By Gonzalo Benedit, President, EMEA, APJ, Workday

The global financial crisis of 2008 irrevocably altered the way that the financial services industry operates.

The chaos left in its wake heralded a new era of increased regulatory compliance requirements for banks and financial services institutions. For companies operating in 2018, more stringent legislation is simply an everyday aspect of conducting business — but it also presents an opportunity to grow and develop, if digital transformation is prioritised.

The term ‘digital transformation’ can refer to many things. In this instance, it should be understood through the lens of an ongoing initiative focused on automating processes, developing agile frameworks, and cultivating compelling digital experiences for customers. It is also critical to remember within this, that unlocking this potential is directly related to being able to gain more intelligence out of analytics and data. In this article, I therefore want to explore some of the key elements of digital transformation that financial services companies must embrace if they are to thrive in the digital era.

Move forward, never back

Digital disruption is a revolutionary presence in all markets, but none more so than the financial services sector. This sector is renowned for its trailblazing new entrants becoming the poster children for technological advancement. These tech-savvy competitors, which include Digital Banks and FinTechs, have created an environment where traditional institutions, including ING, Lloyds and Deutsche Bank have had to drastically alter their core offerings just to survive.

FinTechs are appealing to customers because they are simple to use, and make life easier. And amongst traditional banks, there has been a realisation that these agile upstarts represent serious competition across not only emerging markets, but also Western Europe. The strict compliance regulations that have often hamstrung traditional institutions from an innovation perspective must be overcome. The risk factor associated with strict regulations is now outweighed by the prospect of losing out to competitors; McKinsey reported more than three years ago that legacy financial institutions will see profits decline 20 to 60 percent by 2025 if they fail to evolve digitally.

Some of the world’s leading financial services organisations have already made positive steps to instigate change through migrating to the cloud. And whilst cloud is widely recognised to be a cost-effective approach, the benefits extend much further. For instance, cloud computing acts as a safeguard against technology obsolescence by removing the need for expensive, time-consuming upgrades. And from a security perspective, it allows organisations to demonstrate to regulators, through a single-security model, that their data is safe and secure.

Cloud computing allows financial services organisations to rework legacy, regulatory and management reporting, and replace them with more dynamic alternatives. This lean methodology removes unnecessary processes and admin where it does not add value, and fosters an environment of continuous improvement. In addition, it is important to remember that regulations are not static. They constantly evolve, and a cloud-based approach allows services to remain compliant without imposing upgrade burdens on the end user. Therefore, it is perhaps unsurprising that PwC has predicted the cloud is set to become the primary infrastructure model in financial services.

Manage back-office operations effectively

Often, financial services organisations focus almost exclusively on optimising front-end services to enhance customer experience, but back-office capabilities deserve an equal amount of attention. Currently, there are question marks over the technologies and tools required to support those who pay the bills, process payroll, create financial statements, and plan for the future. And that’s before considering decision-makers who need access to accurate data and more comprehensive business insights. Many financial institutions find themselves off the pace when it comes to managing processes and procedures for maximum business benefit.

Don’t overlook employees

Because digital transformation has become commonplace, general expectations have altered dramatically as a consequence, and not just for customers. Employees are used to intuitive and engaging experiences during daily life and expect the same experiences in the workplace. Employees want the interfaces they interact with to be intuitive and mirror those in the consumer world, even when conducting back-office processes such as managing financials, talent and payroll.

Traditional financial organisations that fail to adapt to evolving employee expectations are likely to encounter issues with attracting and maintaining talent. On the other hand, for those that consolidate systems for finance and HR, the benefits are immediately apparent. Within the financial services sector, companies can be expected to see improvements including reduced managerial time spent on performance and compensation reviews, time-to-fill for critical positions, and a lower voluntary turnover of employees. And perhaps most importantly, combining these systems allows HR executives to increase time spent on strategising, rather than on burdensome administrative tasks.

Look to the cloud

Digital transformation is an ubiquitous term, but it needs to be made tangible in order to be of any practical use. For financial institutions, this means linking the concept to deliverables such as cost reduction, strategic expense management, cost-capture and financial system implementation. Key to success is a move away from legacy on-premise software, towards the untapped benefits of the cloud.