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Emerging from digital transformation fatigue, why ecosystem strategy is the way forward

Over the past decade, digital transformation has worked its way to the top of C-suite agendas. Though while it started out as a global business phenomenon, it quickly lost momentum. Buzzword or not, the rip and replace approach to digital transformation is now being seen for what it really is – strategy for delivering change that adds complexity at huge cost and high risk.  

Looking at the financial services industry, there has always been hesitation when it comes to new technology. It has become increasingly difficult for banks to justify the risk, cost and time, accompanied by complexity and lack of clear returns on investment, of large digital transformation projects. 

Cleaning house on single IT transformation 

Reflecting on the rip and replace mantra, I challenge anyone to find an IT transformation project that has actually “ripped and replaced” all of their old technology. Yes, banks have migrated a lot of their technology over the years, but they have also left much of their systems intact, adding to the complexity rather than reducing it. 

The sobering truth is that these projects overrun, overspend and under-deliver. A reported 84 per cent of IT transformations fail, and let’s not forget Co-op Bank’s £300m IT project failure in 2013 – but none of this is new.

There is so much that can be learned from the mistakes of others, banks can stand back, see what has worked and what hasn’t, and then position themselves for success.

We have seen a turn to collaborative ecosystems to allow institutions to compose the bank platforms they want for today and in the future. Take for example ABN AMRO which launched spinoff bank New10 with their own, enclosed digital platform and business model. 

New wave banking with collaborative ecosystems

On their own, banks are not able to create affordable proprietary technology quick enough to allow them to deliver everything they need to meet the demands of 21st century customers. Instead, banks turn to ecosystems of collaborators, with each member bringing something different to the table to make the whole more than the sum of its parts. 

In a survey of executives by Finextra and the Euro Banking Association, 81 per cent said working with partners was the best strategy for achieving digital transformation goals. Creating an ecosystem of trusted partners will help provide seamless and secure services that you can count on.

This collaborative ecosystem approach also gives traditional banks a leg up by providing them with the ability to be more agile and catering to the ever-changing demands of the customer by enabling them to bring the best of these digitally-native applications and services directly to their customers. 

Agility is a prerequisite to success 

Agility and adaptability are key ingredients to building a digital technology platform, regardless of where a company is on their digital journey, so long as it has a platform that is open and fosters collaboration. 

Regulations, consumer behaviour trends and even a pandemic can all enact fundamental change to a bank’s processes and products. The ability to be nimble will increasingly be a prerequisite to success.

For example, recent Forrester research shows that as Covid-19 has reshaped customer expectations and paired with increased competition, banks are focusing on improving operational efficiency and CX to better serve customers across all touchpoints. With open technology, change can easily be accommodated with minimal risk by adding new partners based on needs. The bank is thereby composed of its ecosystem members, which evolves with time, allowing for a wider set of capabilities and opportunities. 

While agility is of utmost importance, it isn’t the only goal. Fintechs have a strong record of delivering innovative solutions to banking challenges at a much lower cost than banks could originally develop themselves. 

While the big platform companies like Alibaba, Amazon, Apple and Google all encroach into financial services, bringing new, uber-customer-friendly ways of handling money, banks are having to respond and pivot quickly. Out of this increasingly saturated and competitive arena, fintechs will be their friends, making banking more user-friendly and accessible. 

This shift is already happening. According to EY’s Global FinTech Adoption Index 2019, 64 per cent of consumers worldwide have adopted two or more fintech services, citing attractive rates and fees as the reason for adoption. Take online shopping for example, when buying a piece of furniture online, chances are you’ll be offered Klarna or a similar point of sale loan as part of the checkout.

All this is propelling banking further down a path of collaboration and further away from old school digital transformation. The challengers and some incumbents have already embraced this. With the myth of “rip and replace” exposed and the benefits of the collaborative model more clear than ever before, banks will be able to develop coherent digital strategies that allow them to tightly focus their investment to respond effectively to change. 

But with every day they delay, they fall further and further behind in the race. Both customer expectations and technology are moving fast and only the best of the competition are responding with equal pace.




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Elliott Limb

Elliott Limb

Chief Customer Officer


Member since

21 Dec 2020



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This post is from a series of posts in the group:

Financial Transformation

The pace of evolution for many corporate finance and accounting functions is accelerating. The mandate of the CFO is expanding and the challenges they face accumulating. This blog is an exploration of these topics.

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