The way customers interact with banks and insurance companies has changed: according to Eurostat and The Financial Brand, as much as 40% of banking customers in the EU are active online banking users. That number rises to 61% in the US. We expect this number to rise to 83%–89% in the EU by 2020.

What we expect from financial institutions has also changed. Brick-and-mortar institutions are becoming obsolete quickly. According to a survey among European youngsters, 70% would rather go to the dentist than visit a bank branch. Today, we do most of our transactions online (in Spain, 65% of online transactions versus 35% offline for the average online user, estimated for 2015), but most of our purchasing offline (75%). However, that is likely to change in the future.


Alejandro Gonzalez

Companies define and implement digital with different organisation setups

Our experience reveals that most companies do not have clear strategies on how to organise digitalisation. Results from an internal European survey reveal that 73% of companies rely on top management to define digital strategy – a correct approach, in our opinion, but then implementation is developed by top management in one-third of all companies, which is wrong by all measures. Only 18% of companies rely on central digital organisations to implement their strategies, 36% having it delegated to specific departments; the most common are IT and clients. Most surprisingly, 14% of all companies have no clear guidelines about who designs or implements the strategy.

Only 18% of companies rely on central digital organisations to implement their strategies, 36% having it delegated to specific departments; the most common are IT and clients

So, who is right? Setting aside those who rely on top management to implement the strategy and those who do not have a strategy, distributed implementation responsibilities are more common than a central department, by a 2:1 ratio. Does this mean that distributed is better?


Pedro Fernández

Chief digital officer versus decentralised digitalisation

Digitalisation affects many different aspects of the organisation: processes are to be changed, product definitions to be rethought, operative and commercial channels to be affected. Responsibility over those functions is often spread through the organisation.

Therefore, any digital transformation plan must coordinate different areas and teams, each one working with its own point of view and agenda. When implementing the plan, two main options arise:

  • Chief digital officer (CDO): Setting up a central organisation under a CDO, who is accountable for all digital projects in the organisation, with a digital budget, resources and responsibility over main digital transformation KPIs
  • Decentralised digital functions: Distributing key digital functions (defining digital processes, fine-tuning digital channels, adapting products to the digital world, new ventures) among the traditional owners of those functions

Generally speaking, a CDO and a digital department are better for steering a common strategy. Decision-making is easier, there is more agility and initiatives are better coordinated. Also, responsibilities are clearer, KPIs easier to follow and objectives simpler to set. It also is a better option to ensure adoption of agile methodologies in the organisation and change management towards a digital culture in general that facilitates interaction with IT leaders.


On the other hand, distributing functions also has several advantages: the implementation is done closer to the line of business, and the business priorities are therefore easier to harmonise with the digital strategy. Secondly, the particularities of different BUs are better taken into account. Thirdly, authority is easier to build, and the ‘we-know-best’ argument can be better avoided.

In any case, if the company is to go with the CDO, everybody involved should be aware that it is to be, by definition, an interim solution, available only as long as the company is transforming. The aim of the digital department should be to transform the aspects that ought to be changed and then quickly transfer those functions to the line of business. A CDO who wishes to preserve his job rather than transform the company would be a hindrance to digital transformation.

Traditionally, financial institutions have understood the digital market as an independent one, and thus have undertaken digitalisation through the development of offshoot digital companies. In developed markets such as the UK and Spain, many of the top-10 insurers have followed this approach.


Our opinion on this strategy is that this was good enough in the past, but is not advisable anymore. The virtue of this tactic used to lie in the fact that you could test digital technology and the digital market without having to radically transform the parent company or cannibalise your own clients. This is not the issue any longer (digital technology is well tested and the digital market is not a niche one anymore, but the mainstream of clients), and it has considerable drawbacks, such as duplicate investments and lack of digital adaptation within the parent company.

The new roles in a digital organisation

As we have stated, in a bank or insurer, the objective of digitalisation is to transform the core of operations and processes. The outcome of the transformation should not be the growth of digital functions in parallel to core functions (i.e. digital channels versus traditional channels), but to transform current functions so they are adapted to digitalisation (strengthening BI, channels, product areas, etc.). However, it is also a fact that radically new digital functions arise because of digitalisation. For these, new capabilities must be developed or acquired.

What is the role of IT?

It is a common mistake to associate digitalisation with IT. IT is undoubtedly a critical enabler of digitalisation, but there is much more to digitalisation than having the technology. The business point of view is critical when defining digital channels, customer interactions, products and even internal processes. All along the way of digital transformation, IT must play a very active role because most of these aspects to be defined will impact the technological architecture or technical components that must be assessed. IT must then play a role as a facilitator and guide the company towards innovative technical solutions that help achieve defined goals.

Alejandro Gonzalez is Partner at Arthur D. Little and Pedro Fernández is Principal at Arthur D. Little