By this point, the major migrations of consumers to digital banking channels during the ongoing Covid crisis has become a very familiar refrain. Likewise the need to counter the growing appeal of all-digital providers like Chime and Ally and strong digital players like Bank of America and Chase sits on every bank and credit union do-list.
Yet for many institutions digital transformation would not be nearly so far along were it not for the exigencies of the pandemic, and absent that emergency, they might have been lapped by smarter competitors better tuned in to consumer preferences.
So the industry’s next step, according to Deloitte Digital, a unit of Deloitte Consulting LLP, is rethinking what digital transformation really is.
Reboot Your Digital Thinking:
A report by Deloitte Digital states that two key matters must be addressed: a fresh conception of “digital transformation” and rethinking how financial institutions organize themselves to tackle true transformation.
First, the industry must stop treating digitization merely as a process for translating branch-level tasks into digital equivalents. That time is past.
“Banks’ ambitions for digital experiences have traditionally been to replicate in-person interactions, making purchasing and servicing journeys available online,” the Deloitte report states. “This ambition missed a broader opportunity to make banking more human. … Digital channels are quickly moving beyond being simply another channel to becoming the core of banking value propositions.”
Likewise, the time for thinking of migration to digital channels to save costs is over too, according to Deloitte. What people expect from financial institutions has evolved.
Second, many institutions will have to completely change the way they approach digital transformation or they will fall further behind the leaders.
This will require getting past fiefdoms and the quarter-to-quarter fixation of investors and analysts.
What People Expect and What They Want You to Add
Deloitte’s report contains multiple lists that make a good comparison tool for would-be transformers to see where they stand in the race.
First is a list of six common pain points — if your institution remains challenged by these, you are hardly off the starting blocks:
- Consumers can’t update personal information in digital channels, instead having to go to branches or calling the institution.
- Digital notifications that do the bare minimum. Today consumers expect to be given relevant information in the moment. (Amazon, for example, flags coupons or other ways to save on a transaction.)
- Lack of real-time synching across all channels, which can cause people to spend in error.
- Generic advice given when people expect tailored advice.
- Digital services that don’t match the ways Americans manage their money, which often continues to be on some kind of spreadsheet.
- Digital and manned channels that don’t connect at all, in practical terms.
The next set of checkpoints from Deloitte concerns six digital banking features that the firm considers to be table stakes. Without all of these, your institution won’t be competitive.
- Quick and seamless account opening, accomplished through touchless technology and incorporating face scanning and document recognition. (And that takes five minutes max.)
- Real-time spending notifications that consumers can fine-tune to their needs.
- Integrated personal financial management tools that give a full view of consumer finances.
- Goal-oriented “sub-pockets” that allow people to set up savings and spending however they like.
- Spending analytics that are practical and capable of being adapted to the consumer’s lifestyle.
- Access and security tools and routines that use biometrics to avoid people being locked out of their accounts.
Deloitte also lays out broad consumer needs that any digital transformation effort must serve to be on the mark:
- Teach me what to do with my money to ensure long-term success. Example: financial coach powered by artificial intelligence.
- Help me pick the correct products and services for my financial condition. Example: rewards that can be customized.
- Show me how to budget appropriately — but with the occasional “treat.” Example: scenario planning.
- Keep me up to date. Example: real-time progress reports.
- Relieve my anxiety about paying bills. Example: automated cash sweeps.
- Reward me. Example: Provide bonuses for reaching milestones.
- Make me feel safe from fraud and feel secure. Example: provide emergency savings accounts.
- Assist me to contribute to social causes I care about. Example: automated tax donation forms.
“There is no ‘one-size-fits-all’ solution to the unique needs of individuals. Winning firms create unique, tailored and distinctive segment-specific experiences.”
— Deloitte Digital report
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Nine Organizational Hurdles Successful Transformers Must Clear
Understanding all of the above doesn’t guarantee successful transformation any more than having professional blueprints will help an amateur build a McMansion. The Deloitte report sketches nine challenges that can keep an institution from managing transformation.
- Investor expectations that prevent an institution from investing for digital transformation.
- Inconsistent data practices that prevent an institution from squeezing value from internal information.
- Inability of fintechs and incumbents to make partnerships work, due to the former’s inability to scale to enterprise levels.
- Outdated or crippling regulations that restrict large-scale digital transformation initiatives.
- Resistance to rethinking an institution’s workforce.
- Lack of organizational agility and coordination to make partnerships work.
- Traditional financial institution views on risk controls that stymie innovation.
- Desire to meet short-term performance targets drags on longer-term transformation efforts.
- High regulatory burden siphons off resources needed for transformation.
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Nine Principles That Can Get Transformation Moving
The organizational attitudes and structures that Deloitte considers essential are as follows:
- Leaders share a common vision for transformation — and they will be measured on their achievement of a shared set of goals as well. Example: improve customer satisfaction measures by 30%.
- Players aren’t afraid to use external capabilities. Example: Tapping expertise or services of vendors or “as a service” providers within the industry.
- Communication and feedback help the organization avoid operational risk. Example: Keeping all employees “in the loop” as transformation progresses.
- Realistic roadmaps keep everyone’s eyes on the goal and help address internal conflict. Example: showing everyone where opportunities lie.
- Appoint or develop a “charismatic, risk-tolerant champion” to drive transformation forward. This leader may come from any function, but has to rise above his or her origins. In other words, who will be your institution’s “Steve Jobs”?
- Bring along staff so they see transformation as a positive. “Employees are empowered to own their future by building the skills and talent to support the future operating model,” the report states.
- Use small victories to build momentum and engender the belief that transformation is possible. “Nothing builds momentum like a real, successful example.”
- Execution discipline and accountability are keys to success. The implication here is that the time for “innovation theater” is over.
- The goal should be for transformation to eventually pay its own way. “Build a set of foundational capabilities to generate costs savings, and establish a self-funding model by using rapid cycles of prototyping and re-investing benefits from quick wins.”