Today’s banking industry leaders are challenged to grow revenues, reduce costs and keep pace with increasing risk and regulatory scrutiny all while meeting the changing expectations of their clients. Industry disruption of the type banks are witnessing today may be seen as a threat or an opportunity.

To evolve, banks need to fast-track digital integration throughout their organization. Banks must address the demand for digital capabilities to not only optimize the customer experience but to bring efficiency to their process as well.

A new banking landscape is unfolding, bringing with it a continuous wave of new competitors and a new generation of customers with non-traditional needs. Banks have a great opportunity to respond to this challenge by accelerating their transformation efforts and modernizing their infrastructure so that they can thrive as  future-ready, customer-centric.

Creating Digital Foundations

KPMG LLP (KPMG) recently surveyed 100 executives from the largest US banks about their digitization journeys and the majority – 75 percent – said they need to do more to digitize customer-facing and back-office processes. And while 54 percent said they were well on their way to developing an integrated, scalable digital operating model, much work needs to be done.

And how are banks planning to move their digitization forward? Sixty percent say they are investing heavily to develop their own digital and fintech capabilities and 58 percent say they plan to acquire digital capabilities.

Digitizing an entire bank can be an enormous task, “although banks that start with their focus on foundational elements may realize a significant return on investment”, according to Celeste Diana, a principal in the KPMG Financial Services Strategy practice, who focuses on digital innovation and business transformation.

“Core modernization,’’ Diana said, can “unlock product innovation, speed-to-delivery processes, real-time processing, and other important aspects of customer needs.’’

Bank executives setting out to improve an institution’s digital capabilities will need to place emphasis on “the impact to the entire enterprise – from strategy, to people, to culture,’’ all while recognizing that their efforts also will require attention to improvements to “the business model down to the operating model – efficiently uniting front, middle, and back office to deliver consistent experiences.’’

Composability

Planning a core modernization initiative is incredibly complex. Like all large transformations, it requires field-tested partners. These include third parties experienced with the platforms and technologies being implemented. For example, the number one driver for core modernization efforts is a bank’s desire to be more agile.

The key architectural principle of a technology ecosystem that enables agility is “composabilty”. That means each service component is as automatic as possible so that it can function on its own with a given input.

The architecture is only one part of being nimble – and it’s the easier part. The more difficult challenge is having a horizontally integrated team. This approach is the opposite of traditional silos that align teams by function and requires a one-team approach with a single automation tool that allows end-to-end integration covering security, compliance, policies, and controls.

Don’t get Left Behind

All banks are facing massive modernization and digital transformation efforts. While an army of fintech start-ups, box stores and alternative lenders raise competition by scaling up and moving steadily into the banking space, a modern core infrastructure is what will allow banks to survive – and thrive – despite these disruptive threats.

The roadmap for successful core modernization has been established – how to scale and how to prioritize for impact are known, and the common pitfalls identified. Wherever a customer is on their transformation journey, they can invest wisely and accelerate their efforts by building on the lessons learned from modernization pioneers. And KPMG is here to help.

The KPMG Banking & Capital Markets practice, comprising nearly 4,000 professionals and 400 partners, sees today’s environment of converging challenges as a catalyst for improvement. It starts with listening and gaining a deep understanding of where the customer’s business is currently, and where it can be.

KPMG can work with customers to help expand their capabilities, differentiate their services, and open up new markets. KPMG’s execution strategies are founded on a promise to realize the results that matter. And all this is done by being on the customer’s side, and by their side, at all times.