Industry Perspective

Banking’s Digital Future: Accelerating Transformation A Joint Point of View with PwC and Workday

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Digital banking is the future—and that doesn’t end with the customer experience. Banks are emerging from the pandemic strongly positioned to make strategic investments for the future and see digital transformation as a key factor in their ability to remain competitive. As the overall economic conditions continue to influence the sector’s growth projections, leaders are focusing on diversifying revenue, streamlining operations, and finding innovative ways to build resilience while managing risk.

These leaders understand that while customer-centric business models are

necessary for future success, meeting stakeholder expectations must remain

a primary motivator. In this vein, visionary banks are making investments that

will make their operations faster, fitter, and more agile.

That’s where the cloud comes in. From predictive planning to back-office

automation, cloud-based applications help banks get more value from the

oceans of data at their disposal. These applications also enable the remote

access, intelligent workflows, and real-time decision-making that is so crucial

to creating a sustainable advantage.

Transforming legacy systems gives finance teams in particular a broader

view of the business. Enabling technologies such as machine learning can

free finance from its transactional focus, ushering in a new era of efficiency.

By prioritizing tasks that truly need their attention rather than wasting

hours on mundane manual tasks, finance teams can provide smarter,

more actionable strategic guidance for the future.

As organizations across the sector accelerate digital transformation,

small and medium-size banks are also feeling the crunch to find efficiencies.

Cloud-based tools and platforms offer smaller institutions the benefits of

focused innovation, helping them compete with the biggest bank’s efficiency

of scale and the most agile fintech’s speed to market.

With the landscape shifting every day, banks are investing in technology to

help them become more responsive, identifying and increasingly capitalizing

on opportunities as they arise. Quickly assessing which resources the bank

has at its disposal—and running accurate predictive models—are crucial

capabilities for an uncertain future.

“You need to have a view on where you can compete so you can set the

strategy,” says Peter Pollini, Banking and Capital Markets leader at PwC.

“Because it’s changing all the time.”

“You need to have a view on where you can compete so you can set the strategy because it’s changing all the time.”

Peter Pollini Banking and Capital Markets Leader, PwC

Banking’s Digital Future: Accelerating Transformation | 3

The changing banking sector. The pace of change in banking is breathtaking. While disruption is coming

from many directions, senior executives in financial services are focused on

three top change priorities, according to PwC: client and customer satisfaction

(90 percent), regulatory compliance (85 percent), and operational resilience

(82 percent).

Banks need to be ready to deliver the digital experiences customers

demand—because consumers aren’t willing to wait. Mobile banking has

already overtaken all other banking channels in popularity, according to

the American Bankers Association. Roughly 1 in 4 bank customers now

say mobile apps are their top choice for conducting banking activities.

But the sector’s strict regulatory environment can be a roadblock for digital

acceleration. To navigate continually evolving compliance rules, banks are

turning to cloud-based platforms with flexible reporting capabilities that can

adapt as requirements shift.

“Gone are the days when you’ve got a new accounting regulation and you

have to build the logic into an interface,” says Angela Borth, senior director of

Product Strategy for financial services at Workday.

For instance, Workday Accounting Center makes it possible for banks to react

to regulatory changes on the front end, Borth says. Having access to a richer

set of data also helps banks comply with changing compliance rules—and

respond quickly and efficiently to audit requests.

“Our banks expect significant savings in audit costs with the data lineage

available in Workday Accounting Center,” Borth adds.

When it comes to increasing operational resilience, the banking sector is

focused on pursuing new business opportunities while also managing evolving

risks. Having a comprehensive and effective environmental, social, and

governance (ESG) approach is a necessary piece of this equation as banks

work to navigate the volatility created by health and humanitarian crises,

social inequality, and climate risk.

Banks need to set clear goals around environmental impact, diversity, equity,

and inclusion, and transparency to meet rising expectations around the role

financial institutions should play in society. Measuring—and communicating

about—progress around these goals is key to creating sustained outcomes

and demonstrating the organization’s sincere commitment to these issues.

