Any form of leadership is based on influencing and guiding people to reach their maximum potential, thus achieving better teamwork, which will allow the fulfillment of the company’s goals or organization. A leader understands that the staff under his charge is the most valuable resource since they are the only resource that will allow him to “move on” in difficult times and help achieve the established objectives.
Transformational leadership is a type of leadership exercised by individuals with a strong vision and personality, which is why they are capable of making changes in the expectations, motivations, and perceptions of their followers, and at the same time, leading change within the organization. This change in attitude and behavior has the potential to radically “transform” an organization. In this article, we will analyze the digital transformations of the banking sector.
Bank digitization expenses
According to Chris Skinner, it is almost impossible to know the amount of money that banks spend on digital technology; it is estimated to spend more than half a billion USD on technology per year. Two years ago, an Accenture study found that only one bank in ten invested in digital transformation; 4 out of 10 were “trying” to transform but lacked a cohesive strategy, and 5 out of 10 banks had no sign of any progress in digital transformation. Another study indicates that 70% of transformation initiatives do not achieve their goals, hence of the 1.3 trillion USD spent on digital transformation, 900 billion was wasted.
Large banks such as JPMorgan, Citibank, Wells Fargo, among others, spend around 50 billion in combined technology, which is considered to be a lot of money, compared to what is invested worldwide, in Fintech in 2020 it only reached 44 billion, which represents less than what the 4 largest US banks spend on technology. It appears that for every $ 15 to $ 18 spent on banking technology, it is spent on energy, machine maintenance, or other operations, which means that banks spend a maximum of $ 5 and probably $ 2 on innovation, which is double what they spend on Fintech. We ask ourselves the following question: Where is the investment in innovation?
Where is the investment in digital innovation?
It is believed that in many banks, there has been a lack of leadership in this sense, not taking the change of the digital transformation seriously, having little clarity of what said transformation means, not knowing how this transformation is implemented, and most importantly, Thinking that digital transformation is only related to technology.
Technology represents the central infrastructure and the tool behind digital transformation. Still, the digital transformation has more to do with culture and organizational change than with the same technology since in itself, it is about to change the mentality of the people in the bank or financial institution; create engagement through digital experiences (rather than selling products through channels); create a new customer attitude in remote relationships (rather than branch relationships); redesign of products and services based on customer needs and wants (rather than traditional bank views on sales and revenue). In such a way, the digital transformation is based on the bank’s leadership and that it is fully committed, and not that it delegates the digital change in some project, function, or budget.
Leadership and digital transformation
As can be seen, the digital transformation of a bank or financial institution is closely related to the change of mindset of the organization. However, the bank can implement different technological tools, but if this implementation is not accompanied by the support of the bank’s leaders and a “mindset change” program is not carried out by all members of the organization, these technological tools will not be able to reach its maximum potential. That is why, when a financial institution wants to invest in digital innovation, digital tools or promote a complete digital transformation, it must be done through a training process for the organization’s or institution’s personnel in terms of mentality and way of thinking; in this way, the new technology implemented, will be effective and will allow the achievement of the goals and objectives proposed by the institution.
What do you think about this topic? Do you think bank leaders are taking the necessary steps for digital transformation?
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