It’s Time for Banking Providers to Stop Faking Digital

How consumers do their banking changed overnight, with an emphasis on digital transactions and engagement. Most firms responded quickly by providing functional digital alternatives. It is now time to move beyond the basics and provide consumers exceptional digital experiences.

Since the beginning of 2020, consumer behavior around digital engagement has leapt forward more than it has in the last decade. No industry has been spared, and many industries will never look the same again. Retail stores are closing, people are making entertainment choices without leaving their home and communication that used to be done by phone is now done with video enhanced platforms.

The banking industry had to serve their customers without the benefit of physical branches, using existing technologies and digital platforms to meet new expectations that shifted instantly. Some consumers were already using mobile devices to do daily transactions. Other consumers educated themselves on how to do banking remotely.

In the majority of cases, the basics of banking were met. Consumers increasingly deposited checks remotely, transferred funds between accounts, paid for goods and services without cash or plastic and, in some cases, even opened new accounts. The problem is that few of these experiences were similar to the seamless simplicity of ordering a movie on Netflix, buying necessities on Amazon, having a meeting on Zoom or listening to a podcast or music on Spotify or iTunes.

The question becomes, can banks and credit unions move beyond ‘digital basics’? The answer is yes, provided that leadership within financial institutions are willing to invest in inside-out digital transformation, rethink the innovation process, hire people who have a vision for what is possible beyond traditional financial services, and are willing to disrupt their legacy business model and culture.

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Impact of COVID-19 Only the First Step

The forced digitalization that many banks and credit unions undertook as a result of the pandemic should not make any financial institution executive sleep better at night. It is good that most consumers were able to have their basic needs met using digital options when the branches shut down … but the experiences were far from optimal.

In most cases, financial institutions were only ‘faking digital’, requiring many of the same steps that were required in the past, offering the same products that have been offered for decades and viewing the customer journey as a series of linear steps on single channels. This is not the way digital engagement from industry leaders works.

Consumers are not going to flock back to the branches. Several research studies and early experiences from organizations that have already opened branches are confirming this reality. In fact, it is very possible that we are only seeing the beginning of an accelerated transition from physical to digital channels.

The reality is that financial institutions must completely rethink what digital banking means. This includes the following:

  • Revamp back office processes for a new digital reality
  • Modernize technology to support open platform structure
  • Embrace organization-wide innovation
  • Reinvent engagement

All of the above must be done at a speed that exceeds the speed of change we have experienced since the beginning of the pandemic. In other words, while we have never seen change happen as fast as it has in the last six months, we will never see change this slowly again.

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Revamp Back Office Processes for New Digital Reality

Consumers have been exposed to a wide variety of digital alternatives that many may never have considered before COVID-19. The movement away from physical dependence was immediate and dramatic. As time went on, digital adjustments became new habits and behaviors that opened the door for completely new ways to shop, buy and engage.

As time at home continued, consumers had time to investigate the best ways to live their life … digitally. Most found that the best digital experiences were:

  • Simple (the fewer clicks the better)
  • Intuitive (the flow was seamless)
  • Personalized (understanding of needs improved over time)
  • Multichannel (engagement was channel agnostic)
  • Secure (data was protected)

What consumers also found was that their financial institution usually fell short on many of these fronts. In fact, the ability to use digital devices to perform many of the tasks they wanted often replicated what was done in the physical world. This became increasingly unacceptable to many consumers, making them ask the question, “Is there something better?”

Banks and credit unions must immediately evaluate every step required for a consumer to find a preferred solution at your institution, buy a product/service, engage with your organization (using their channel of preference) and create a personalized relationship that gets better over time. The mission must be to make buying a banking product as easy as Amazon, have an app as intuitive as Google, be as personalized as Netflix, be as channel agnostic as Spotify and be as secure as your organization has ever been in the past.