That requires in-depth reporting capabilities that provide easy access to

operational and HR data, and can show how key metrics have changed over

time. This, in turn, demonstrates accountability and builds trust.

In this environment, banks are also adopting technology that can help them

analyze the landscape and predict possible outcomes with predictive analytics.

Looking at credit in particular, banks are using predictive models to inform

lending decisions in areas facing increased climate risk, such as California and

the Gulf coast.

“Gone are the days when you’ve got a new accounting regulation and you have to build the logic into an interface.”

Angela Borth Senior Director of Product Strategy for Financial Services, Workday

Roughly 1 in 4 bank customers now say mobile apps are their top choice for conducting banking activities.

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“There’s this interesting complexity out there around alignment of models

that are already taking into account historical frequency and severity of

climate-specific changes,” says Pollini. “The challenge is forecasting the

incremental impact of climate change.”

Workforce upskilling is another top priority for banking leaders. In fact,

98 percent of financial services organizations rank technological proficiency

or the ability to adapt to new technologies as the top skill they need to develop

over the next five years, according to PwC.

That makes sense, since all this technology is only as good as the people

operating it. Banks need people with the right skills to reconfigure the

business for a digital future, as the sector moves toward platform- and

ecosystem-based business models that will allow them to respond faster

to change. And more often, banks are partnering with large technology

firms to get there faster than the competition.

“Speed matters here,” says Pollini. “If you can create an advantage with

your migration to the cloud, for example, that could lead to a lower cost of

managing your business.”

What will set future leaders apart? To set themselves up for success in an era of uncertainty, banking leaders need

to stay ahead of the changes that are already underway—and prepare to pivot

during the next wave of disruption.

“This business gets more complicated every day because the definition of

banking changes every day,” says Pollini.

As digital transformation accelerates in banking, five key capabilities are

poised to set future leaders apart.

1. New ways of working.

COVID-19 required banks to build the capabilities to support a

remote workforce—and the value of this investment will stretch

far into the future. It gives banks the flexibility to offshore more

work or rethink their talent and real estate strategy entirely.

But the equation goes both ways. To attract and retain top talent

in an increasingly global job market, banks are looking to give their

employees the tools that will make it easier to do their jobs—and

the flexibility that enables greater work-life balance.

“Every institution needs to think more about their people strategy

and their people experience,” says Pollini.

Enterprise cloud management systems such as Workday give

banks the ability to better manage individual employee schedules

while also meeting the needs of the business. “You can’t really

manage on a spreadsheet that someone wants to work four hours

98 percent of financial services organizations rank technological proficiency or the ability to adapt to new technologies as the top skill they need to develop over the next five years.

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in the morning and four hours in the evening because they have

childcare commitments throughout the middle part of the day,”

says Pollini.

Workforce tracking and analysis tools can also help leaders

understand employee needs, allocate resources more effectively,

and deliver training as needed. A combination of data, AI, and

automation can inform decisions that improve productivity and

help banks make better use of their workforce.

But banks need integrated finance and HR data to gain insights

into how operational costs impact their profitability. And this isn’t

possible when finance operates on a legacy system, even if HR has

already moved to the cloud.

“The downward pressure on interest rates and profitability is

forcing banks to look at their cost base and their efficiency ratios,”

says Borth. “Many banks out there are still on legacy mainframe

or on-premise platforms for finance. But they’re turning their

attention to finance transformation and digitizing the middle and

back office.”

2. Smarter resource management and talent development.

Banking leaders need reliable data to make strategic workforce

management decisions that will drive productivity and profitability.

“You don’t get scale and efficiency without understanding where

you’re inefficient and where you don’t have scale,” says Pollini.

And the more contextual data is, the more valuable it becomes.

