Peter Shubenok is the Founder and CEO at RNDpoint, a leading provider of lending platforms for Banks and MFIs.
Digital transformation is all about onboarding the right technology to improve business processes, increase the speed of time to market and elevate customer satisfaction. By 2024, it's estimated that $2.4 trillion will be spent on business technology innovations, with 70% of European executives reiterating that the pandemic only accelerated their digital transformation expansion plans.
Essentially, Moore's law kicked into hyperdrive. But is the era of the tech evolution as rosy as it seems for businesses? And what are the challenges along the way for lending providers? What steps should they take to overcome them?
The truth about digital transformation
The idea of digital transformation is far from reality. Several studies by McKinsey & Company show that organizations continue to fail to meet their company's digital transformation goals. In fact, less than 30% say they're successful. Why is this, and moreover, why should a business invest in something with such a high failure rate?
The truth about digital transformation is many organizations approach transformation as a one-off project rather than a process for strategic improvement for long-term business perspectives. In our experience, this usually occurs in one of several ways:
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ByAmy DaniseEditorPlanning takes place only once a year
Technology is rapidly advancing, just as the world is changing. If we look back to 2019, it's difficult to believe that we'd be living with masks, social distancing and remote working just two years later. The same goes for technology. Strategic planning that takes place once a year does not account for rapid organizational and world changes that can leave the business behind its competitors.
For example, the demand for commercial loans rose in 2020, whereas demand for consumer loans decreased with potential borrowers preferring to save than spend.
It becomes too inward-focused, less client-centered
It's easy to focus on what impacts your business processes, but how do these changes impact your clients long-term? When it comes to digital transformation, the long-term goal should always be client satisfaction alongside business efficiency — not one or the other.
Decisions become highly politicized
Too many shareholders with varying decisions can break a project. Each team has its own areas of interest, and it's simply not possible to please everyone. Instead, taking a structured, pragmatic approach can give the best, most logical results.
The budget just isn't there
Digital transformation is an investment, but the main factor here isn't just the dollars on the bill. It's the long-term impact digital transformation can have and the value it brings to your business. Seek to establish the overall expected ROI (return on investment) first before committing, and create an achievable strategy based on this.
Note: A small budget doesn't mean there's a blocker to any digital transformation. Instead, it's about being aware of which changes are possible and will have the greatest impact on your business.
What can you do if your organization is lagging?
When it comes to digital transformation, no matter how much you've invested, you may feel you're lagging when it comes to the competition. The same goes if digital transformation is new to you.
As technology moves forward faster, you may be wondering how you will catch up and if it's worth the effort. Don't panic. Here are some of our tried-and-tested tips for businesses looking to tackle digital transformation in the lending industry:
1. Get started now. Tech moves fast, and if you continue to think in terms of the competition, you could well be left lagging behind. The most important first step is to commit to getting started.
2. Analyze the market. What are leaders in your industry doing and in what direction are they moving? Start by asking your team these questions and look beyond their strategy into the future before designing your own. Analyze, adapt, improve.
3. Remember that it's not one giant leap. Instead, ensure your digital transformation plan includes small, achievable steps. This way, your business is constantly getting upgraded, and your team feels encouraged to move forward.
4. Focus on the golden rules: Automate, add new technologies, hypothesize. This is all about the benefits you should intend to get from transformation. Automate as many processes as possible to achieve efficiency. Constantly seek out new technologies that may potentially work for your business — don't rely on old tricks. Hypothesize to define what could work and what won't and try it out.
5. Know where you want your business to go. As I said before, digital transformation can be a costly process, which is why wasting your funds on trends with no long-term perspective isn't worth it. While it is good practice to hypothesize and experiment with different technologies, it's also vital to have a road map of where you'd like your company to be heading overall and to use technology to help get you there.
Industry best practice: The perfect picture of digital transformation
Having worked in the financial sector for a long time, I've noticed that companies that successfully undertake digital transformation have one thing in common: They hire the right people for the job and make it a strategic priority. Often, they are in designated roles like Chief Digital Officer, Innovation Officer, Digital Innovation Officer or Chief Innovation Officer and their sole responsibility is to utilize technology to get results.
For the lending industry, in particular, it’s vital to have someone with a financial background, ideally in lending, driving the strategic planning behind digital transformation.
Connect with a dedicated transformation team. Setting digital transformation as an external priority enables you to get fresh advice from experts on what you're doing right and what can be improved. This allows you to generate an unbiased strategy for future development and get the best results.
Every business has different needs, and there is no one-size-fits-all solution to digital transformation. This is why, at the very beginning, it's essential to establish what you hope to get out of it.
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