7 Ways to Navigate Digital Disruption in Banking

It is important that banks and credit unions recognize the major digital trends that are impacting the financial services industry. Once these trends are understood, actions must be taken to prepare for the future of digital banking.

According to a Forrester report entitled, ‘Trends 2014: North American Digital Banking,’ five major forces are impacting North American digital banking this year:

  1. A heavy regulatory burden
  2. Changes in technology
  3. Rising consumer expectations
  4. New competition
  5. Greater need for leadership and results

Despite already having significant challenges in front of them, Forrester recommends that bank and credit union executives prioritize which initiatives are most urgent and take action to navigate the digital disruption … innovating across channels. By doing so, financial leaders will be in a better position to acquire new customers, engage existing customers, and prepare for the future.

The 5 Digital Forces

To navigate the digital disruption in banking, financial channel professionals and marketers will need to understand the underlying trends that are impacting the industry. According to Forrester, there are five primary digital forces.

1. The Regulators – Uncertainty Remains

The full impact of Dodd-Frank Act and Durbin Amendment are yet unknown. As a result, digital channel professionals are under pressure to replace thinning revenue streams and time devoted to compliance.

2. Changing Technology – Computers, Smartphones, Tablets, Phablets, Glasses – Oh My!

Forrester predicts that by 2017, 72 percent of U.S. adults will use online banking, and 43 percent will use mobile banking. To maximize investment, a responsive website must be built. And, it’s not just about the website anymore, smartphone, tablet and assorted wearable apps need to specialized apps. Forrester recommends assigning one team, or a small number of closely aligned teams, to address changing technology.

3. Great Expectations – How To Keep “Cool” In A SnapChat World

Customers’ expectation of a digital experience is being set by Uber, SnapChat and other popular apps. These expectations are affecting how your customers and prospects perceive your organization’s mobile experiences. In the Forrester report, Google data found that 40 percent of Americans will move on if a bank’s website is not mobile-optimized. Like other analysts, Forrester reported that the quality of the digital experience is a key customer retention factor.

4. Competition From New Players – Innovate To Stay Ahead Of Silicon Valley

The competition is tougher than ever for traditional financial institutions. From alterative financial services providers, to technology vendors like Apple, Google, and Facebook, many new players are offering banking and payment services. Forrester advises banks to INNOVATE and offer game changing technology to retain existing customers and gain a competitive advantage in attracting new ones.

5. Digital Responsibility – A Strategic Initiative For Leadership

In digital banking, additional funding = more responsibility. Digital teams have the attention of the C suite and the funding is flowing toward digital initiatives. Forrester reports that already in 2014, American financial providers have increased spending on mobile by more than 10 percent from last year. All the attention and money is a double edged sword. Teams must be diligent in their prioritization and have a process to defend decisions and tradeoffs.

7 Actions – A Digital Banking ‘To Do’ List

Once the major digital trends impacting the financial services industry are understood, it is time to take action on those trends. While some institutions can make headway on all of the initiatives mentioned, others may need to prioritize their actions based on resource commitments.

1. Extend Successful Product With Innovation

Forrester advises banks and credit unions to use an approach they call “innovating the adjacent possible.” This means mapping out natural extensions of existing products/services instead of inventing based off of completely new ideas. To do this, digital teams need to engage employees, partners and customers in ideation and to pilot new innovations. They need to open innovation labs and run hackathons to keep new ideas flowing into their business.

2. Monetize Digital

Institutions need to find new revenue sources, and digital opens up interesting possibilities. This can be popping upsell/cross offers within your mobile app. It can also mean potentially charging a convenience fee for mobile remote deposit capture, paper statements and other services. Digital teams should experiment with fee opportunities to see what their specific market will bear and how fees will affect overall customer satisfaction.

3. Help Customers With Money Management

Another insightful recommendation is the importance of integrating money management tools into digital experience. By helping customers better manage their money, they’ll be much more likely to stay loyal to your organization. Start small with a simple personalized dashboard and plan for more advanced features like spending analysis and calculators. Below is a very clever idea from Zions Bank, “What It Would Take to Become a Millionaire Calculator.”

zions_save_a_million_calculator

4. Digitize The Sales Experience

Even if the bulk of customers still apply offline, the digital experience and the information on your public website plays a major role in a consumer’s decision to apply for an account. Forrester advices digital teams to deepen their understanding of the banking product purchase journey so that they can offer tools to give shoppers guided product recommendations.

5. Be Everywhere 24/7

We’ve all heard the cross-channel, and now omnichannel rhetoric, and realize it is the channel nirvana. Forrester understands how difficult it is too … so they recommend a pragmatic approach—identifying the critical cross-channel pairs by activity and pilot efforts to address them as seamlessly as possible. One example they share is an online mortgage calculator linked to an in-branch appointment setter to meet with a mortgage advisor.

6. Let Data Drive Decisions

The long-term goal is to have data for making and defending all decisions. This year, Forrester recommends digital teams map out their approach to gathering and using data. They need to define the basics: who’s in charge of reporting, who outside the digital team can help gather data, who in the organization has expertise to help them ask the right questions. Lastly, they should look at how their internal data compares with market and third party data.

7. Mobilize Employees

To date the bulk of digital efforts have been focused on retail customers. Forrester points out that many banks have increased budgets for employee-facing digital initiatives. One way they are investing is by giving branch employees tablets. Forrester also recommends piloting digital offerings by offering them to employees first. This helps makes customer-facing team members better advocates for the bank’s online, mobile, and tablet features.

Next Steps

It’s a very exciting time to be a digital channel professional in financial services and this Forrester report is an excellent resource. Our firm and our clients find it extremely valuable to utilize these types of analyst reports and other market data when considering go-to-market strategies. It’s a good reminder to take a look around and get a third-party reality check when considering a new product or consumer solution. Take advantage of all your resources and leverage any analyst data you have to create (or validate) strategies and tactics to attain the goals for your digital channels.

amy_reichertAnn Reichert is the director of marketing for Mitek, the leading innovator of mobile imaging for financial transactions. She has more than 20 years experience helping technology brands build awareness and adoption of their solutions through integrated marketing.

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