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Forget Digital Transformation - It’s Time to Embrace Digital Evolution

"Digital transformation" as a concept has been reduced to a buzzword, and the need to constantly evolve has become table stakes for financial institutions.
Oct 4, 2024
Rakin Azfar
Content Marketing Manager

For more than a decade, financial institutions (FIs) have been marching to the beat of digital transformation; however, as consumers’ digital behaviors continue to evolve and as fintechs and neobanks push the boundaries of digital innovation, is transformation the right strategy anymore? Perhaps it's time to shift our perspective and embrace the potential benefits of digital evolution.

A growing segment of banks and credit unions recognize that digital transformation is somewhat of a misnomer. While FIs were right to embrace digital - evidenced by the fact that 71% of consumers now manage their bank accounts online or via mobile - their transformation has been much less of an endstate and more of an ongoing evolution. In Cornerstone Advisors’ What’s Going on in Banking 2024, 23% of banks and 27% of credit unions said they’ll never be done with their digital transformation strategies - a statement Cornerstone Chief Research Officer Ron Shevlin applauds. “As a management fad, digital transformation is at the end of its life cycle,” said Shevlin, highlighting a prescient insight from Brian Alfano, Chief Digital Officer of Oregon Community Credit Union:

“Digital transformation has been a buzz term in our industry for many years. That term provides false hope that financial institutions will get to an endpoint and ‘transform.’ If we want to succeed in this fast-paced changing market, we need to shift our thinking towards evolution. We will always continue to evolve our digital offerings to meet member and organizational needs. If we don’t, we will be left in the dust.”

For small banks and credit unions, Brian’s insight feels especially relevant and important at a time when competition for deposits remains fierce, and the pace of financial innovation continues to accelerate. If FIs are going to keep up with their customers’ expectations, they’ll need to ensure they’re evolving in the right direction - and that means putting the customer at the heart of their digital strategy. 

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Below are three ways FIs can begin to embrace digital evolution:

Invest in Experience Over Product

In a world where consumers have an overabundance of financial products and services to choose from, experience is an FI’s most powerful lever for differentiation and building trust in a digital setting. Digital transformation prompted many institutions to adopt the digital banking products, money management tools, and payment solutions their customers want; but to ensure those solutions continue to deliver value, FIs need to shift their thinking towards delivering a product experience that meets the digital consumer’s evolving preferences for speed, convenience, personalization, and security. 

Embracing this mindset allows FIs to pivot away from thinking about what digital products they need to buy or build (as every other financial service provider out there is doing) towards staying laser-focused on finding ways to empower their customers to bank where, when, and how they want. 

Choose Reliable Innovation Partners 

Designing a world-class digital experience is only half the battle - FIs need reliable technology partners to help them deliver those experiences at scale. Fintechs have become a powerful innovation engine for many smaller FIs that lack the budget and resources to build or manage technology in-house; however, about 40% of these partnerships fail to operationalize due to ineffective strategies, issues with scalability, or poor organizational alignment.

FIs need reliable fintech partners that can help them build the capacity, flexibility, and resilience within their core systems and processes to evolve alongside customers' behaviors. Whether it’s seamlessly integrating the financial tools and features customers want or improving implementation and launch timelines, these partners can help FIs innovate faster and on their terms.

Embrace a Culture of Innovation

According to McKinsey, the most successful digital transformations involve employees in every role who are actively engaged in that transformation. Applying this logic to digital evolution means that leaders of financial institutions must allow a culture of innovation to take root at every level of the organization, not just within the C-suite.

Obviously, building a lasting culture of innovation takes time. However, we try to help our clients accelerate this transformation by equipping them with effective change management strategies and a continuous delivery and deployment process that allows them to innovate faster.

Ready to Digitally Evolve?

Building upon these three pillars of digital evolution will give FIs of all sizes the ability to compete in the modern financial services landscape by evolving alongside the needs of their customers and communities. And, of course, they don’t have to digitally evolve on their own alone. That’s what we do here at Narmi - help FIs transform and be where banking is going. Whether it’s driving account and deposit growth through a best-in-class digital account opening experience or extending the functionality and value of a digital banking platform, we help FIs embrace digital innovation on their terms.

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Forget Digital Transformation - It’s Time to Embrace Digital Evolution