Conferring often with digital banking teams in the U.S. and Europe gives me an inside look at the troubles that these teams face. The issue most discussed — and a great pain for many — is the lengthy time-to-market of their digital offerings.
Digital financial services is today one of the most competitive environments. Within three months of understanding a customer need or pain point, challenger banks strive to address it with a new feature or a redesigned journey. Traditional institutions on the other hand can take one to two years to hit the market.
This extended delivery time often means that the offering is no longer innovative and that competitors may have already catered to the customer need that the feature was designed to meet. Continuous delays will result in customers easily jumping to other banks or other financial institutions.
This struggle to reduce go-to-market time affects many digital banking teams, regardless of the size of their institution. In working with them, I have come to understand the three most prominent factors that delay delivery:
- Trying to reinvent the wheel every time
- Dealing with regulations
- Lack of actionable data
Each of these challenges can be overcome, once they’re better understood.
1. Stop Reinventing the Wheel
New product development in other industries works differently from banking. When a new innovative product is introduced competitors try to learn from it, adopt it into their strategy and quickly release an improved version. Digital product development in banking, however, seems less reactive to innovation happening in the marketplace.
Part of the Problem:
Often the need to innovate isn’t seen until consumers, struggling with a financial institution’s products, become aware of better offerings from competitors and begin to switch to them.
Even when a digital banking team does become aware of a better digital offering provided by another institution and decides to integrate it into their system, most times they approach new feature development imitatively rather than creatively. Instead of trying to understand how it is structured and how it benefits customers, they spend time trying to figure out how to recreate from scratch a feature that has already been created by others. This not the rare occurrence, in fact it is common practice among financial institutions worldwide.
Essentially banks focus on reinventing the same wheel as everyone else, when there’s already a roadmap they can use. By the time signs of customer dissatisfaction are clearly visible, if the first decision is to examine how to replicate a competitor’s digital offering, the game is lost.
In reality precious time is wasted on copying what others are already offering. In other words innovation is set aside to simply roll out a product with a blown-up time-to-market, which leads to little return on customer demand.
It would help to avoid this situation if banks and credit unions could more quickly see developments in customers’ experience needs, and also if they became aware more quickly of what bank and nonbank competitors are doing to meet those changing needs.
2. Overcoming the Challenge of Regulations
An issue that traditional institutions can’t avoid is regulations. Highly detailed and complex rules cause critical friction and delay in digital banking product development and feature rollout. The hurdle here for most institutions is not the regulations themselves and how complicated they are to interpret and implement, but how digital banking teams react to them.
Similar to the first point, instead of thinking creatively to formulate a plan to overcome the compliance challenge by understanding how other banks and credit unions have already tackled a specific regulation, many financial institutions react in isolation. The result is spending much time trying to figure out how to be compliant only to have to go back again to restructure the product design to make it friendly to users.
Following the rules in order to be compliant is certainly the right way to go for digital banking product development. It should, however, not come at the expense of innovation.
Rather than separating the compliance stage from the customer experience stage in product development, create a process considering both simultaneously.
Focusing first on being compliant and then on how to be user-friendly drags out the development time. The final product might be completely compliant but the process is lengthy and often the end product is unfit for most users. Customer experience focus should go hand-in-hand with compliance.
Additionally, such a linear approach makes for an extremely tiring process that leaves product development teams feeling like they are stumbling blind on a dark path without a map. They are routinely stuck following a step-by-step process that leaves no room to think creatively, snuffing out any sparks of true innovation.
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3. Create Access to Actionable Information
Digital banking product development too often suffers from lack of actionable and up-to-date data that enables the speeding up of processes. This data pertains to information that can help teams prove how a new feature could be incorporated into the institution’s retail banking strategy, and/or if they have the digital structure to implement it.
Without useful and actionable data product development teams struggle to build concrete business cases, spending hours researching to no avail. Propositions of innovative new features either take too long to be formulated into a strategic design plan or are abandoned altogether. Other projects come up and take priority, so that great ideas are pushed back and innovation is stifled.
In other cases the gathered data is not conclusive enough. It is sporadic and sometimes outdated and limited to specific areas of the market. Financial institutions then lack the necessary competitive intelligence show them which competitors offer what digital banking features. Therefore they remain unable to reach parity.
Broadly three types of information are required to achieve digital banking product agility:
- Data that enhances the digital banking team’s feature pitch.
- Data that boosts the overall process.
- Data that allows institutions to differentiate in the market by discovering unmet customer needs.
As can be seen, prolonged time-to-market not only negatively impacts a financial institution’s revenue and competitive strength, but also the teams working to bring forth innovative products and services.
Listening to your team and addressing the three primary causes of innovation delay using some of the suggestions and observations above can greatly help solve the problems surrounding your digital product development.