Can Digital Transformation Become Too Much of a Good Thing for Banks?

It's become a cliché that COVID-19 accelerated the adoption of digitization in banking that was already underway. But as digital transformation becomes a commodity and no longer a differentiator, do financial institutions risk undermining the human touches that flagged the best and the brightest?

In Arthur C. Clarke’s Space Odyssey series, HAL 9000 is a fictional artificial intelligence character who is responsible for the Discovery One spacecraft and its crew. In the story, HAL 9000 develops self-awareness and sets in motion a series of tragic events initiated by emotional responses to threats which he perceives could be detrimental to his own well-being.

The story is a powerful allegory that exemplifies a worst-case scenario that people often consider when they think about the future of automation and especially technologies like artificial intelligence. That’s on one level. Yet we have steadily increased our reliance on devices and algorithms. Indeed, we have embraced them as a seamless part of our daily lives. And for most of us, so far, their impact is anything but ominous and at times, barely noticeable.

That being said, one of the effects caused by social distancing restrictions has been an accelerated rate of adoption of technology and automation solutions, as financial institutions and other organizations have been forced to seek out and implement new ways for engaging with their employees and customers.

Key Question:

So people have been able to retain access to essential products and services during this pandemic. But is the human experience being marginalized in the process?

Digital Transactions Work Better in One Direction than the Other

A good example of this is the sudden shift from traditional commerce to ecommerce. As people have been forced to become more comfortable with purchasing goods online, the transition has raised new and unexpected challenges.

Most ecommerce platforms — banking platforms, too — are designed for the “happy path,” the standard browse, purchase and fulfillment workflow directly responsible for generating revenue.

That’s great, but that’s only part of any process. What about all of the other outlier scenarios such as returns, refunds, discounts and promotions? Traditionally such scenarios have been handled in-person — usually at the service desk at brick and mortar stores.

“All of these ‘improvements’ have created further distance between the financial institutions and consumers.”

But in a purely virtual world, it is no longer convenient or even feasible to provide such a high-touch solution. Yet, it is still essential to offer support for these outlier scenarios or else the overall customer experience will suffer. (Some larger ecommerce vendors have tried to short-circuit the process by telling shoppers not to return goods, and waiving charges.)

Banks and credit unions have also embraced automation, in some instances to a much greater extent, to facilitate social separation. Even prior to the COVID-19 outbreak, there was already a growing trend of financial institutions closing branch locations in favor of more online services.

This makes sense from a purely economic standpoint. However, it has greatly affected the intimacy and affinity that customers have appreciated from their financial institutions in the past.

The days of a teller greeting you by your first name and being able to converse with you on a personal level are certainly numbered. Even the more complex and stressful process of meeting with a manager to apply for a mortgage or loan has been replaced with a generic online form and a stream of automated communications.

All of these “improvements” have created further distance between the financial institutions and consumers, impacting loyalty and trust and creating a much more fragmented vendor landscape.

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Life When Only the Very Worst Cases Reach Your Desk

The pandemic has also prompted organizations to automate internal business processes. Automated monitoring, reporting and sharing of information has become commonplace. Technologies such as robotic process automation (RPA) can even execute individual tasks that mimic human interaction.

However it is important to understand that automation technologies are simply following the instructions and algorithms they have been given. Further, if they encounter an unexpected scenario, they are not able to resolve it on their own.

Why This Matters:

When people rely too heavily on automation, they run the risk of becoming a victim of “cognitive complacency,” a condition which occurs when humans place too much faith in the capabilities of automated technology solutions.

In its most severe form, cognitive complacency can impact your bank or credit union by replacing domain expertise with algorithms, eroding the understanding of why processes work in a specific way. This leads to the undermining of problem-solving skills.

But the problem can grow worse.

A different, but equally challenging issue, is a scenario referred to as the “automation paradox.” This can occur when the majority of the simpler tasks that used to be performed by humans become automated, leaving employees with only the most complex cases to deal with — which can have a negative impact on job satisfaction and result in higher attrition.

For these reasons, it is important to assess the risk of automated solutions before they are deployed within your organization.

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The ‘Wow’ Factor of Some Automation May Be Long Gone

From a competitive market standpoint, it is important to understand that although automation was originally viewed as a differentiator and a strategic advantage for early adopters, it is now reaching a stage of maturity and usage where it is becoming a commodity.

And like any commoditized offering, the playing field for all competitors has been leveled, forcing them to find new ways to create brand awareness and retain customer loyalty.

Strong customer service remains one of the most powerful and valuable differentiators for any business. This makes it all the more important to prioritize personal touch as part of any automation solution.

Studies have shown that 56% of customers who stopped doing business with a company did so because experiences were not personalized. This is especially true in the current environment where switching costs are low and the availability of comparable goods or services is high.

There is every reason to believe that the adoption of automation and transformative technology will continue to accelerate in the coming years. We can only hope that once we emerge from this reactive environment caused by the pandemic, there will be a much greater emphasis placed on preserving and enhancing the human experience.

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