The Challenges of Digitally Transforming Banks in Portugal

At every step, the digitalisation of our lives is accelerating. With artificial intelligence, robots and the Internet of Things (IoT), we realise that digital innovation is omnipresent. This is also true of banking. While some banks in Portugal have invested in different solutions to reach clients via digital channels, generally the country has far to go before reaching the level of digitalisation in Northern European countries.  

Here are just four of the challenges faced by banks when carrying out digital transformation projects, and some thoughts on how they can be overcome.  

A two-speed highway towards digitalisation 

Even though the majority of retail banks’ digital operations are already available on digital channels, leaving behind traditional banking mediums including cards and cheques, the adoption of new ways of interacting with banks has occurred at two speeds. On the one hand, elderly customers face greater difficulty in adapting to digital interactions with their banks. On the other, younger generations are already fully immersed in digital channels and feel like they have no need to physically visit a bank or use an ATM.  

This divide between the progress of digital transformation efforts in Portuguese banks is not only caused by customer demographics and new products engagement, but also relates to improving internal processes. When speaking about digital transformation, the tendency is to think solely about technology. But, in reality, the main challenge faced by banks is people: their customers and the way they interact with their products and services. Technology should be developed and implemented to suit the customer, rather than the inverse.  

Everything in one bank  

The success of digital transformation possesses an inherent challenge: aligning and involving the entire structure of a bank – from decision-makers and those responsible for diverse areas of the bank, to risk, cyber security and compliance. All the while, banks must ensure a focus on customer experience. For digital transformation projects to be successful, they need a defined target audience; clearly defined internal processes; and solutions that respond to the needs of clients without comprising internal needs of the bank and its regulatory commitments.  

‘Go big or go home’  

The size of the project proves another hurdle to overcome. Digital transformation projects tend to be larger and take time to integrate into customer journeys, therefore taking longer to deliver results. To expedite this process, guarantee constant operations during the project and not to compromise the project’s objectives, the journeys should be defined, implemented and available continuously, secured by validation not only by the internal product team but also the target audience. It is this audience that will be able to give far more concrete and trustworthy feedback on what they expect from their banking experiences.  

Data: the new oil  

Speaking of the customer, the expectations of new customers must also be considered: more immediate interactions and being ‘just a click away’ from their finances, but also more personalised experiences.  

For example, if the bank wants to make use of all its customers’ data, the systems it uses will need to have the capability of analysing and accessing this data adequately and with an eye to personalisation, without requiring the user to input new information or wait for the relevant pages to load. This can, for instance, simplify access to credit pre-approval or facilitate the automatic pre-entry of data needed for credit applications.  

To do this, banks need the capability to access complete datasets and realising customers’ credit forms in a timely and structured way. They require efficient, real-time data consolidation, allowing for pre-existing information on a particular customer to be retrieved instantaneously. These datasets are usually scattered across different systems, making it difficult to create a uniform and consolidated repository. As a result, the biggest challenge faced by banks in their digital transformation projects is the creation of a process that brings together the various data and is able to present credible results rapidly.  

Digital transformation: where next for Portugal?  

The disparity between European countries’ digital transformation of banking is stark. In Denmark, Norway and Finland, banks have a digital penetration level of over 90%, reflected in the development of efficient digitalised systems which are without flaws in the main. In Portugal, where digital penetration is around 45%, financial services remain on a journey towards replicating this.  

It’s clear that the secret behind the successful digitalisation of banks lies not only in using the full potential of technology with customers’ consent, but also a keen focus on data that can be used to learn and understand a bank’s most important asset: its customers.  

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