As another new year rolls around, with it comes a new set of new year resolutions – with a change in financial habits being one of the key objectives for many people.
Whether it’s saving more money into that rainy-day fund, cutting down the bills or even taking the plunge and investing in our first stocks and shares ISA, many of us routinely re-evaluate our finances at this time of the year.
Against such a backdrop, how can financial services providers encourage these healthy new years’ resolutions – and help people to stick to them?
Many people rely on the tools offered by their bank, building society or investment platform to encourage them to achieve their financial goals – resulting in a much-increased effort by financial services providers to deliver these digital goods.
Indeed, according to Cornerstone Advisors’ 2022 What’s Going on in Banking study, to date, three-quarters of banks and credit unions have launched a digital transformation initiative. Another 15% plan to develop a digital transformation strategy this year.
However, the research also shows that there is significant work still to be done.
Among the financial services providers who believe they are three-quarters or more done with their digital transformation, only half have seen significant improvements in loan productivity, just 28% report significant reductions in their operational expense structure, and less than one in five have generated significant increases in payments revenue and other non-interest income.
Therefore, what is going wrong with these so-called digital transformations?
There is a very real danger that by simply launching functionality that customers now take for granted, providers think they have ticked that “digital investment” box and can rest on their laurels.
However, this is far from the case, with far more sophisticated digital investment often needed. For example, seven in 10 banks don’t plan to replace their core systems as part of their digital transformation, even though these systems are often hindering their progress and will prevent them for being able to harness important future developments.
As an example, embedded finance—the integration of financial services into non-financial websites, mobile apps, and business processes—will help banks generate roughly $50 billion in banking-as-a-service (BaaS) revenue according to an upcoming Cornerstone Advisors report. Few banks, however, have identified BaaS as a strategic priority for their organization.
ieDigital is a portfolio company of Parabellum Investments, led by Founder and CEO, Rami Cassis, which has expertise in a number of disciplines including enterprise software. The team from ieDigital and Parabellum Investments analyses the latest developments in business technology regularly. The interpretation of digital transformation is specific to each organisation and translating technology into practical business outcomes requires the focused specialism the combined IE Digital & Parabellum Investments team is qualified to deliver.
For those financial services providers concerned they are only starting their digital transformation today, it is still better than starting it tomorrow.
Indeed, if they invest in their digital offering today, they could well be encouraging next year’s new years’ resolutions for many of their current customers – and plenty of new ones too.