Digital thinking has not yet penetrated financial markets effectively. In the 2019 Retail Banking Report, Gartner revealed that 69% of U.S. retail banking brands ranked average or below in digital performance. To add insult to injury, FinTech’s and online brands outperformed traditional banks in key digital strategies. It’s likely this isn’t news to you, many CIO’s at financial institutions are currently tasked with bringing digital thinking to traditional businesses. But why is it so easy for FinTech’s to hack away at the traditional banking market?
What’s Wrong with Digital Thinking Today?
While the pandemic has rushed several digital transformation projects ahead, the truth is traditional institutions are still lagging behind younger brands. While they have an advantage in funding and reputation, traditional banks lack the simplicity younger brands enjoy. Simplicity is the essential driving ingredient to good digital thinking. Simplicity in operation, in design and in technology. To build out new digital features, traditional banks often have to add one layer onto another until they’re building multi-layered and complicated teams and technologies. Complex legacy systems can easily prevent the successful implementation of digital banking.
On top of layered technology, layered and split teams working on fragmented projects create further complication. To instil successful digital thinking, collaboration and teamwork must be placed before technologies. Empathy and user psychology are essential parts of a digital strategy. Currently, digital thinking is about layering tools and techniques on top of systems already in place, rather than taking a step back and looking at the system holistically, and how it can be digitized. One BCG report stated that banks “with stretched project timelines cited such challenges as problems attracting appropriate talent to the right locations and the operational difficulties of implementing across multiple locations. Talent deficits [were] seen as a reason for scaling challenges too—for example, in relation to customer journeys.” Digital thinking is new, so either new talent has to be found, or current team members have to be trained in digital theories and techniques to be able to make an impact. With people skilled in digital banking running low, location strategies need to be re-evaluated to ensure each financial institution is getting the best people for the continued growth of the business.
To create a simple, clear and stable environment that drives new business in this age of hands-free banking, digital thinking should be centred around 3 essential components; attract, onboard and retain. When fully integrated, built around the customer and designed from the ground up, these 3 core pillars will ensure continued customer loyalty and market domination. Let’s explore them a little further.
Attracting your user base starts by building an integrated and empathic experience. In the modern age, this starts with a mobile first approach that funnels into all channels. It’s essential to leverage your mobile app and website to encourage referrals and app downloads for reasons beyond onboarding. Getting an app on your users’ phone is half the battle, and if you can get there before they sign up, that user’s much more likely to become a client in the future.
While mobile first is essential, every user should be able to interact with your brand through their chosen channel seamlessly in the way they choose. Your videos, website and ATM should all have the same look and feel, be easy to use and be usable either self-directed or with assistance from your team. Developing strong connections between each channel provides your users with the opportunity to switch to their chosen method, helping create a stronger bond with your target audience.
Part of a digital approach is knowing how to attract your users digitally, understanding where your customers are and how to advertise to them. This includes a clear digital marketing strategy with innovative advertising and channel specific strategies, the CMO and CIO should be working closely together to build a strong attraction proposition. One British retailer is rumoured to be going under soon as a result of not catching up to their competition digitally. Their digital strategy simply didn’t include strong enough digital marketing. Attracting digitally isn’t just about providing the best digital service once someone’s signed up, it’s also about finding your customers on their own channels and marketing to them in a way that resonates. For example, leveraging gamification to encourage app downloads through Instagram adverts, or building a supportive and valuable money management blog are several ways of attracting your user base digitally.
Onboarding should be simple. There should be zero friction points, and this is only achieved by relying on the data. Guiding customers from attraction into becoming a client seamlessly without having to speak to the bank is essential. Beyond that, transparency, ease of use, improved efficiency, and becoming data driven will ensure a successful digital onboarding process.
While it’s essential to stay in line with KYC and be able to digitally confirm identity, there are several new technologies and tools to help onboard clients directly from their mobile phones without the friction of in-person services.
While streamlined infrastructure and simplicity will ensure continued customer loyalty, becoming an essential part of your user’s day to day life means providing services other banks don’t. Giving your users technologies within their app that help them manage their money more effectively and reach their own financial goals with your assistance helps retain customers for the long term. It’s not enough anymore to just be the means by which your users hold onto their money, retaining clients is now about providing services they rely on to help them reach their financial dreams.