Without completely blowing up all legacy processes for a new digital reality, an organization will simply be putting digital lipstick on a legacy pig. Existing processes do not support the transformation to a digital organization.

Modernize Technology to Support an Open Platform Structure

Consumers have embraced many platform-based businesses that reduce friction, lower prices, and provide flexibility and speed-to-market. Tech giants like Amazon, Google, Apple, Uber, Netflix, and numerous others have illustrated the power of an open platform model.

Many of the new digital-only banks also use open platforms and cloud technologies to integrate with outside players. An excellent example is Marcus by Goldman Sachs that has built their open platform from the ground up and integrated services from Clarity Money, Apple Card, and most recently Amazon credit services.

Affordable digital technologies enables companies of any size to leverage data, advanced analytics, and a cloud-first approach to redesign traditional business models. The benefit of an open platform is the ability to provide a ‘pay-as-you-go’ business model that can combine existing solutions with those from outside providers (fintech, bigtech or non-financial) facilitated by application programming interfaces (APIs).

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Embrace Organization-Wide Innovation

There has never been a time when innovation across an organization is more needed. With most institutions stuck in a legacy operating mode as the world is going digital, innovation needs to be elevated within banks and credit unions to improve every step of the customer journey. Without rethinking every component of banking from a new perspective, organizations will be ‘stuck in the past’.

One way for banks and credit unions to jump start the innovation process is by forming working relationships with fintech companies, according to Cornerstone Advisors. “Banks and credit unions are acknowledging that fintechs often have better design capabilities than what exists at banks or their major industry vendors,” states Steve Williams, the firm’s president and co-founder, “They see partnering as very much a chance to ‘bolt in’ a better customer experience to their legacy back end in a time frame that can allow them to stay competitive.”

According to the Innovation in Retail Banking report, published by the Digital Banking Report and available for FREE download, while more organizations are focusing on investing in innovation, the scale of innovation is still usually incremental against current processes and products than transformational. In addition, many innovations are focused on reducing costs than on improving the customer experience.

In a marketplace being disrupted by COVID-19, it is the customer experience that needs to be improved. More importantly, if the organization’s culture remains the same, a passive innovation process will simply magnify these flaws.

True innovation has become much more about having the right leadership and culture than simply having the right technology. Part of this leadership and cultural change is having the willingness to act.

Reinvent Engagement

In a world that has been rattled by a health crisis compounded by a social crisis, the importance of trust and transparency cannot be overstated. Many consumers are very concerned about their personal financial situation and are unsure of the best way to proceed.

By providing specific insights in charts, tables and even models — both directly through email as well as through social media and an online portal —  financial institutions can help consumers and business clients make or save money while building trust through the institution’s knowledge. Once viewed as a ‘luxury’ by many financial institutions, there is increasingly a direct path from the content strategy, to the information used by the consumer or business, to the ultimate sale.

As stated in the article, ‘Why Content Marketing Is Important To Financial Institutions‘, “Content marketing for consumers may include blog posts, short-form videos, podcasts, social media communication as well as the way you communicate on your website. All of these content strategies must have the same emotional appeal and must be focused on the needs of the consumer. Done well, they combine highly targeted and contextual appeal for the consumer with data and information that is helpful.”

Beyond content marketing, having a high level of transparency is another element of engagement that will gain in importance post-COVID. This is because consumers have become wary of organizations that have hidden components that may cost them money or restrict their ability to save money.

Determine Your Starting Point … Now

While many banks and credit unions responded to the immediate jump to digital relatively quickly, the process of going beyond ‘faking digital’ has only just begun. There is a need to immediately self-evaluate where you are in the digital transformation journey and double down on becoming more simplified, intuitive , personalized, multichannel and secure.

As mentioned, the pace of change has accelerated, but it will never be this slow again. It is time to evaluate investment priorities across the organization as it relates to becoming a digital organization that resembles the best in other industries – because these are the firms you are being compared to by your customers and members.

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