If you’re feeling that your bank or credit union is falling behind in digital, you may take comfort that you’re not the only one who’s worried. Only 10% of financial institutions consider themselves as innovation or digital transformation leaders, according to data from the Digital Banking Report. That comfort is deceptive, however.
The frenetic race toward digitalization in banking is in full swing and financial institutions that have been sitting on the couch are now falling behind. Others who have been engaged in the process for years were able to push the pace not only during the initial Covid period, but afterward as well.
Citizens Bank, with $185 billion in assets, had established itself as a leader in digital transformation. But even so, the large institution found it had to dramatically expedite the process. Citizens was about one year into its three-year digital roadmap when the pandemic hit, but demands of that situation exposed operational flaws, convincing the bank to rethink its timeframe.
“The pandemic forced us to look at the customer journey and remove friction points,” explains Michael Ruttledge, CIO and Head of Technology Services. “We found that too many of our processes were still manual or dependent on paper.”
The transition was also crucial to facilitate Citizens’ growth from a regional to national presence through a series of acquisitions in 2021. Ruttledge discussed the tech challenge in a podcast interview with Jim Marous, Co-Publisher of The Financial Brand and CEO of The Digital Banking Report, that also included Mohit Joshi, President of Infosys.
The two executives laid out five considerations to accelerate the kind of digital transformation that Citizens has been undergoing on an enhanced schedule.
1. Build Internal Trust in Technology
Joshi predicts that financial services technology budgets will increase 6% to 9% in the year ahead, the highest percentage increase in about 15 years. So your digital transformation efforts may not have a money problem, but they likely have a trust problem. The solution is to focus on building confidence in IT’s ability to deliver on its promises.
“Banks need to stop looking at their technology as a bunch of piecemeal components to update individually.”
— Mohit Joshi, Infosys
As he sought to break old IT development paradigms, Ruttledge worked hard to gain executive support. “Get early wins to gain business leaders’ confidence and trust,” he advises, adding that it also helps if you’re lucky enough to have executives who have been through large-scale digital transformations before.
IT also needs to create an overall digital transformation vision. “Banks need to stop looking at their technology as a bunch of piecemeal components to update individually,” says Joshi. “Instead, look at the overall platform and how all those pieces come together in a comprehensive plan. That plan then needs buy-in from the entire C-suite.”
2. Hire (and Develop) Talent
What good are emerging technologies if no one in the organization knows what to do with them? Citizens approached their talent shortage in several ways. They hired new talent with experience in agile environments, mobile solutions and DevSecOps. (The term refers to development, security and operations, “an approach to culture, automation, and platform design that integrates security as a shared responsibility throughout the entire IT lifecycle,” per Red Hat.)
The bank also developed existing talent. Some employees hadn’t written computer code in years as their job responsibilities morphed into project management and other oversight functions, according to Ruttledge.
Whatever it Takes:
In a kind of ‘back-to-the-future’ move, Citizens is retraining IT employees in coding, but for new technologies like AI and crypto.
Citizens created an Engineering Academy and hosted ten-day boot camps and badging and certification programs in emerging technologies such as cryptocurrencies, AI and machine learning, and the cloud. About 200 of Citizen’s 800 technology employees have completed some or all of the academy’s offerings.
“Employees love learning and enjoy these classes,” says Ruttledge. “Upgrading their skills also makes them more confident about retaining their jobs.”
3. Partnering-Up Accelerates Change
To accelerate digital transformation and spur innovation, Citizens has partnered with numerous fintech providers for solutions including a mobile front-end, aggregated credit bureau data, and artificial intelligence for marketing. “We’ve had to think about things differently and are leveraging the talents of our vendors,” says Ruttledge.
You can’t keep throwing money at new capabilities and not reduce costs in other areas.
Modernizing legacy systems that are multiple decades old while adding new digital capabilities and accelerating speed-to-market is a daunting task — and an expensive one at that. Cost reduction is a crucial part of the equation.
“Removing costs takes careful planning and a longer-term roadmap,” says Ruttledge. That task also involved partnering. Citizens’ has relied on Infosys to help it decommission out-of-date/unnecessary systems and improve efficiencies.
A side benefit to working with a global vendor is that Infosys shares with U.S. customers what works in other parts of the world. For example, Ruttledge appreciates Infosys’ introduction to China’s Ping An Insurance Group, a technology-powered retail financial services company. “We’ve studied their digital customer acquisition strategy. It’s unbelievable how successful they are. We can then implement what we learned into our own digital transformation efforts,” says Ruttledge.
4. Use Data as a Foundation
Data analytics and digital transformation are inseparable. “The only way for you to really know and service your customers and create frictionless customer experiences is by leveraging internal and external data,” says Ruttledge. “Data can get you to the Holy Grail of a 360 degree customer view.”
“The only way to create frictionless customer experiences is by leveraging internal and external data.”
— Michael Ruttledge, Citizens Bank
That holistic view is especially critical for banks like Citizens with multiple products across business units such as auto lending, checking and savings accounts, mortgages, and wealth management.
Citizens often turns to external providers to gather data. For example, no one enjoys digging up a W-9 needed for a mortgage application and then sending it to their bank. It’s much less friction for the customer if the bank pulls that data from a third-party automatically.
Citizens also uses data coupled with machine learning in decision science, for example, identifying the right customers for the right offer at the right time or stopping fraud before it happens.
5. Mobile, Mobile and More Mobile
“Mobile has become the default method of customer interactions,” says Joshi. “With 5G and edge computing, the future of customer experience will be mobile-first.” Ruttledge agrees that the biggest opportunity for financial institutions is in delivering everything customers need on a mobile device.
In a mobile-first environment, argues Joshi, the integrated app ecosystem becomes critical, and banks will need to embrace open banking to embed apps such as WeChat, Facebook Messenger and WhatsApp in their mobile offerings.
The end goal, notes Jim Marous, should be customer engagement on mobile. “Banks need to build an ecosystem that makes customers want to come to their platform,” he states.
Ruttledge believes that when it comes to digital transformation, Citizens Bank is now in a good place. “Citizens has great relationships with its customers and is expanding nationally. We’re looking at building our brand even further with new customers and in new geographies. We’ll continue to have brick and mortar branches, but we are turbocharging digital.”