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5 Challenges of Digital Transformation in Banking


8 min read

After more than a decade, digital transformation in banking remains one of the industry’s most difficult tasks, often giving rise to digital banking problems. Despite the best efforts of the banking industry, digital adoption has been slow because of operational and cultural barriers, difficulties in operation and potential hazards, and the digital transformation risks associated with modernizing an aging IT system to incorporate cutting-edge digital advances.

Digital transformation is hard to do not because there aren’t enough trained IT workers. Expenses for employing cutting-edge equipment account for a disproportionately large share of the total.

Because of a lack of urgency and reliance on obsolete technology, some of the biggest financial institutions have resisted making large strides toward the digital revolution. However, we currently live in a time where digital technologies are being exploited by every industry. Because of this, the current system will soon have to go through a quick digital change.

Digital transformation challenges faced by banks is a common thing; cybercrime has increased globally, necessitating a digital transformation by financial services to tackle cybersecurity threats or face grave consequences. As a consequence, short-term efforts are more vital than long-term solutions, which were meant to drive past efforts.

This blog post will go through some of the most challenging components of banking’s digital shift. Let’s get into the details now.

Digital Transformation In Banking

Financial institutions of all sizes are rushing to incorporate cutting-edge tools and services into their operations as a consequence of the continuing digital banking transformation. But what exactly does this move entail? The move to online and digital service delivery, as well as the massive back-end changes required to allow this transformation, are at the core of the banking digital transformation.

Many financial institutions make the mistake of launching many digital initiatives at the same time, which have a poor probability of success due to a lack of resources and coordination required to compete with digital-native alternatives, thereby heightening problems in digital banking. Instead, the financial industry must tackle digitalization from the top down by integrating digital systems, customer experience platforms, apps, and infrastructure.

Digital transformation in banking may be seen in the usage of blockchain technology, the application of artificial intelligence, and the collecting, management, and analysis of client data.

While the phrase “digital transformation” may apply to a variety of activities, the ideas outlined below will assist you in getting ready for your own bank’s digital transformation.

Book consultation with experts to create your digital transformation strategy!

Top 5 Challenges Of Digital Transformation In Banking

Here are the five biggest problems with digital transformation in banking and financial services:

  1. Securing social media communications
  2. Evolving away from legacy applications
  3. Solving security issues at scale
  4. Breaking down silos and mitigating risks
  5. Choosing between bricks-and-mortar, digital, or both

Now is the time to tackle these challenges, understand their intricacies, and find effective ways to succeed in your digital transformation journey.

#1. Securing Social Media Communications

Banks, like any other organization, must engage with their consumers in the places where they spend the most time, which is increasingly on social media. Marketers will spend more money on social media sites like Facebook and Twitter as their huge user bases attract more and more of them.

Making sure all social media accounts are secure should be a primary priority. A centralized monitoring system capable of detecting and preventing possible policy violations in all communications should be put in place. In the digital transformation in investment banking, implementing efficient yet user-friendly controls over social communications is critical.

#2. Evolving Away from Legacy Applications

Bank digital transformation strategy implies that companies must change technologies to newer ones. According to studies, 58% of financial institutions are still utilizing legacy mainframes that are 5 to 10 years old. The majority, 27%, reported utilizing mainframes between 11 and 20 years old, while just 9% reported using legacy equipment between 21 and 30 years old.

Back office technology needs to be updated badly because its old systems were not made for the networked digital environment of today.

Moving from obsolete and disorganized legacy financial systems to new, digitally connected ones may be challenging and often leads to digital banking problems. Before the transfer can be accomplished, applications, custom processes, connections with other systems, security, and maintenance must all be acquired. If you want to get the most out of your money, invest in training and continuing education for your employees.

#3. Solving Security Issues at Scale

Along with the security of social media channels, the security of the IT infrastructure and all the data it holds is one of the most important challenges of commercial banking digital transformation.

Nowadays, a typical financial institution may contain tens of thousands, if not hundreds of thousands, of computers and other networked devices. When you incorporate social, cloud, and mobile platforms, the attack surface expands considerably. Furthermore, the distribution of hazards changes significantly as a result of cloud transitions and supply chain issues.

The good news is that the digital revolution in banking is also driving the need for tailored security and compliance solutions that can grow on demand. Whether a bank has a small or large digital asset portfolio, there are now solutions that can scale to any size, covering everything from WhatsApp chats to Facebook status updates via automation and total cloud enablement. Because of their scalability, SaaS solutions are frequently used in the retail banking business.

#4. Breaking Down Silos and Mitigating Risks

Financial organizations have historically worked in silos with a number of separate divisions, each with its own set of goals and tools. The obvious consequences include slowed development, limited scalability, and reduced levels of customer satisfaction. More traditional banks’ reputation for being unhelpful to customers seeking new services or assistance with current ones is well-deserved.

With the introduction of digital banking, a consolidated platform that consolidates customers data and connects previously independent financial systems is established. This solution eliminates all difficulties related to silos. 

Always keep in mind that information silos may lead to a lack of cooperation and consistency in corporate policy-making, which can jeopardize security and compliance. CMOs and CISOs should work together to create and implement integrated solutions that benefit all parties involved, particularly now that marketing is at the forefront of brand protection.

