Banks falling behind in digital transformation efforts

Banks falling behind in digital transformation efforts

Despite investing more than $1trn globally in new technology over the last three years, the majority of banks have yet to see any financial boost from their digital transformation programmes.

This is the finding from a report issued by Accenture into banks' IT investment. It looked at the technology development of 160 international retail and commercial banks against their financial performance to see if the money spent on new digital technology had reaped any financial reward. 

While the study found that those banks who had invested most heavily in digital services had generated greater profit, this was largely due to cost savings rather than an increase in revenue. 

The report also found that just 12% of surveyed banks have fully committed to digital transformation, 50% of banks made little progress and the remaining 38% are in the midst of their transformations but their digital strategies lack coherence, stated Accenture. 

The issue has become increasingly critical for UK and European banks, argued Accenture, citing the arrival of new regulation such as PSD2 which is designed to boost competition among incumbent banks and new startups, as well as waning investor confidence in the traditional banking model. 

However, given that investment in new technology has yet to significantly boost revenue, Accenture has argued for banks to look for more than an increased tech budget and to adopt a more risk-taking approach to innovation and new business models.  

“Even the most digitally focused banks have a big challenge ahead and will need to find ways to generate new revenue as traditional fee income gets squeezed,” said Richard Lumb, group chief executive – Financial Services at Accenture. “To achieve stronger returns on their digital investments, banks will need to radically increase market-share based on pricing, take additional risk on new revenue opportunities or add services customers are willing to pay for.”

Comments: (4)

A Finextra member
A Finextra member 20 June, 2019, 16:532 likes 2 likes

I would argue much of this investment has been wasted trying to modernize legacy environments - rather than looking at modern customer requirements, journeys and experiences - starting with a blank piece of paper and starting from scratch.  Those that are greenfield environments have managed to make an impression - they were not constrained by a legacy.  Embrace the change, don't resist it.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 20 June, 2019, 18:271 like 1 like

The study accepts that banks have generated greater profit from digital transformation. That means digital transformation has delivered financial boost. It does not really matter - in this limited context - whether the greater profit has come from increase in revenue or decrease in cost. 

Philippe Guenet
Philippe Guenet - Henko - Reigate 21 June, 2019, 06:54Be the first to give this comment the thumbs up 0 likes A consultancy doing such a survey is likely to have some bias involved. Yet it is true, in my experience, that much of the effort has been to work differently (Agile, Data projects, etc) with no coherent Digital agenda for growth. Most CIOs & IT heads have fallen into a year on year trap of reducing IT costs rather than delivering value faster, modernising tech, enabling growth, upskilling teams and self. Focus on means rather than outcomes, no actual Digital strategy or worthwhile change agenda. Not surprising therefore.
A Finextra member
A Finextra member 21 June, 2019, 11:422 likes 2 likes

Is this really a surprise?
- 'Digital Transformation' is a buzzword that has been thrown around, with vendors, banks and consultants all jumping on the bandwagon. The term is too diverse and has too much hype attached to it. Now we enter the trough of disillusionment.
- In reality, banks will continue to evolve their technology stacks, with some reliance on the many legacy systems (to manage risk and cost).
-  Surely a more realistic approach is not to boil the ocean with digital transformation - instead to begin projects on a small scale and prove benefits quickly, then to integrate.
We need evolution, not transformation or revolution.