Digital transformation – from processing efficiency to advisory services

We have been working on digital transformation for many years. It is here to stay and has become an integral part of our daily lives. The tasks that are constantly being addressed with digital transformation have changed over time and continue to evolve. In terms of meeting needs, digital transformation and banking share the common ground of providing assistance in fulfilling these needs. As secondary needs, they are not an end in themselves. Digital transformation supports almost all areas of life, while banking fulfills the main functions of value preservation, maturity transformation, and risk diversification. These main functions have remained fairly stable over time. But the way they are carried out has changed dramatically. The most important elements here are reliability, security, and simplicity.

From gathering information and providing advice through to making the decision and carrying out a transaction, everything has to be reliable. “Reliable” means that either my expectations are fulfilled or I am at least pleasantly surprised, or something is still working the same or at least similar to yesterday. In short, I can rely on a promise. This reliability refers to the selection of relevant data, its processing into information that can then be incorporated into the decision-making processes, the recognition of the initial situation or the precise identification of the need. Digital tools support us here in a variety of ways, with efficiency taking center stage in the last decade.

The element of security can be understood in various dimensions. On the one hand, there is the much-discussed technical security, which is highly dynamic and should be followed accordingly. Another element of security is the functioning of the entire financial market system. With a stable financial market system, the state creates the framework conditions for our economy, thus relieving us of many costly activities that would otherwise have to be carried out. Institutions such as banks, markets, centralized systems, but also issues such as currency stability, deposit security, etc. provide security. Technical security and safeguarding the financial market system are just two aspects that are subject to major changes.

Everything should be as simple as possible but still possible, and as intuitive and self-explanatory as possible. Meeting this challenge means using digital tools to make tasks quick and simple and ensuring that decisions are still made consciously. Particularly in terms of simplicity, we have seen a great deal of development through digital means.

By far the most important value in business with the three elements mentioned is trust. Chris Skinner explains this very well in his book “Intelligent Money” (2024). Without reliability, without security, without simplicity, there is no trust. Trust is created when I receive relevant information from my bank, when account activity is transparent, when I can use my assets, and when someone is there to deal with any issues. This list can be changed almost at will and is far from complete.

The aforementioned trust-building prerequisites of “reliable, secure, and simple” are, as we have seen above, very dynamic and in some cases subject to major changes. Unexpected changes that are perceived as major have a negative impact on the trust between customers and banks. Unexpected adjustments, additional requirements for security compliance, or the absence of process steps may serve as examples to illustrate this effect. This effect of loss of trust due to unexpected changes is accompanied by our limited ability to absorb information and by mistrust. I can’t and don’t want to know in advance what my bank is constantly adjusting. Phishing and fakes have taught me to act with a healthy mistrust and to validate sources of information. So it’s important to implement all adjustments in a way that does not damage trust, whilst maintaining the customer perception of “reliable, secure, and simple”.

The main topic of the last decade in digital transformation was increasing efficiency in compiling information and processing transactions. With regard to the attributes “reliable, secure, and simple”, procedures and methods were found that maintained trust. The current focus is now on advisory services and managing relationships via digital channels. Clearly, this is much more demanding. The performance requirements for functions in the context of digital advisory services are many times higher in terms of precision, validity, speed, and communication. Even just providing reliable advice that offers added value is challenging, even when using artificial intelligence – stable results over time and in cross-sections are necessary to maintain trust. It is imperative to measure developments against the criteria of “reliable, secure, and simple”, especially when venturing into the realms of advisory services and relationship-building functions.

Technology makes it possible to link the fulfillment of primary needs much more directly with banking (with the catchwords being “invisible” or “embedded” banking). Paying, for example, is easier, faster and less conscious. A multitude of processes run in the background between different systems, resulting in greater complexity, a higher probability of errors, and a reduction in the participants’ sphere of influence. This has been built robustly for digital payments. In the next phase, it is the advisory elements and the more challenging processes that need to be transformed – always with a focus on maintaining and deepening trust. To achieve this, we will need to use tools such as artificial intelligence, GenAI, etc. Our human thinking is structured sequentially and analogously, and the implementation of advisory and communication elements must follow this pattern. To do this, we need more situational analysis capability and more language in the digital world to ensure interaction. A lot of development is still needed to be able to do this reliably at all times. We have to learn to deal with increasing complexity, speed, loss of control, and rising demands, and to try out new things and find innovative solutions. An entire industry will have to master these steps. To achieve this, interdisciplinary cooperation in various combinations is crucial. Doing this with industry partners like ti&m, who bring expertise from other application areas and implementation skills to the table, is critical in this phase of digital transformation.

Advancing into more advisory and relationship- building areas, coupled with more partners and systems, means that the demands placed on “reliable, secure, and simple” are increasing exponentially. Facing up to this is the key to maintaining trust in banking functions.