#5. Choosing Between Bricks-and-Mortar, Digital, or Both

Despite the broad availability of digital banking solutions, many customer expectations relate to their financial transactions at a physical branch. That is correct. Finding a happy medium that enables them to fulfill the needs of all of their customers while still evolving is one of the continuing digital banking challenges and opportunities confronting the banking industry.

While some customers prefer to check their account balances on their mobile devices, others prefer to perform transactions on a computer. Others like the convenience of completing a brief loan application online. Customer experience shows that they still prefer to do transactions in person.

Because of everyone’s obsession with digital transformation, many people believe that bank offices will soon become extinct. However, this is not the case, as many people still prefer to meet in person to discuss major financial issues such as house loans and mortgages. Rather than replacing face-to-face contact, digital technology is meant to augment it.

Financial institutions, in general, must undertake digital transformation if they are not to fall behind as digital technology advances. Successful financial institutions overcome the problems in digital banking in order to increase customer centricity and/or the proportion of digital wallets in their portfolio. 

Because of this, these financial institutions are now able to offer their customers and end users “security through transparency,” which was made possible by digital transformation.

The financial sector should search for methods to enhance their services and build mutually beneficial connections with their customers in areas where most consumers perceive challenges because it is the customers’ trust and enjoyment that is most important.

Let’s identify and overcome obstacles in your digital transformation

Advantages And Disadvantages Of Digital Transformation In Banking

Individuals, small companies, international corporations, and even banks themselves may gain from digital transformation banking. Many benefits may result from careful planning and continual improvements:


  • Convenience. With only an Internet connection and a few simple screen touches, you can access your personal or business bank account from any device. Customers are happier as a result of their increased ability to monitor their accounts and update their profiles at any time (add new mailing addresses, e-mails, telephone numbers, etc.). If that weren’t enough, checks might be sent to you immediately, eliminating the need to visit a bank.
  • 24/7 service. Because of the bank digital transformation, you can now use an online bank whenever you need it, including on weekends and holidays. In certain situations, you may be able to finish your financial transactions before the bank even opens, saving you the time and trouble of standing in line. This is a significant advantage of implementing a digital strategy.
  • Time-saving. You will enjoy not just the convenience of being able to access your account from the comfort of your own home, but also the huge amount of time you will save. It’s pretty convenient, especially when you think about how long it used to take to do even the simplest transactions at a bank. Now, you can do everything quickly and easily from the comfort of your own home or from anywhere with an Internet connection.
  • Automated transfers. There are no restrictions on the number of automated transfers (payroll deposits, automatic bill payment) that a direct bank may do, and there are no fees for providing these services to any other financial institution.
  • Easier management. Although more information than is generally collected by banks is necessary to create an internet account, the process is straightforward thanks to mobile apps. Customers may upload their own data or contact online assistants for assistance with the current issue. Also, the system saves information about the payee so that it doesn’t have to be entered again when making future payments, etc.


  • Security issues. Cybersecurity is one of the numerous difficulties that traditional banks and government organizations confront today. Even with the best ways to protect data, fraudsters, phishers, hackers, and other bad guys may still be able to get into accounts.
  • Services. Not every bank has the capacity to provide a full package of digital services these days. Some, however, still need visits to traditional financial organizations’ physical offices.
  • Transactions. For more complicated transactions, a visit to the bank branch may be required. Anyway, customer centricity is important. Another shortcoming of certain online banking services is their inability to process cross-border payments. Only a few small flaws remain, which will be addressed in due course. The advantages exceed the disadvantages, allowing for more efficient procedures, cheaper overhead, more time saved for consumers, and more effective service delivery.

Summing Up 

The longer you wait to start your digital transformation in banking summit journey, the less likely you are to win the battle for digital supremacy. Each new technical advancement exponentially outperforms the preceding one. If your organization overcomes the aforementioned challenges to begin a transformation in digital services, it will certainly reach the peak of digital dominance.

Remember that digital transformation challenges faced by banks happen a lot and they will arise as long as technology changes and evolves at such a quick pace. But you always have a choice — join the digital revolution now, before it’s too late. Consult with DashDevs experts to explore your growth options!

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Table of contents
What Is Digital Transformation In Banking?
In the banking industry, “digital transformation” refers to the cultural and operational shift toward enhancing operations and value delivery to customers via the extensive use of digital technology throughout the whole organization. When done correctly, digital transformation challenges banks to compete in a crowded sector. While technological developments are necessary for digital transformation, they are not a panacea. If financial institutions can successfully implement their digital strategy, they may gain enormous benefits. Now is the ideal moment for financial institutions to successfully implement digital transformation and upgrade their internal operations. In the next decade, quick action might be the difference between success and failure.
Why Do Banks Need Digital Transformation?
Common banking methods have long since outlived their usefulness. They need a significant amount of time and effort, as well as the participation of multiple individuals. Procedures take a long time to complete. This highlights the need for a digital solution to accelerate and simplify procedures. Keep in mind how drastically COVID-19 has changed things and increased the importance of digital transformation in banking. Because of this, many people now use online banking and prefer to take care of all their financial needs from the comfort of their own homes.
How does digital transformation impact retail banking, and what benefits does it bring to address industry challenges?
Digital transformation influences retail banking by leveraging advanced technologies. It enhances operations, improves customer experiences, and tackles challenges like outdated systems and security concerns. The shift to online services caters to changing customer preferences, making banking more efficient and secure. Digital transformation in retail banking ensures a customer-focused, innovative, and resilient financial environment.