As much as traditional financial institutions have been changing their methods and adapting to new developments, there’s a good deal that they still need to do, and some unmet challenges are reaching the critical point.
After speaking with dozens of industry executives at face-to-face and virtual events about digital transformation, customer experience and related matters, I’ve analyzed feedback and opinions about obstacles and challenges. Three major issues continue to stand out.
Spending on the Wrong Digital Transformation Tools
In the third quarter of 2021 ABBYY commissioned a survey, Digital Strategies in Financial Services, with Gatepoint Research. The study asked senior decision makers, including chief experience officers, vice presidents, and directors at banks and other financial services institutions about the benefits their institutions gained from spending on automation.
The results were worse than we anticipated. More than a third of the sample admitted they don’t even know if their technology investments are working — millions of dollars spent, and not a clue as to whether it was even worth it or whether they got the expected ROI.
Especially worrisome is that less than half of respondents say they use artificial intelligence, two-thirds use robotic process automation (RPA), and only 10% use process intelligence tools. I find this surprising because it’s often assumed financial institutions are in the lead of the AI technology race – especially with analysts stating it has moved from a “forefront option to a core capability.” In fact, McKinsey states that organizations implementing AI-based applications are forecast to increase cash flow 120% by 2030.
Time’s Running Out:
Financial institutions need to know exactly where to focus their digital transformation budget — more so now given that research showed 45% of institutions expect to increase budgets in 2022 and more than half will fork out between $500,000 to $5 million on digital transformation.
When you’re investing that kind of money at transforming business processes, you should know exactly how it currently works and how much better it will be afterwards.
That means strategically assessing current processes, people and workflows and seeing how they interact with each other before deciding where to invest and make changes. Only by having an unbiased analysis of your systems can you ensure it will be improved significantly, be monitored on an ongoing basis and give a true picture of its ROI.
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Ignoring the Impact of the Great Resignation
We’ve all been reading stories about the continuing trend of employees quitting their jobs in droves, but what are financial institutions doing about it?
While many work-from-home initiatives have succeeded, an ABBYY survey showed 74% of employees experienced challenges working remotely. Communication tools were cited as the top solution to make their jobs better, while 33% declared not having the right IT tools as a problem.
It’s a very competitive hiring market right now and investing in employees and providing ways to help them improve in their role is critical. The strong growth in automation in the past two years is impacting jobs, fueled by Baby Boomers choosing to retire. Financial institutions can turn to technology solutions to scale and preserve institutional knowledge for the next generation of financial services knowledge workers.
Rethinking the Human Element:
Financial institution leaders need to think about how they can upskill and repurpose staff — from level one roles, like customer service advisors, to carrying out more value-added activities within the company, like wealth advisors.
For example, they could focus on improving employee digital skills to support the need for more “citizen developers” in banking who will be responsible for helping implement automation using low-code and no-code tools.
Gartner estimated that by 2024, 75% of large enterprises will have four or more low-code development tools for IT application development and citizen development initiatives. This suggests that upskilling employees is imperative.
It is also recognized that financial services institutions need to achieve greater equality. An underlying theme at many events I’ve attended is that the industry needs more women in positions of authority, for example. The industry still has a long way to go but there is a very positive outlook for the future regarding diversity and inclusion.
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Still Falling Short on the User Experience in Onboarding
Customer onboarding is one of the most challenging aspects for banks, yet research commissioned by ABBYY shows that it is only ranked as their third most important priority.
The study showed almost half (48%) of executives say they want to accelerate onboarding and 33% want to improve it, although it ranks low on their list. This clearly shows a strong disconnect between the data and executives’ beliefs about onboarding challenges.
What’s also disturbing is that an incredible 31% of respondents admitted that it takes more than a week — sometimes, months to fully onboard customers, so it’s no surprise that only 15% are happy about this.
Meanwhile, customer expectations continue to rise, fueled by fintechs which can more easily bypass these challenges and offer more seamless digital experiences, thereby attracting new customers.
So why are banks still falling short on user experience and what is causing the problems?
When asked what aspects of customer onboarding challenge their people, processes and systems, 40% of respondents said that their biggest headaches are problems related to ID validation and verification. This is a key factor with customer onboarding that when done poorly and often leads to abandonment. Customer onboarding is a key income generator, so a high level of abandonment is a significant lost opportunity for new customer acquisition, retention rates and revenue. During a webinar Peter Wannemacher, Principal Analyst at Forrester, stated that abandonment rates for online banking applications are at an all-time high of 97.5%.
Think of the money that has walked away from your institution. Financial institutions must make smarter investment decisions in technology when it comes to addressing these challenges.
As the figure cited earlier indicates, consumers are growing less tolerant. It’s called “digital fatigue” — if you’re making customers go through three-to-four clicks to accomplish a simple task on their mobile device then you may have lost them to competitors who can do it with one click.