Corona: Digitalization drivers for banks

March 2021 – The Corona pandemic is intensifying the pressure on established banks to reinvent themselves and, above all, to reposition themselves digitally. Hamburg Commercial Bank is taking good advantage of the opportunities that this offers. She has proven in recent years that she masters "change."

two women talking in the office

Before Corona, the topic of "disruption" was often a fine vocabulary for smart forum conversations. With the pandemic, the end of which is far from foreseeable, the starting position has changed fundamentally. Change is here, it stays, and it changes disruptively and, above all, sustainably existing products, processes and business models. And it is clear that even with the presence of vaccines and effective drugs against the virus, there will be no return to the status quo ante. The economy is a process of progress, not a return to the familiar.

Just as it seems unlikely that, after surviving the pandemic, all people from their home offices will make their way back to inner-city office towers on clogged roads and in crowded commuter trains, so little will companies be able to seamlessly build on their pre-crisis work. Hybrid models will determine the future: this applies to working in the office and at home. But also for future business models of companies and banks.

Man looks at his smartphone

"The comparatively small size and specialisation in certain areas of banking and particularly promising industries is becoming a real competitive advantage for a house like ours, especially when it comes to digitalization issues."

Jan Sojka, Head of Digital Excellence Center at the Hamburg Commercial Bank

A lot of tradition means legacy

The latter have been undergoing fundamental change for years: new competitors, the fintechs, are pushing into the market and often making life easier for the established with synergies, but also harder through new competition. In addition, there is increasingly tighter regulation. A symbolic example of this is the information provided by the client, which a bank advisor has to document at a wealth advisory service: in the past, a DIN-A-4 sheet was sufficient for this; today, the form stack has felt the thickness of a phone book from the eighties.

Above all, however, the industry is driving digitalization forward. Or digitalization the industry. Depending on your point of view. This process has now experienced a new dynamic with and through Corona. tradition. But sometimes it is also a millstone in the effort to reinvent itself. Germany's incumbent banks are usually aware of the need to modernize their IT structures. The problem is that unlike a fintech that can dare to restart on the green field without technical and legal legacy, German banks and savings banks not only have significantly more employees and more customers, but also an x-dimensional IT landscape built up over decades and thus a lot of legacy.

However, in order to be able to map and, above all, use the advances in digitalization, a fundamental system change is often necessary – a complex and expensive undertaking. Especially for banks, which, unlike HCOB, have to manage a large branch network. "The comparatively small size and specialisation in certain areas of banking and particularly promising industries is becoming a real competitive advantage for a house like ours, especially when it comes to digitalization issues," says Sojka.

Jan Sojka

Jan Sojka, Head of Digital Excellence Center at the Hamburg Commercial Bank

The working environment of employees in many banks is currently often still characterized by systems and processes from a past business world. "The resulting pressure to act has now reached the industry nationwide; However, there is still a way to go before implementation," says Sojka.

An important building block is the cloud-based Modern WorkplaceThe benefits of moving processes to the cloud, which are usually manual, fragmented and not optimized for the customer experience, are undisputed for the digitalization of banks. 78 percent of the respondents to the "Cloud Monitor 2020" of the auditing and consulting company KPMG attested to cloud computing a "large" to "rather large" contribution to digitalization. Cloud computing then contributes the most to improving collaboration between departments and the IT department, say 70 percent of respondents, while 69 percent see a large share in the digitization of internal processes. According to the KPMG survey, the next stage of cloud computing has already ignited: for many cloud users, the next development step is to merge their existing IT solutions as part of a "multi-cloud concept".

But for all the euphoria, in Sojka's words, complying with the applicable legal and regulatory requirements is a not to be underestimated expense item in the IT transformation. It is not a question of porting all the applications and functions available in the current workplace to the cloud in the status quo. This would not be suitable to achieve demanding IT transformation goals, nor would it exploit the possibilities of cloud use. Rather, it is a matter of consistently reducing complexity and optimizing the (customer) benefits.

Modern Workplace as the Key to the New World

The introduction of the Modern Workplace based on Microsoft 365/Azure is an important building block of the IT transformation of the HCOB. In addition to cloud-based elements, legacy on existing server-based applications (On Premises) is made available virtualized. But the transformation of traditional infrastructure is also being driven by the Modern Workplace, such as the replacement of landline telephones with computer-aided telephony (softphones) and the replacement of a single signon card with multi-factor authentication.

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