Today, banking has to shapeshift to survive. Banks and other financial organizations are in a state of reactive flux, navigating a volatile and competitive market, as well as increasingly sophisticated forms of financial crime. Yet the many factors motivating digital transformation in the banking industry can be distilled down into three key points:
2.1 Keeping up with customer expectations
Just as other industries have embraced hyper-convenience and instant-access services, banks must meet growing customer expectations for speed, without compromising on security or UX. According to Alkami’s Digital Banking Performance Metrics report, the rate of account holders using digital banking checking account services reached 77% in 2024.
Challenger “neobanks” have set a new bar for mobile banking, with next-level personalization, engaging budgeting tools, and accessible options for functions like person-to-person payments. But as well as keeping up with these new digital services, the traditional bank must sustain and optimize its other channels of contact. The data shows consumers still want the reassurance of a human presence — with 29% stating they prefer to resolve complex issues over the phone, according to Zendesk's CX Trends Report.
To keep up with these evolving customer needs, traditional banks and other financial institutions must become fully adaptive, working towards a position where they can adopt and continuously capitalize on change.
- Read how a large US bank uses Celonis to drive digital transformation and reduce costs, all while delivering an impeccable customer experience.
2.2 Modernizing to enable smarter operations
It’s no secret that the banking sector has been slow to evolve. With digitally-native alternatives springing up every month, financial institutions need to modernize to survive, let alone prosper, but a Revolut report reveals two thirds of businesses feel “legacy banks” are too slow to adapt to their needs.
This isn’t for lack of effort. In fact an Autorek survey of financial services professionals finds 50% of US and UK respondents review the efficiency of the back office every year. What’s holding banks back is an overreliance on labor-intensive manual processes, siloed departmental systems and communications, and fragmented tech stacks. This, in turn, leads to inefficiencies, wasted resources, and creates a barrier to the successful implementation of emerging technologies like AI. To stay competitive, banks must reduce their dependency on legacy systems, embracing a process-centric approach to modernization, and leveraging tools capable of securely handling such data-rich systems.
2.3 Navigating an evolving risk landscape and shifting regulations
Risk management has never been more crucial to the financial sector, with illicit financial flows expected to reach $6 trillion by 2030. Threats aren’t only diversifying, but are becoming more sophisticated too. AI may be driving digital transformation, but it’s also being wielded by cybercriminals to augment their capabilities, leading to more prolific and advanced forms of fraud like personalized phishing and social engineering attacks.
To mitigate this risk, regulatory reform is frequent and ongoing, but these updates vary hugely by region and market. The UK, for instance, is introducing a new corporate criminal offence called ‘failure to prevent fraud’.
It’s vital that banks stay agile to keep up with shifting compliance regulations, but the modernization of operations and processes will also tighten defenses against cybersecurity threats. With real-time visibility across the tech stack, as well as improved reporting and monitoring facilities, financial institutions can work to close the gaps bad actors exploit.
