Daily Editorial Update – Are Indian banks digital ready? here’s a STEP test

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Today it is difficult to escape the word ‘digital’ in any conversation, strategy or discourse. A number of studies indicate that everyone of the human domains is getting redesigned and redefined for digital, either to take advantage of the capabilities of ‘digital’ or due to the deep-seated influence of digital–things, artefacts and entities.

Banks, especially the Indian ones, are at the absolute front line, weathering digital impact on their customers, business models and employees. Critical as it is, digital readiness needs to be understood properly and correctly. It is not unusual to see a great deal of confusion in defining digital. Some people define it based on strategy and others based on frameworks.

For example, many believe that digital is about using digital technologies to do business. This approach suffers from an automation syndrome. The proponents of automation as proxy for digitisation think that once they are able to do in computers whatever they did manually, they had digitised. Some others believe that digitisation is a channel strategy.

In banks, the prevalent approach is to have digital by defining and positioning digital channels either as a collaborative to or substitution of brick-and-mortar products and channels.

A few others believe that the role of digital is to push marketing of brands, products, services and also to better govern, through data, analytics, service and aggregation, the marketing and business development strategy of a bank. A second school of thought seeks to define digital, based on frameworks. This approach attempts to componentise the main aspects of digital.

One framework, which is very popular is the ‘SMAC’. SMAC stands for social media, mobility, analytics and cloud computing. As all of us know, digital requires completely different ecosystem and connectors between players of such ecosystems. In SMAC, key elements focus on the new technologies and methods which have been forcing changes in the last couple of years.

To this, a new addition is ‘I’ which stands for Internet of Things (IOT). Portability, channel agnosticism, Mobile first, databased customised offerings and ability to scale up and down are some of the necessities to be successful in a rapidly changing world. Yet another framework is ‘DPRT’ which stands for disruptive, responsive, personalised and trusted nature of digital. Whatever we may accept as a definition of digital, Indian banks must embrace the impact of it unequivocally.

At a lower stage of maturity, they may just do automation and at high maturity they might do cutting edge innovations and collaboration. How does one determine whether the organisation is ready for digital? I believe that a ‘STEP’ approach is highly useful, both for the leadership to gauge readiness and refine and enhance it.

The acronym STEP stands for security first, transformation preparedness, enterprise architecture, productivity as the key foundation. It is instructive to examine the framework in some detail. ‘Security first’ is the paradigm that shall override every other in the digital arena.

As multichannel and collaborative partner ecosystems play together in real time, the strength of security shall be tested at every touch point. The old methods of security governance, will be able to serve the new demands only partially.

Readiness of the organisation shall be good with effective end-to-end capabilities as compared to diagnostic, reactive and remedial regime followed by most banks today.

Readiness would demand large investments in infrastructure, tools and manpower. Data security, confidentiality and privacy, minimally in focus today, will be on the top. Readiness shall include deployment of analytics, machine learning and deception techniques as also secure coding and testing practices.

‘Transformation preparedness’ will also be a key test of digital readiness of the banks.

Platformisation and rapid obsolescence of wexisting products and services would mean that cycle time of a complete makeover of organisations, especially the IT and digital-based offerings shall be short and rapid. ‘Enterprise architecting’ will be the heart and brain of a digitally-fit bank.

As digital demands enforces new disciplines, organisations shall be ready only when they would have taken a holistic approach to business processes, technology and the organisational structure. Stakeholders will demand concrete steps and plans.

‘Productivity’ will be a synonym of digital readiness and will be defined as the ability of banks to sweat their assets–human, technology and infrastructure. As digital technologies are deployed for higher performance, tools and measurement standards to understand outcomes shall be essential.

Benefits of technology deployed centrally have to be harvested in the front line. In sum, the STEP framework will hold the key to digital readiness of Indian banks.

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