Digital transformation strategy of commercial banks from the perspective of data elements From IBM

The following is the Digital transformation strategy of commercial banks from the perspective of data elements From IBM recommended by recordtrend.com. And this article belongs to the classification: research report, financial technology.

Recently, the China Banking and Insurance Regulatory Commission issued the guiding opinions on the digital transformation of the banking and insurance industry (hereinafter referred to as the Guiding Opinions), requiring banking and insurance institutions to promote the high-quality development of the banking and insurance industry through digital transformation, build a new pattern of digital finance that adapts to the development of modern economy, constantly improve the ability and level of financial services to the real economy, and effectively prevent and resolve financial risks.

IBM consulting organizes digital transformation experts and data experts to interpret the guiding opinions from the perspective of data elements, sort out the key points and context of digital transformation development, and closely focus on one digital transformation strategy, two main positions of digital transformation, two sets of enabling systems of data + technology and two major risk safety prevention points, from digital business innovation Put forward strategic suggestions for the digital transformation of commercial banks from the dimensions of the value of data elements.

01. Background analysis

The development mode of China’s banking industry has accelerated its evolution. China’s banking industry will enter a development stage of high competition, high differentiation, high cost, low growth rate and digitalization. The survival of the fittest and mergers and acquisitions will be the theme of the next 10 years. As China’s economy enters a new medium speed growth platform, the shortcomings of the traditional management thinking and methods of the banking industry begin to appear. The banking industry urgently needs to get rid of the original “path dependence”, and find the “second development curve” when the traditional business has entered the “Red Sea”.

Digital transformation has become an inevitable choice for banks to seek new growth engines in the new era, and it is also a touchstone to reflect the differentiation of bank management capabilities. Based on this background, the China Banking and Insurance Regulatory Commission (CIRC) put forward the guiding opinions, requiring banking and insurance institutions to attach great importance to the work of digital transformation, and put forward 30 guiding opinions, indicating the direction of development in the next five years.

02. Sailing in the sea depends on the helmsman

Strategic planning and organizational process construction clearly emphasize strengthening the top-level design and overall planning of digital transformation, and are the “helmsman” of digital transformation.

（1） Adhere to the integrated enterprise level transformation strategy

There is no doubt that digital transformation must be a “number one” project, which requires the board of directors and senior management to take digital transformation as the transformation strategy of the bank and make overall and systematic planning. In the next 10 years, the digital transformation strategy is the most important part of the bank’s overall strategy, and even the whole of the bank’s transformation strategy. The two strategies should be integrated and cannot become separate entities.

In the future, when evaluating the market value of a bank, the capital market and third-party institutions will refer to the “fourth report”, that is, the bank’s data asset table. The bank must show its excellent data application ability and good data governance level in the process of high-quality customer service. This means that digital transformation is not a simple digitization of front-end products of various businesses, nor the “renovation” of back-end information technology, but an overall digital activity that includes front, middle and back-end, business lines, data elements and information technology “multi arms” coordinated operations. Data and technology should change and evolve from “support empowerment” to “value empowerment” to form a digital value of “connecting, driving and reshaping with numbers”.

（2） Value orientation, quantify digitalization itself

The guiding opinions emphasizes “encouraging organizational structure innovation and value creation oriented”. What is value creation oriented? On the road of digital transformation, the most important thing is to adhere to the return to the origin, serve the real economy, create value for customers, and feed back performance growth.

Case:

DBS Bank was awarded the title of “the best digital bank in the world” by Eurocurrency in 2016 and 2018 respectively. What it has done is very innovative. It is not only talking about digital strategy, but also quantitatively showing the significance of digitalization to profitability. According to the quantitative analysis, compared with traditional customers visiting the branch, customers who conduct digital transactions in DBS generate twice the turnover and have more deposits and loans. Moreover, the cost of acquiring digital trading customers is 57% lower than that of acquiring traditional customers. Traditional customer transactions can earn 19% return on net assets, and using digital customer transactions can earn up to 27% return on net assets.

For the first time in the world, DBS has proved the achievements of its digital transformation with figures, and its practice is very worthy of reference for commercial banks to implement the digital transformation strategy. The Department of overall planning and promotion of digital strategy should design a scientific and reasonable transformation effect evaluation index system, form a closed-loop effect evaluation driven by process control, and provide an objective basis for evaluating the input and output of digital transformation.

（3） Organizational change under the “emergence mode”

The guiding opinions emphasizes “strengthening cross field, cross department and cross function horizontal collaboration and flat management. Establishing a co creation team integrating different business lines and business and technology lines”. Under the guidance of such requirements, it is bound to lack flexibility and adaptability to continue to formulate the transformation strategy with the strict and top-down control thought of traditional bank management. It is necessary to learn from the “emergence” law in complex systems and establish a new organizational model inside the bank that breaks down departmental barriers from the bottom up, so that “people who can hear the gunfire” can make decisions and lead resource allocation. Some leading financial institutions are trying to establish ant organizations to form a group and distributed intelligent form by strengthening internal cooperation across lines. For example, ing restructured its organizational structure and established teams, divisions and tribes to allow employees from marketing, product development, digital channels, it and other functional departments to cooperate in the form of small cross functional parallel teams. At the same time, the bank empowers these teams to carry out end-to-end digital operations of customer processes and product services according to their specific goals.

（4） Science and technology professionals enter the cabinet

The guiding opinions advocates “encouraging the selection and employment of professionals with scientific and technological backgrounds to enter the board of directors or senior management”, reflecting the new thinking of the regulatory authorities on the composition of corporate governance structure under the new situation of digital transformation. Many banks in the world have set up chief digital transformation officers (cdtos) to attract a group of top emerging technical talents in the market with the help of market-oriented mechanisms and cultivate emerging digital organizational culture.

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