Blog: IT Consulting

Tackling Common Financial Digital Transformation Challenges

August 18, 2022 - by Synoptek

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Tackling Digital Transformation Challenges Within The Financial Services Industry

Despite repeated efforts and huge investments, the financial services industry continues to struggle with digital transformation. Although many institutions have implemented a bunch of initiatives, some still find it challenging to formulate a cohesive and sustainable strategy for digital transformation. What makes the transformation difficult for the finance industry? Read on as we deep dive into the top hurdles and steps that companies within the financial services industry can take to overcome them.

Top Financial Digital Transformation Challenges

Like any other industry, financial services firms are rushing to implement digital transformation strategies in the wake of the pandemic. Technologies like AI, machine learning, and blockchain are poised to drive innovation and enable better resilience and responsiveness. While most financial services organizations realize the significance of digital technologies in their business, despite huge investments, success ends up being elusive.

A recent mid-market benchmarking study conducted by research firm Everest in partnership with Synoptek uncovered the strategic, operational, financial, and risk impact technology has on businesses across different industries. It was discovered that most enterprises lack a well-defined, enterprise-wide technology investment strategy and end up making investments that do not share common goals.

Most financial services organizations fail to see their transformation efforts reap fruit, because of several hurdles. Some of the key factors highlighted in the report include:

1. Complex Infrastructure Ecosystem

Since the last couple of years and especially post-pandemic, financial services organizations are increasingly forging new partnerships to enhance their market position and competitive standing. This has led to a sudden surge in mergers and acquisitions. According to Deloitte, M&As in the banking industry saw over 210 transactions, as of December 31, 2021, an 89% increase from the previous year’s 111 deals with an average deal value of $693 million. Although these partnerships help expand and scale capabilities, business lines, markets and fuel rapid business growth, they also make the underlying IT infrastructure ecosystem extremely complex. Unfortunately, varied management focus, resource constraints, incompatibility issues, diverse cultures, and processes tend to come in the way of effective transformation.

2. The Legacy Conundrum

Financial services organizations have long been averse to adopting modern technology, which explains the legacy conundrum. With most relying on age-old tools and systems to run banking operations, enabling financial digital transformation doesn’t come easy. Maintaining or upgrading these systems can be truly cumbersome, and they also pose a high risk to cybersecurity. Since legacy tools are built using niche technologies, they are rarely updated and are an easy target for cybercriminals. In addition, since most legacy systems cannot be integrated with new platforms, the vital data they hold remains isolated and incompatible with advanced systems. This makes them a barrier to efficient operations- especially if their data isn’t being used to the extent the modern world demands.

3. Lack of Skilled Staff

Another challenge faced by financial services firms while enabling digital transformation is the lack of skilled staff. Although most organizations today have a team of IT experts to manage day-to-day operations, they do not have the capability (or capacity) to manage complex digital transformations. The lack of proper IT skills can make it difficult to put a plan and roadmap in place, especially looking at the current deficit of skilled technocrats. The lack of efficient resources is quickly becoming a major reason for failed transformation programs, especially as requirements across cybersecurity, application architecture, software integrations, data analytics, and data migration surge.

4. Budget Constraints

As financial services organizations struggle to optimize costs across their growing enterprise, investing in digital technologies is probably the last thing on their mind. Most C-suite leaders would rather invest in launching a new product or entering a new market – than implementing new technology. For financial services organizations that have a less-than-stellar transformation strategy, scope creep can push back deadlines and add in new work – contributing to the overall cost of a project. Add to it extra consultation work, changes in needs, and human errors – and the cost of financial digital transformation continues to increase.

Overcoming Hurdles Through Managed Services

For financial services firms, digital transformation, although critical, is also extremely multifaceted. Overcoming hurdles that come along the way requires opting for Managed Services. Investing in a skilled partner for managed services can:

  • Help understand what your long-term goals are and the ROI you want to achieve from your transformation efforts
  • Provide detailed insight into the cost of transformation as well as the tools and technologies you need to invest in – based on your unique business requirements
  • Enable a comprehensive assessment of existing tools and systems and conduct a thorough gap analysis
  • Help you understand the challenges of legacy applications while suggesting the best approach for modernizing them
  • Enable you to eliminate capital expenditure on bulky hardware & software and enable access to on-demand skill set and resources
  • Ensure your business scales as the needs of your customers grow, while maintaining the best level of service and satisfaction
  • Help deploy the right cybersecurity and compliance policies and technologies and ensure critical data and assets are protected 24/7
  • Ensure all IT-related issues are looked into proactively while also enjoying around-the-clock access to a service desk

Wrapping Up

In 2022, the benefits of financial digital transformation go far beyond just better time-to-market. For the finance industry especially, the benefits extend to better interactivity, accessibility, security, and scalability. According to the Everest study, financial services firms that leverage technology as a strategic differentiator achieve a substantially superior risk impact and a higher operational impact compared to industry peers. They tend to perform much better across cybersecurity and compliance risks and realize better outcomes concerning business continuity, disaster recovery, and employee productivity.

As technology-led transformation paves the way for hyper-connected banking across the front, middle and back offices, it is time for you to engage with a Managed Services Partner and keep up with the pace of digital innovation who can also help you stay on top of all the digital trends.

Contact us today and learn how Synoptek can help you ensure higher availability of services, safeguard against evolving cybersecurity attacks, and ensure compliance with the ever-growing regulatory environment.

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