Disruption is now a daily fact of life for financial institutions. From the ever-growing array of new competitors including fintechs, challenger banks and tech companies to the effects of the COVID-19 pandemic, banks and credit unions are experiencing immense pressure to keep up in a digital-first world.
These developments have triggered a fundamental shift in consumer experiences, expectations and behaviors. With branch closures, social distancing and financial uncertainty, digital banking has become a critical touchpoint for more consumers and businesses than ever before.
At the beginning of the pandemic, NCR had more than a 260% increase in digital banking traffic over prior peak activity.
This accelerated demand for digital and self-service interactions is only expected to continue. And it’s challenging banks and credit unions to transform the way they do business — to innovate faster, differentiate their offerings and offer a greater breadth of digital products and services. It’s also intensifying the need for personalized experiences, advice and guidance.
While digital transformation has been an area of focus in most industries for years now, the pandemic has accelerated those efforts. According to a study by Fortune and Deloitte, 77% of CEOs indicated the COVID-19 pandemic has significantly accelerated their digital transformation plans.
For financial institutions, the pandemic’s impacts have also fast-tracked the need for a digital-first approach to banking — one that puts the customer at the center of the experience.
What Hinders Financial Institutions From Making This Shift
Over the past two decades, financial institutions have primarily focused their efforts on providing low-friction transactional experiences. They’ve historically operated in silos, often resulting in fractured experiences and back-office complexities. This operating model has created innovation challenges and has made it difficult to deploy new banking technologies and experiences across channels without introducing friction. It has required cobbling together disparate systems and applications to bring new products and services to market — often adding expense and further complicating the experience, leading to massive inefficiencies.
These silos not only create disjointed experiences, but they also make it challenging to efficiently service and sell to customers given the lack of centralized data and intelligent workflows. And they’ve made it increasingly difficult for financial institutions to have full visibility into their customers’ financial lives — hindering the ability to provide the truly tailored experiences and integrated service consumers require.
As the recent global health crisis, evolving technologies, new market entrants and new business models continue to shape consumer expectations, banks and credit unions can no longer wait to shift their mindset. They must work to reduce friction, drive change and create new efficiencies within their organizations.
How do banks and credit unions begin to break free and forge the path to digital-first banking?
1. Embrace a Culture Shift
Change begins with culture. Culture can either empower or hinder an organization’s success. It’s the very backbone of an organization and determines whether there’s a solid foundation for growth and innovation.
For many financial institutions, embracing a culture shift is vital. This culture shift must encourage innovation — and it needs to come from the top down to be successful. It requires organizations to reevaluate their digital strategies, including their overall approach to channels and how they operate and serve their customers through self-service channels, in person and behind the scenes.
Alignment needs to occur across the enterprise to begin to break down silos and implement change. This means taking a holistic view of the entire ecosystem and working together across business lines and departments. It involves cross-collaboration to ultimately eliminate friction in the customer journey and provide new ways to interact with customers in a convenient and straightforward manner.
In this digital-first world, those that do not embrace an innovative, digital-first culture may experience damaging consequences. Thinking of innovation as a mindset to foster change, and adopting a culture that encourages innovation, will position banks and credit unions to keep pace with consumer demands.
2. Invest in Modern Technology
Forgoing antiquated, rigid silos in favor of more modern technology and architecture will position financial institutions for long-term success. They will be able to break free from the legacy infrastructures that have hindered their ability to keep pace with the evolving landscape. Technology that offers rich data and analytics, APIs, developer tools and the ability to integrate third-party products can give them the flexibility, agility and scalability to respond to market changes more rapidly.
Financial institutions that prioritize the critical convergence of physical and digital interactions will equip their businesses to reap immediate benefits. Taking an integrated approach to digital self-service, branch and ATM/ITM technology will enable them to provide engaging, connected interactions and build brand loyalty.
They should also maintain a sharp focus on making their branches more efficient and profitable while continuing to enhance the user experience across channels. As ATMs remain a critical touchpoint, more institutions will consider transferring the burden of machine maintenance and updates to a trusted partner. The ATM as a Service model can simplify this self-service channel — offering a digital-first user experience while reducing the total cost of ownership. With this model, financial institutions that do not have the expertise, budget, time or resources can stay current through patches and updates for their ATM applications.
3. Implement Change Across the Organization
Investing in modern technology with flexible, open architecture introduces infinite possibilities. And it opens the door to becoming more agile, improving business processes and significantly reducing integration and operating costs.
But with technology, there is always a process for governing its use. And when there’s a technology change, there’s most certainly a change to processes and people. Therefore, the use of any new technology requires evaluating the impact on processes and resources to improve business performance.
Introducing a fully digital account opening solution, for example, will impact workflows and processes across the entire organization. Bringing new products and services to market more rapidly may also require new skill sets to maximize growth and innovation opportunities. Hiring in-house developers, software engineers, data analysts or product managers, for example, can help speed the delivery and support of new products and services. Having these skill sets readily available can dramatically increase efficiencies and propel financial institutions ahead of competitors that don’t.
These trying times have pushed banks and credit unions to refocus their efforts. But they have also granted financial institutions the opportunity to take a more thoughtful approach to banking for the long term. By embracing a culture that encourages innovation, they will be able to make the shift to a digital-first mindset. And by investing in modern, flexible technology, they will establish a foundation to broker change and compete in the face of disruption.