Just like the opening lines of Hamlet’s famous soliloquy in Shakespeare’s play of the same name, “To be or not to be, that is the question,” another question is being asked in that familiar way about the terms digitize vs. digitalize. ‘Digitization’ and ‘digitalization’ are two conceptual terms that are closely associated and often used interchangeably in a broad range of literatures.
The Gartner glossary defines digitalization as “the use of digital technologies to change a business model and provide new revenue and value-producing opportunities; it is the process of moving to a digital business.” Gartner also says, “Digitization is the process of changing from analog to digital form.”
What does it really mean to digitalize a business process? Is it different from automating or just improving it?
You could argue that digitalization is just extending automation. But Gartner uses “digitalization” to emphasize that the goal is to create and deliver new value to customers, not just to improve what is already being done or offered.
Digital business transformation is about doing things differently — creating new business designs by using digital technologies in combination to blur the boundary between the physical and the virtual worlds. It’s not just about automating or inserting technology into an existing process. Nor is it about replacing paper or people.
Digitalization includes the use of business intelligence and analytics with data, whether structured or unstructured, to provide insights and analysis for the business. In addition, embedding the analytics within the business processes provides real-time analysis and decision-making in the fast-paced digital world. It is also using any technology platform for delivering information and services, whether mobile phone, video, website, tablet, social media, or others. It is delivering any information or service, anytime, anywhere, and in any way.
Quoting from a KPMG White Paper on Digital Banking, with each passing day, the banking sector witnesses at least one new breakthrough in some part of the world that has the potential to redefine how banking services would be offered in coming years.
The new pockets of digital disruption emerging in the banking space can not only provide more efficient channels to the customers, but also explore more cost-effective technologies for back-end operations and enhance customers’ experience with unexplored value-adding services. Digital disruption is gradually changing the way banking has been done in past few decades.
Between 2000 and 2015, the global penetration of internet has grown by seven-fold from 6.5 percent to 43 percent, while in India, internet penetration for individuals grew exponentially — from less than a percent to 30 percent. Moreover, the regulatory and policy push on financial inclusion and intense competition from banking and nonbanking players, have further accentuated the need for banks to embark upon the digital journey.
World over, banks are moving towards ‘branchless banking’ and the ‘all-digital’ banking system is becoming popular among banks and customers. From the back-end operations, client-facing services, banks across the globe are digitalizing the complete banking value chain.
Despite several opportunities, banks face pressure from both external and internal forces that hinder full-scale digitalization. The complexity and width of digital initiatives vary upon infrastructure, customer preferences and policy framework of the region. Digital skill gaps, lack of user awareness, regulatory restrictions and limited infrastructural support push banks to constantly modify their digital strategy.
Moving forward, digitalization could be perceived both as an opportunity and a challenge. The winner in the future is likely to be decided based upon path-breaking innovation, planning and successful implementation of ideas. Banking shall soon become a real-time, context-driven and fully automated service, based on robust digital roadmap.
The way ahead for banks to go to the next level of the digital era is to collaborate, integrate, automate beyond their core banking services and create an ecosystem of partners for growth.