Digital Transition Amid Macroeconomic Turbulences

Zsolt Vadócz, Head of digitalisation, K&H Group, Hungary (a subsidiary of the Belgian KBC Group)

Zsolt Vadócz, Head of digitalisation, K&H Group, Hungary (a subsidiary of the Belgian KBC Group)

According to a recent McKinsey Global Survey, rising interest rates and inflation are the two biggest potential risks to the company's growth. The Surveyshows that CFOs have been reshuffling priorities as the global economy grapples with financial troubles. The Survey also shows that CFOs have sharpened their focus this year on managing the inflation that has stifled economic growth around the world. Supply chain disruptions and interest rate hikes also have commanded their attention, leaving financial leaders less time to focus on building capabilities and organisational growth.

With due respect to all the troubles CFOs are facing in international companies, I believe that growth potential lies in digitalisation. Mid- and long-term company growth is determined by the organisation's digital capabilities. I'm referring not only to the use of cloud and advanced analytics but the adaptation of artificial intelligence in all relevant fields of the organisation, starting from the customer journey to the lead management and far beyond.

As a significant integrated financial service provider (banking, insurance, investment) in Hungary (Central Europe), the Group's digitalisation is the priority. Not only because it is a source of substantial cost-saving but because it generates a competitive advantage on the market.

Customer behaviour has rapidly changed in the last couple of years, which has had a significant impact on financial services as well. Customers— mainly the younger generation but not only— are constantly online, in most cases being present on different platforms simultaneously. Moreover, they make frequent decisions related to money spending, be it a small present, an expensive flight trip, or a daily banking transaction. As a result, mobile transaction figures are exploding.

We are constantly expanding the functionality of our mobile banking application, from the opportunity to the online opening of a bank account to the integration of insurance products directly available in the app. In addition, due to years of stubborn software development, we launched Kate 2022, the AI-based digital financial assistant. I could elaborate on how difficult it was teaching her Hungarian, one of the most challenging languages on the Earth. It would be entertaining, but this is not the notion. The main topic is that we are working on a lifestyle application far beyond simply banking.

“Customer behaviour has rapidly changed in the last couple of years, which has had a significant impact on financial services as well.”

We compete for our customers' timespan by understanding their aims, personal goals, and needs, even predicting their future intentions and dreams. Mobile banking has become a platform of communication between the Group and their customers. A digital advertising pillar and a 'general store' providing far more than financial services only. The 'sexier' the application is, the newer customers we will attract. Hence, we are transforming the services provided by adding brand-new elements. Sometimes we develop it ourselves and other times we are better off acquiring it from a start-up.

CFOs cannot measure the benefits of this transformation directly on P&L schemes. However, we can evaluate all the benefits of digitalisation projects upon previously established KPIs targeting the increase of users, transactions, and effectiveness of end-to-end solutions.

All this transformation on the customers' side offers tremendous opportunities for the whole organisation, from lead generation to product development and marketing, employee involvement, backend operations and finally to the HQ's updated and accurate information system.

It is no exaggeration to state that digital transformation impacts the entire organisation, like the disruption and recompilation of supply chains in manufacturing. Therefore, no doubt that CFOs should spend as much focus on it as on macroeconomic indicators' impact on misalignment budgeting and forecasting— they have limited control over it anyway.