by harmonizing the mindset of the people from top-down and across the organisation. Most essentially, the decision makers should be fully in sync with the workings from ground zero. Here are some key additional sentiments that should form the business ethos:

• Customer Centricity: It is important to think from the consumer’s point of view while building a sophisticated business user platform. It should be based on a simplified yet secure architecture, which stimulates customer interest and trust.

• Data Aggregation: Each and every interaction with the consumer needs to be captured for a 360 degree view. Each executive interacting with the consumer, whether explicitly or implicitly, is capturing data, which should be honestly directed into the enterprise’s digital ecosystem.

• Innovation: A business needs to continuously innovate in the digital domain. This is a differentiator. However, it is also about being ready to fail with equal panache.

• Collaboration: Going digital is not the exclusive prerogative of any one business function or role. It is an organizational ethos. For transforming from a traditional to a digital organization, different functions need to come together and design a digital platform to leverage the market opportunity. A transformation effort should be leveraged as a Program Management exercise.

• Exploratory Mindset: The digital journey is interspersed with failures. The enterprise needs to pick up the learnings from the failures and integrate in their journey. Such a mindset is very important while building a digital culture.

Quick Sands to Avoid

It is a must to get all the people, from the top to the bottom, on board with a mind-shift that is conducive towards practicable change. In doing so, one needs to be aware that there could be a difference between agreeing and executing.

• Complexity: Certain processes are convoluted involving multiple system layers. A careful duediligence prior to digital up-gradation is a must.

• Pace: Time utilized in deliberation affects the transformation turnaround time. Agile Development based on Scrum framework would help the project to speed up.

• Skill Sets: It is difficult to find the functional knowledge outside and technical skills inside the enterprise. Change Management approach adopted in the form of a project by complementing the functional leaders within the organization’ with ‘system integrator vendors’ does the trick.

• Security: Transacting in the wider digital ecosystem outside the enterprise has its own set of perils. A proper Risk Management approach can be adopted by engaging Network Security vendors.

• Cost: Enterprise IT spend has its own limits, when many a times failures are encountered. Adopting a phase-wise approach and earmarking investments to project and process milestones, where results are quickly visible, help to mitigate the issue.

As the BFSI sector witnesses digital competition from outside their domain, they have to keep up with the changing consumer mindset. The enterprises in this sector need to focus on all three pillars that include the digitization of products; the digitization of consumption; and the digitization of service for sustenance and increased profitability. Though there are many loop-holes and mine-traps to be negotiated on the way, the ‘high octane’ business impact in the form of 6x more referrals, 90% more sale, 2x improved brand loyalty, and 26% improved profitability – are all worth the bargain to transcend deep challenges.

Authored By Navin Gupta, EVP & Head BPM, Datamatics


If you have an interesting article / experience / case study to share, please get in touch with us at [email protected]

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