Here’s How Financial Institutions Can Streamline Digital Transformation by Consolidating and Optimizing Their Vendors
Despite digital transformation being critical for meeting business objectives, nearly 50% of FIs admit they are still in the early stages of their transformation efforts. Among financial institutions (FIs) that have embarked on this strategic journey, a mere 30% deem their initiatives successful. This begs the question: what’s holding FIs back from achieving digital transformation?
The answer lies in complexity. Over decades, FIs have layered new technologies over older systems, creating an intricate, patchwork technology stack. This complexity increases operational costs and hinders agility, leaving FIs vulnerable to competition from new market entrants with leaner, more agile infrastructures.
Consolidating systems into a unified platform is a powerful solution to this challenge. By rethinking and optimizing technology stacks with robust integration, FIs can streamline operations, improve customer experiences, and position themselves to compete effectively.
The Root of Complexity in Financial Institutions
Financial institutions operate in an industry where regulation, customer expectations, and competitive pressures constantly change. As these challenges mount, so do the layers of software applications and systems designed to address specific needs, from core banking functions to loan origination and fraud prevention.
In addition to these financial systems, FIs have increasingly embraced enterprise applications to manage critical functions like customer relationship management (CRM), human resources, and compliance. This often becomes unmanageable, with the average institution juggling more than 200 applications across departments.
The result? A fragmented software supply chain that consumes 90% of IT budgets just for maintenance and upkeep, leaving little room for innovation and strategic digital transformation. This complexity ties up valuable resources to keep the lights on instead of pushing forward with the organization’s digital strategy. Here’s how vendor consolidation and optimization can help banks and credit unions gain a competitive edge.
- Improving the Customer Experience
Today’s financial services customers expect seamless, fast, and personalized interactions across multiple touchpoints—whether they’re applying for a loan, checking their balance, or seeking help with an account issue. However, managing these interactions effectively requires data to flow freely between disparate systems. When departments and tech are siloed, this free data flow becomes difficult, leading to customer delays, errors, and frustration.
Consolidating systems into a unified platform eliminates these silos and allows real-time data sharing across all customer-facing and backend systems. This means that regardless of where or how a customer interacts with the bank, whether by mobile app, branch visit, or customer service call, the experience will be consistent, efficient, and more personalized. By integrating key systems, FIs can reduce friction in customer interactions, creating a more engaging and satisfactory customer experience.
- Reducing Costs Through Streamlined Operations
One of the most significant challenges facing financial institutions is the high cost of managing a sprawling technology stack. As mentioned, 90% of IT budgets are often tied up in maintenance, leaving minimal funds for strategic initiatives. Each system requires vendor contracts, support agreements, and specialized knowledge from IT teams, adding layers of complexity and cost.
By integrating systems, FIs can reduce overhead by streamlining operations, gaining greater visibility into their tech, and eliminating redundancies. This simplifies IT infrastructure management and drives savings that can then be reinvested into strategic innovation priorities, allowing FIs to enhance their competitiveness in the market.
- Eliminating Data Silos to Improve Decision-Making
Data is one of the most valuable assets an FI has, but too often, that data is locked in silos that prohibit departments or functions from communicating with each other effectively or in a timely manner. This hinders operational efficiency and limits the institution's ability to make informed, data-driven decisions. When departments aren't working with the same data set, discrepancies and errors are more likely to occur.
By eliminating silos, FIs ensure that all departments are working from the same, up-to-date information. This synchronization enables leadership teams to make quicker, more informed decisions based on real-time data. For example, risk management, compliance, and customer experience teams can all access a single source of truth, leading to fewer errors and faster resolutions.
- Freeing Staff for High-Value Work by Automating Manual Tasks
Managing a disconnected set of systems and applications means skilled staff are saddled with time-consuming manual work to ensure data flows correctly across the organization. These tasks take up valuable time and are prone to human error, further complicating operations.
When FIs unify their systems through a central platform, these manual tasks can often be executed hands-free since teams gain the tools to build automated workflows triggered in real time. This real-time automation, enabled by a free flow of data, allows employees to shift their focus from administrative tasks to higher-value work that directly contributes to strategic goals.
Streamlining Digital Transformation by Optimizing Integration
Financial institutions have long viewed digital transformation as a daunting, multi-year journey. However, by focusing on consolidating and optimizing tech with a unified integration platform, FIs can accelerate their transformation and see tangible results sooner.
An optimized integration strategy reduces the operational burden on IT teams, freeing up resources for innovation. FIs can shift from being reactive—focused on maintaining a complex infrastructure—to proactive, using technology to drive business growth and improve customer satisfaction. For banks looking to remain competitive, streamlining and simplifying infrastructure complexity is not just an option but a strategic necessity.
About the Author
Rob Storer serves as VP of Product for SMA Technologies, the leading provider of automation solutions for financial services organizations and the maker of OpCon workload automation and orchestration.