Digital Transformation in Financial Services

What Cost Estimation Methodology to Choose?



By Soukaina Touil

SKEMA Business School

Morocco and Lille, France




In a rapidly changing digital world, the financial services industry is struggling to stay competitive through digital transformation projects. Indeed, financial institutions today are engaging in huge digital transformation projects to stay up to date and create value. However, many of them fail in their digital transformation projects, mainly due to cost overruns. This paper discusses the reasons leading to the projects’ failure through a root cause analysis, followed by a presentation of the different alternatives to the main problem, then an analysis is established of the different alternatives through the multi-decision attribute model and a non-dimensional weighting technique to narrow down the alternatives to one best solution that can be applied to our problem. Finally, a Force-Field analysis is used to determine the forces supporting and hindering the application of our solution.

Key words:      Cost estimation, Financial Services, Digital Transformation, Top-Down, Fintech, Budget Methodologies, Contract, Project, Consulting


In a world where technologies are rapidly evolving, the economic model has transformed in a very competitive way, and businesses are striving to keep up with the digital change and to create a significant competitive advantage. Indeed, “two-thirds of business leaders believe their companies will lose competitiveness if they don’t become significantly more digitized. The pace and volatility of digitization opportunities make it more difficult for IT leaders to help their companies exploit emerging digital opportunities”[3]. Taking this into account, organizations in different industries understood well that they should integrate digital technology into all areas of business, resulting in fundamental changes in how the business operates and delivers value to customers.[4]

Among all industries, the financial services industry, which can be simply defined as the services offered by financial and banking institutions, is struggling to optimize cost-effectiveness and profitability following the last decade’s downturn[5]. As such, this industry is particularly concerned with and affected by the digital transformation and process optimization through different financial technologies, or as they are commonly called, Fintech. Implementing new technologies require a huge investment from the financial institutions. In 2017, they have invested more than $13 billion on Fintech and digital transformation.[6] This number is significantly important compared to the other industries.

However, as much as the rewards can be promising and fruitful, the risk of the Digital Transformation failure is very high. Indeed, 84% of companies fail at digital transformation[7], including financial services institutions. A real example of this kind of failure is Co-op Bank, which has invested £300 million in 2007 in the modernization of its IT systems. Four years later, the whole investment went to waste and the digital transformation was deemed a failure.[8] One of the main reasons leading to this failure was “underdeveloped plans in continual flux and poor budgeting”[9].

However, if we take a closer look into the failing digital transformation projects, we can see that they have followed traditional funding and budgeting models that have closely impacted the failures.[10]

Indeed, the classical budgeting models such as the Top-Down cost estimating approach, have been proven to be inefficient in digital transformation projects. The Top-Down approach takes into consideration the different costs starting from the final deliverable, breaking it down into smaller work packages, and allocate the adequate budget for each package. It identifies tasks quickly and is efficient when there’s a clear insight into the details of a project[11]. However, in a digital transformation project, the emphasis should be put on the word “Transformation”, because it implies change. Implementing new technologies to replace the previous ones requires an agile environment and operating models[12]. The transition into that kind of models require another investment in business agility, and this is what the classical cost estimation approaches do not take into consideration, which leads to budget and schedule overrun and very often to the project failure.


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Editor’s note: Student papers are authored by graduate or undergraduate students based on coursework at accredited universities or training programs.  This paper was prepared as a deliverable for the course “International Contract Management” facilitated by Dr Paul D. Giammalvo of PT Mitratata Citragraha, Jakarta, Indonesia as an Adjunct Professor under contract to SKEMA Business School for the program Master of Science in Project and Programme Management and Business Development.  http://www.skema.edu/programmes/masters-of-science. For more information on this global program (Lille and Paris in France; Belo Horizonte in Brazil), contact Dr Paul Gardiner, Global Programme Director paul.gardiner@skema.edu.

How to cite this paper: Touil, S. (2019). Digital Transformation in Financial Services: What Cost Estimation Methodology to Choose? PM World Journal, Vol. VIII, Issue VIII, September.  Available online at https://pmworldlibrary.net/wp-content/uploads/2019/09/pmwj85-Sep2019-Touil-digital-transformation-in-financial-services.pdf



About the Author

Soukaina TOUIL

Lille, France




Soukaina Touil is an ambitious problem solver, freshly graduating from SKEMA Business School of Lille. Today she holds a master’s degree in Program and Project Management & Business Development, and also a master’s in Corporate Finance from IAE of Lyon. Born in Casablanca, Morocco, she moved to France to study for her master’s degree in Lille. Certified in PRINCE2 and AgilePM methodologies and preparing for the CAPM methodology Certification, she has acquired significant professional experience through her internship in Casablanca as a Junior Analyst in the Financial Services within a consultancy firm, then as a Junior Financial Market Analyst through her internship in Capital Markets within a Bank of Investment in Casablanca.  She has also worked for a French consulting firm specialized in Capital Markets as a Junior Business Developer helping them establish a market study and opening their new branch in Casablanca. Passionate about Finance and Project Management, she is today ready to face new challenges on the European market.

Soukaina lives in Lille, France and can be contacted at touil.soukaina@gmail.com


[3] CEB, The new IT Operating Model for Digital, 2017, Retrieved from https://www.infoq.com/articles/Digital-Transformation-Guide-1

[4] The Enterprises Project, What is digital transformation? Retrieved from https://enterprisersproject.com/what-is-digital-transformation

[5] Oracle Financial Services, A Strategic Approach To Cost Efficiency in Banking Industry, September 2017. Retrieved from http://www.oracle.com/us/industries/financial-services/strategic-approach-efficiency-wp-3886143.pdf

[6] Deloitte Center For Financial Services, Fintech by the numbers, 2017. Retrieved from https://www2.deloitte.com/content/dam/Deloitte/us/Documents/financial-services/us-dcfs-fintech-by-the-numbers-web.pdf

[7] Bruce Rogers & Michael Gale Interview, Forbes, why 84% Of Companies Fail at Digital Transformation. January 2016. Retrieved from https://www.forbes.com/sites/brucerogers/2016/01/07/why-84-of-companies-fail-at-digital-transformation/#58bd3665397b

[8] Rolin Zumeran, A Look Back at Digital Transformation in Financial Services (and Digital Transformation in General) in 2017, January 2018. Retrieved from https://www.openlegacy.com/blog/a-look-back-at-digital-transformation-in-financial-services-and-digital-transformation-in-general-in-2017

[9] Martin Gill, Why Do Digital Business Transformations Fail? April 2015. Retrieved from https://go.forrester.com/blogs/15-04-01-why_do_digital_business_transformations_fail/  

[10] Mark Lamoureux, How Budgeting Impacts Digital Transformation, April 2018. Retrieved from https://www.veriday.com/blog/budgeting-impacts-digital-transformation/

[11] Andy Makar, Top-Down vs. Bottom-Up Project Management Strategies, August 2018. Retrieved from https://www.liquidplanner.com/blog/how-long-is-that-going-to-take-top-down-vs-bottom-up-strategies/