Another key component is data and analytics, and its essential role in digital thinking. AI’s main value comes from its powers of prediction. It can be extremely profitable to apply AI’s predictive powers to attracting the right clients, for example, leveraging AI to predict when an ex-client may be interested in returning, or differentiating between the potential fiscal value of prospects and therefore approaching them with appropriate marketing. Finding the highest value client, then attracting and retaining them can be done with effective analytics and AI.
Building open, cloud-based technology helps you leverage analytics to monetize your data. It’s essential you use analytics to improve and develop your onboarding process into something that delights your users, rather than frustrates. Where are your prospects dropping off in the onboarding journey? Which channel has the highest abandonment rate? Which clients are likely to open their own business, or buy their own houses soon? Monetizing your user’s data means using analytics and AI to ensure you receive the largest share of wallet and are always serving your clients what they need at the right time.
Another key role analytics and AI play in digital thinking is assessing risk. While decision making should stay in the hands of people, AI can help you predict the likelihood of loan and lending repayment, ensuring improved risk assessments. By leveraging AI to assist with risk, you also give your AI engine the opportunity to learn and develop, consistently keeping you ahead of financial institutions who don’t leverage an AI solution until much later. AI should provide new insights, data and analytics that equip your team with the best tools possible to make impactful, valuable decisions. CPQi creates highly accurate risk management prediction models for financial institutions powered by artificial intelligence. We give banks personalized models that use industry and business specific data to support the measurement and prediction of risk. Our AI systems evaluate changing circumstances using research, data and modelling to predict future patterns and trends. These predictions are an invaluable tool in enhancing the judgement and decision making of current employees and improving the attract, onboard, retain process at your institution.
The Future of Banking is Digital
A clear value proposition must be the first step towards true digital banking. As with all projects, without a strong financial and social incentive, motivation will fizzle out and projects fall flat. Clear strategies, goals, milestones and financial targets must be set out at the beginning of the project and reassessed at each stage. It’s important stakeholders on both the business and technical sides understand the purpose of digital transformation to ensure a strong ROI. In the same BCG survey, under half of the respondents said that they have a clear understanding of the benefits of digitalization, or that they are achieving those benefits. This lack of clarity can turn into friction later when projects need the backing and occasional guidance of senior management to be successful. Not understanding the role of digitization impacts the ability of decision makers to set reasonable and achievable goals and expectations. For example, developing and implementing a new digital channels strategy across mobile should have key metrics to measure success such as; a 15% increase in mobile driven sign ups, or 20% less customer service tickets, or even a 10% rise in in-app purchases for financial products. Understanding the role of digitization and the value it can provide will ensure teams are held accountable for their projects.
Digital banking has to really be digital banking, not just legacy banking with a digital feel to it. That means legacy platforms need to be upgraded and integrated. In some cases, it can mean that the way teams are working needs to change, digital thinking needs to permeate every aspect of banking technology to be truly successful, including the way team members communicate with one another and users. If a customer’s asking an “AI customer service” platform a question, it really needs to be AI technology responding, not a set of automated responses or a group of people. If your technology is going to be on the cloud, it can’t just use cloud technology for a few key features, it really needs to be hosted on the cloud and accessible by all relevant team members, usable from anywhere in the world. Removing the layered technology systems typical of banking is difficult, but will give you a simple, clear and stable environment that drives new business in this age of hands-free banking. Clear, simplified technology platforms, integrations and processes are essential for the future of banking.
Customer centricity must be at the heart of digital thinking. Data driven customer journeys are the only way to bring new business and keep current users engaged in the digital age. While many banks may have large data analytics teams, the digital journey is still fairly new and so it can be difficult to really assess how that data should be leveraged. The UX Design Agency believe that digital thinking is a 5 stage process consisting of “Empathize, Define, Ideate, Prototype, Test” with empathize signifying research and collecting large amounts of data, and define involving “extracting and prioritizing insights”. Putting customers at the heart of your business starts with listening to them. Sometimes, something as simple as a slightly annoying jitter in an app or website can lead to a large portion of users losing brand affinity and eventually business. Finding digital focused team members who can develop and design customer centred products driven by data will help bring your business long-lasting and loyal users in the digital age.
CPQi have been powering financial institutions with new, exciting technology innovations for over a decade, and this time is no different. We’re developing an exciting solution to digital thinking that will help banks conquer the attract, onboard and retain process. By leveraging analytics and AI to find the right people to market to, and innovative techniques to get them interested, we’re helping banks head into the next stage of digital transformation. To find out more about our digital banking solutions, book a free consultation.
Written by Paul Morris, Sales Manager for North America, to speak to Paul about digital banking, email email@example.com and he’ll get back to you.