Unlocking Success: The Role of Value and ROI in Bank’s Digital Transformation

Digital transformation has become a strategic imperative for banks worldwide, but did you know that 2/3 of digital transformation projects fail? As companies invest in technology to stay competitive, understanding these initiatives' value and return on investment (ROI) is critical. Let’s explore how banks can maximize the impact of their digital transformation efforts by emphasizing value and ROI.

Post mortem

Analyses of failed digital transformation efforts often point to a lack of connection between business strategy and the transformation itself – with reasons for doing the transformation hiding behind vaguely-worded slogans such as “improving sales”, “reducing running costs” and “eliminating technological debt”. Additionally, there’s an omnipresent assumption that the current processes must be transferred completely without any changes, eliminating any possibility of reducing the accumulated product debt. It’s no wonder that the transformation initiative wanes as time passes – the project gets off-track, executives are either replaced or lose interest, talent is reallocated elsewhere, internal resistance builds up, and failure becomes inevitable. To avoid this gloomy fate, an alternative approach to digital transformation is absolutely necessary – one that prioritizes value and ROI.

Find a focus

Before embarking on a digital transformation journey, banks must define their North Star – the outcomes they aim to achieve. There’s a catch here – it needs to be as specific as possible not to dilute the effort. Decomposition is a tool that can help with that – e.g. if the strategic goal is to improve overall profitability, more specific goals may involve focusing on particular market segments to work on further, such as SME clients, as clarity on the purpose of the transformation is essential.

Think outside the box

Having identified the areas to work on, instead of just rewriting the old processes using newer technologies, it is much more beneficial to reframe the challenges and take an outsider’s perspective to identify new, not-so-obvious solutions that may prove more beneficial and will help build a wider bridge for competitors to cross. For improving SME segment profitability, for example, a creative solution may include creating a digital ecosystem of value-added services so that the clients would have all the features required to run their business supplied by the bank. New technologies enable such advancements, and a bank can benefit from improved client stickiness.

Ask (and answer) the right questions

For the generated ideas, there needs to be proof that they will generate positive business results in the long run – that’s why ROI analysis is a crucial component of any digital transformation effort. IT leaders should ask questions such as:

• What specific business outcomes are we targeting?
• How will this transformation impact revenue, cost savings, or customer satisfaction?
• Are there innovative or critical efforts that require flexibility in quantifying ROI?

Answering these questions helps guide the transformation process and ensures that the bank stays on track toward achieving its goals.

Address the weaknesses

With defined profitable business cases covering clients’ needs, the next step is choosing how to execute the transformation. Several questions need to be addressed at this point:

• What tools and technologies to use?
• Is there enough talent within the organization?
• Is there time to experiment?

Choosing the right technologies, such as the banking platform, is paramount to guarantee the predicted ROI of the initiative, as unexpected hurdles can derail it in the future, causing the projections to become wildly inaccurate. Often, at this point, banks turn to their technology vendors for advice, but this is where they run the risk of being boxed in by implementing an off-the-shelf solution that may seem reasonable for one case but will prove problematic in the long run due to vendor-lock-induced inflexibility. That’s why it’s essential to choose a partner that can deliver a solution with an open architecture that the bank would know how to modify and adjust to their needs – possibly even with access to source code. Even better, by combining tried and tested technologies with ready-made business modules and open access in an accelerated build model, banks can aim for a very short time to market without sacrificing control.

Execute boldly, evaluate performance regularly

For any initiative to be successful, executive support is required – but with clearly defined and measured business cases, getting such support and starting the transformation becomes much easier. Remember, though, that measuring ROI is an ongoing process. Banks should regularly evaluate performance against established metrics. By doing so, they can make informed adjustments, optimize processes, and ensure that the transformation continues to deliver value.

Conclusion

Digital transformation is not just about adopting new technologies but also creating lasting value. Banks can significantly improve their success rate by focusing on ROI, aligning with business strategy, and keeping control over the introduced solutions. As the digital landscape evolves, those prioritizing value and ROI will emerge as the true leaders of transformation.

Maciej Sałata

Consulting Director at Comarch