Enriching HR data with information about employees’ past

projects, skills, productivity metrics, customer satisfaction

scores, or other relevant intel can help leaders turn raw data

into meaningful insights that help leaders run the business more

effectively.

These insights can also help banks attract and retain top talent

more effectively. As more and more workers migrate toward

mission-driven jobs, financial services companies need to

show they can offer targeted skills and career development

opportunities to compete.

But research shows many financial organizations still lag in

collecting non-financial data, such as productivity metrics.

Cloud-based enterprise resource management systems can help

banks fill this gap and develop more holistic people management

strategies.

“Combining the data and having a data strategy will be much more

important in the future,” Pollini says.

“You don’t get scale and efficiency without understanding where you’re inefficient and where you don’t have scale.”

Peter Pollini Banking and Capital Markets Leader, PwC

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3. Holistic approach to digital transformation.

It can be tempting for companies to invest in niche solutions that

promise to solve a specific problem—but using different systems

in different departments often ends up increasing cost and

complexity.

An informed, holistic approach to digital transformation allows

banks to concurrently evolve operations across all business units.

This is more efficient and effective than addressing each function

independently, as it helps banks break down the silos that impede

transformation. This means no teams or critical operations are

left behind, and it helps banks build operational resilience for the

future. The end result is a bank that can adapt to any change in the

business model quickly and comprehensively.

Unifying digital transformation also promotes growth by giving

employees a more complete view of customer behavior. When

data is connected across silos, sales teams can discover unmet

customer needs and capitalize on opportunities to deepen their

relationship with the bank.

“Banks on their own today are incredibly complex ecosystems,”

says Pollini. “But they need to do a better job of connecting

customer experiences between channels. That remains the

holy grail of banking.”

For example, if a customer makes credit card payments with a

competitor each month, the credit card team could invite the

customer to switch. But they won’t see this opportunity without

access to the data owned by the deposit team. Workday helps

banks make these valuable connections across lines of business

with its intelligent data foundation.

“There’s no limit to the granularity of operational data you can

bring into Workday,” says Borth. “The data is all in one place and it

doesn’t need to be summarized, extracted, and transported to be

used across operations.”

4. Investments in data and analytics to drive innovation.

As digital transformation continues to accelerate across the

sector, banks will require more advanced digital capabilities

to compete. The majority of firms are already responding to

disruption by employing new technologies within their business

(85 percent) or offering new products/services to customers

(70 percent), according to PwC.

Partnering with technology and non-financial services

companies can help banks innovate at the speed

the market demands. For example, embedded

finance—also called embedded banking—is

disrupting the traditional lending landscape.

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These services, which allow consumers to purchase insurance

or access financing at the point-of-purchase, are expected to

expand rapidly over the next three years. Across consumer lending,

insurance, and payments, embedded finance is expected to

generate $230 billion in revenue by 2025, a 10-fold increase from

$22.5 billion in 2020.

To remain competitive as the market rapidly evolves, banks

need a strong technology foundation that stretches across

the organization. Enterprise cloud management systems give

financial services that foundation, making it easier to partner with

technology experts and innovate at speed.

A holistic approach to digital transformation also helps banks

make better use of their data. Analytics is a primary area of

focus, with banking leaders looking for opportunities to combine

information from across the organization, looking at areas where

customer behavior, employee activity, and financial performance

overlap. This unified view allows banks to gain more valuable

insights from the data they already own.

“I think what’s on the minds of most CEOs is, ‘If I can access my data

more efficiently across the institution, how will I use it to actually

create demand?’” says Pollini. “They don’t want to go out and buy

leads to grow their business. They have the information they need.”

Putting a dollar amount on data in terms of revenue and growth

is only one part of the innovation equation. It also helps banks

identify potential problems, design more competitive products,

and even become disruptors in the field.

5. Real-time strategic planning.

Disruption has become a constant. In this environment,

shortening the horizon for strategic planning is no longer enough.

