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Perspectives

How Banking CIOs Can Achieve Digital Success

2016-10-18


Banking CIOs are at the front and center of digital transformation – fostering relationships, nurturing a collaborative, startup-like culture and restructuring the organization to balance run-the-business mandates with digital initiatives, our latest research reveals.

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First in a four-part series.

All industries are striving to remake themselves for the digital age, including healthcare, retail banking, life sciences and P&C insurers. In the first of our four-part series, we look at the digital imperative for retail banks.

As our exclusive study shows, CIOs are central to digital transformation at retail banks, as they are uniquely positioned to foster strong collaboration across the business, starting with the IT value chain, which in many cases holds the key to digital success. As a result, banking CIOs need to prepare to take on the following roles:

  • Drive digital initiatives. Study respondents believe the essential elements for a successful digital transformation revolve around leadership, filling skill gaps, developing a clear strategy and understanding the benefits enabled by “being” (vs. merely “doing”) digital.

  • Foster collaborative leadership. To lead with digital, banking CIOs must advance the depth and breadth of their relationships across the organization, particularly with chief marketing officers and other C-suite executives who own customer relationships and revenue targets.

  • Balance digital and legacy mandates. CIOs need to simultaneously manage both digital capabilities (through systems of engagement and systems of intelligence) and legacy system mandates (systems of record), while harnessing underlying execution synergies (e.g., data and infrastructure).

To enable this, we believe the digital CIO should embrace a new organizational structure to ensure tightly coordinated execution of separate but semi-equal digital and legacy initiatives (see Figure 1).

Figure 1

  • Promote a culture of innovation. To reflect the dynamism of today’s digital business, CIOs need to embrace and nurture a start-up mindset throughout the organization. They must act as innovators by encouraging a rethink of traditional banking approaches and guiding investments in new financial technologies.

  • Act as digital change agent. CIOs are well-positioned to act as information brokers across the organization and develop transformational services as the lead change agent in the bank. They can develop talent by building the organizational infrastructure and furthering the careers of forward-thinking technologists. 

Imperative #1: Transform the Customer Experience

As banks invest in digitization to transform the customer experience, respondents indicate that the investment is paying off. For example, we worked with a U.S.-based multinational financial services organization that wanted to create a personalized Web-based experience to help customers select products optimized to their needs and spending habits. The bank’s IT organization worked with us to craft and develop user experiences based on extensive research and validation. The result: a 7% increase in application completion, a 20% reduction in customer drop-off, a 30% increase in usability and an estimated 8% to 10% increase in credit applications per year.

Imperative #2: Enable Multichannel Integration

Digital banking CIOs need to lead the following types of initiatives for multi-channel integration:

  • Sales and service integration across digital (mobile, online) and traditional (branch, contact center and ATM) channels.

  • Standardization of business processes across channels to drive integration of underlying technology and data.

  • Use of common data and analytics to map every customer, capture attitudes and choices, personalize offers and manage relationships.

  • Use of a flexible technology architecture (e.g., one built around Web services) to accommodate fast technological change and add disruptive business capabilities where needed.

Imperative #3: Digitize Middle- and Back-Office Functions

CIOs are utilizing the following approaches to digitize middle- and back-office functions:

  • Investing in emerging tools and technologies (e.g., intelligent process automation, robotics, cloud, new-age business process management suites) to improve efficiency and the speed of digitization.

  • Establishing a modular solution architecture and operating model (processes, staffing, organizational structures) to enable faster assembly and development of middle-office/back-office capabilities, aligned with digital-driven change.

  • Leveraging data as a key resource to reduce process bottlenecks, plan everyday operations and organize middle- and back-office services that align with front-end digital services.

  • Providing open APIs as strategic tools to expand the business value chain by creating new capabilities built on integrated data related to customers, information services providers and channel partners. An example is a retail bank enabling access to the logic that controls account summary, branch locator and transaction history functionality.

Imperative #4: Provide Digital Tools to Customer-facing Personnel

Banks recognize the importance of the human touch in customer service; as a result, many are working to reimagine their branches and place digital tools in the hands of their customer-facing employees. This initiative is best led by the CIO, in collaboration with the CMO. CIOs should also consider digital initiatives that reinforce and extend customer relationships.

Looking Forward

Digitally-minded CIOs are well positioned to advance banking’s transformational agenda. As such, they need to focus on:

  • Enabling their institutions to capture, analyze and map their high volumes of customer data and offer personalized products and services.

  • Ensure APIs are positioned as strategic tools to expand the business value chain across customers, providers and channel partners.

  • Drive cultural change and nurture a mindset in which digital is the norm.

  • Provide investment guidance for emerging tools and technologies.

  • Work across silos to create a single version of the truth for all constituents: bank associates, customers and partners.

  • Develop relationships with startups and fintechs to integrate innovative options into mainstream banking solutions.

CIOs who remake themselves and their organizations into digital beings will be positioned to seize the high ground, particularly as digital proficiency continues to separate winners from also-rans in an increasingly congested and competitive retail banking market.

For a full report on our digital CIO banking industry research, please read our whitepaper Banking on the CIO for Digital Success and our overview report Being Digital: How and Why CIOs Are Reinventing Themselves for a New Age. For more insights, please visit our CIO Study page to view our industry specific reports, or our banking and financial services section of our website.

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