Foundations of banking excellence

Banks understand the critical need for digital transformation and digitalization—and IBM and BIAN have researched how healthier financial institutions optimize their digital transformation strategies.

In fact, the IBV interviewed 2,000 banking industry CIOs and CTOs worldwide. Our research identifies a core set of practices that can accelerate innovation, new technologies, and digital transformation of business models and workloads—strategies needed to succeed in a challenging financial services landscape.

Our research indicates that hybrid cloud initiatives have the potential to propel banks toward digital transformation.

Six powerful banking digital transformation practices

Digital transformation done well can unlock cost savings and business value. Automation, artificial intelligence, and modernized apps and workloads have the potential to help banks achieve radical cost reduction. Business models and customer experiences influenced by digital transformation can create new revenue. And evolving from a monolithic to flexible hybrid cloud architecture can accelerate these financial performance benefits.

But banks can’t merely restrict themselves to a “lift and shift” of existing workloads to hybrid cloud.

Traditional banking institutions need to embrace the digital transformation of their operating model practices and apps to empower new ways of working and innovating across both the bank and its ecosystem of partners and providers.

 We investigated what characterizes the practices and capabilities of Healthier Institutions—banks that, when compared to their peers, achieve higher Return on Equity (ROE) and/or lower Cost Income Ratio (CIR)—and identified six practices and capabilities they share.

These practices and capabilities constitute a powerful roadmap that makes astute use of hybrid cloud technologies. In short, it’s moving from business-as-usual today to the expansive, flexible business models of tomorrow. These six practices create clear opportunities and “room to grow” for most organizations.

A potent mix for financial services digital transformation

To embrace the digital landscape in a way that drives healthier financial performance, business and technology teams must evaluate a plethora of initiatives. We have identified three areas of focus to achieve digital transformation:

• Opening to external participation and innovation—transforming banking partnerships with ecosystems
• Modernizing business processes, professional practices, and apps— those that “run the bank efficiently”
• Modernizing legacy systems and technical infrastructure—beyond the initial stages, or building blocks, of hybrid cloud exploration.

 Correspondingly, we investigated banking and financial services executive priorities within these three groupings. What digital transformation initiatives are they focusing on? What do they expect to provide business value, cost savings, and enhanced financial performance? Understanding these perspec­tives provides context as to where banks are finding themselves in their evolution toward financially healthy organizations.

Next steps toward a digital transformation strategy

Competition is tougher than ever in the banking industry, given challenges of the pandemic era, macroeconomic conditions, and new fintech players that erode customer experience and revenue. The need to embrace digital banking and continuous reinvention, augment business profitability, and reduce costs requires a substantial transformation of operations. 

Moving toward hybrid cloud is a precondition. It’s a “must have” for accelerating the transformation of banks’ business architectures from monolithic, inflexible, complex, and expensive setups to open, modular, agile, and automated design.

Our new research can help your organization on this journey. Read the full report to learn more about the six key practices of healthier institutions, where banking organizations are investing in digitalization and the user experience, and how a hybrid cloud strategy can be a catalyst toward a digitally sophisticated future.