In the new normal, banks need real-time data and an agile

approach to strategy development. Digital tools such as Workday

Adaptive Planning give leaders the ability to assess different

responses to change—and shift their plan accordingly.

“Workday Adaptive Planning comes into the picture and completes

it by helping customers model the future and make more informed

decisions,” Borth says.

For example, Workday created a robust retail branch planning

model specifically geared toward lending institutions that

combines workforce planning, revenue, and expense data. This

lets banks model out the expansion, closure, and refurbishment of

branches to see how certain decisions will impact the business.

Having a single, reliable source of truth also builds confidence in

the data being reported. That means leaders can spend less time

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Banking’s Digital Future: Accelerating Transformation | 8

questioning whether they trust the data and focus on making

faster, more informed decisions.

“With the current interest rate environment, deposit surge, and

daily liquidity needs, banks need a streamlined dynamic approach

to closing daily, as well as doing more continuous balance sheet

and margin planning,” Borth says. “Our new adaptive models allow

FPA controllers and line of business analysts to gain new insights

and plan with more precision and speed.”

Steps to a successful transformation. Not all financial services organizations that set out with the goal of digital

transformation end up delivering the desired results. Many organizations

struggle to invest in the solutions that will do the most to streamline their

operations and enable strategic growth. Poor implementation of tech

and a lack of a coordinated strategy are two primary blockers for digital

transformation, according to PwC.

Change management is key to overcoming these obstacles. Banks

must provide training on new systems and tools, and upskill

employees to ensure they know how to use, manage, and protect

data. Amidst rapid innovation, employees must also understand

the basics of control and governance, which helps ensure that

changes are tracked and approved in a standardized way.

Strong cybersecurity practices are another critical part of a

successful transformation. “Data is probably my biggest asset if

I’m the CEO of any large financial services company,” says Pollini.

“And the real question is, how do I protect it? Because there’s

nothing that slows growth like a regulatory matter.”

As the threat landscape becomes more complex, banks are

responding with new security investments. In fact, more

than half of financial services organizations (53 percent)

expect to invest more in cybersecurity over the next 12

months, according to PwC.

Many banks are turning to the experts to help protect their private data,

leveraging the security capabilities built into cloud-based platforms. Because

these platforms deploy security updates at scale, they are able to address new

cyber risks as they are identified.

Banks should also look to embrace the platform economy as they invest in

the infrastructure they need to provide a better experience for customers

and employees. And partnering with a technology leader will allow financial

services companies to transform faster—and get those experiences to market

faster than the competition.

“If you’re a bank and you want to be seen as an ecosystem company, there are

short-term advantages to partnering with a company that already has a really

well-known and very well-respected brand and ecosystem,” Pollini says.

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A new view of resilience. Successful banks of the future are building innovative and inclusive

ecosystems today. In this environment, platforms will enable greater

connectivity, more intricate interactions, and better products and services.

What’s more, cloud-based platform ecosystems give banks the technical

foundation they need to weather future storms. Beyond providing the real-time

information leaders need to react, they offer predictive capabilities that will

allow banks to increase their resilience in an era of unprecedented change.

“Typically, clients and companies have evaluated their resiliency with how well

they react to unexpected events,” Pollini says. “Now companies are starting to

think of resilience as a preventative strategy rather than a reactive strategy.”

With the right foundation in place, future banking leaders won’t need to work

so hard to gain meaningful insights from their data. Intelligent, automated

analysis will be a given, freeing leaders to do what they do best: think big.

“We’ve unleashed a new wave of creativity, with a platform that was built with business users in mind. Angela Borth Senior Director of Product Strategy for Financial Services, Workday

At PwC, our purpose is to build trust in society and solve important problems. PwC is a network of firms in 155 countries with over 284,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com/US.

This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. © 2021 PricewaterhouseCoopers LLP, a Delaware limited liability partnership. All rights reserved. PwC refers to the United States member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

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