Four Salient Steps to Digital Transformation in Banking

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In a world where businesses are depending on the power of cloud to bring transformation and create successful customer stories, banking is wanting the same power too. The traditional banking providers should step up on things like digital speed and convenience. Moving toward the road of faster or digital banking should not leave care and thoughtfulness behind.

“The starting point for each financial institution will depend on its business strategy, market position and capabilities, but all must consider how they can reshape their distribution models, improve their value propositions, and develop end-to-end consumer-centric journeys to increase growth and customer satisfaction,” says Boston Consulting Group.

Experts in the fintech industry recommend banks and credit unions to focus on these methods or steps mentioned below:

1. Redesign the customer journey

When a customer joins a bank, he/she looks out for better services of fund management, ways to save money, methods to gain interest, etc. And add to it, they want it to look like Amazon’s one-click ordering—which involves see it, like it, buy it.

Therefore, banking providers need to determine what are the most critical points in a customer’s journey. Considering how the disease has locked everyone inside their homes, the ultimate goal is to digitize the consumer journey completely from beginning to end. Adapting the path of digital banking not only makes consumers happy, but it also frees up staff for more valuable tasks such as cross-selling and relationship building. Digital banking doesn’t mean no brick and mortar space; it can be used for streamlining processes.

Banks shouldn’t aim at making a big difference at the start itself. They can transform a few journeys for a fixed set of people and later emphasize on the rest.

2. Inculcate the strength of data

Data analytics enable credit unions and banks to understand consumers better, identify business opportunities, and contribute to cost reduction. The analytics also help in identifying loan defaults for financial institutions and consumers who are paying less, and then, accordingly, reprice the services and products.

Add to it, banks and credit unions can make use of data mining for client targeting and better prospecting. The analytics also help in prioritizing leads and establishing a connection between the current and potential clients. “Data mining can help banks and credit unions reinvent themselves as partners that offer highly tailored solutions to their clients, rather than suppliers trying to push products that might not match consumer needs,” says Boston Consulting Group.

The bank can also use data mining for creating profiles of their best customers and make use of reverse lookup for finding similar profiles. Through the payment networks, banks can also contact the non-customers and tell them about the low cost and banking benefits.

3. Direct organization toward digital side

In a digital driven bank or credit union, digital is treated as a priority that needs a clearly articulated strategy, funding, talent, agile ways of working, and an organizational culture that is willing to take risks. That’s not easy to accomplish but can be well worth the effort.

Banks and credit unions that digitize can achieve a 20% increase in revenues and a 30% decline in expenses.

“Infusing a digital mindset into a traditional banking culture can be challenging and the need to manage two cultures during the transition can exacerbate the situation. Success depends on engaged senior leadership that is committed to radically changing the bank,” says Boston Consulting Group.

It is also advised that the ideas for the creation of digital organizations must take lessons from fintechs, such as appointing a data analyst for collecting and interpreting data, personalizing the customer experience, implementing chatbots for better customer service, and usage of artificial intelligence (AI). People can take the learning and sharing of best practices by teaming up with fintechs, advises Boston Consulting Group. The implementation and results are slower than the expected rate. It is very difficult to scale digital initiatives across institutions. Often the right digital and analytical skills are missing. And the integration of digital applicationswith traditional infrastructure is a big pain point.

“We decided from the beginning that if we spent all our time and resources on engineering the ‘pipes under the floorboards,’ we would lose the confidence of customers, even if we met our objectives in the long term,” explains Niall Cameron, Global Head of Corporate and Institutional Digital at HSBC. We’ve found that a balanced portfolio of short-term, high-impact—predominately channel-based—projects, along with long-term restructuring, is the way to go.”

4. Improving the operating model

The consumers are willing to make the best of both worlds, which includes digital experience with the right speed and convenience as well as a human involved that provides the right advice on complex products such as investments or mortgages. The banks and credit unions comprise human interaction with digital services.

The banks or credit unions can create a new business unit and names it as ‘head of digital.’ This division can own digital projects, and use shared services from the IT, HR, and other departments. There are banks and financial consulting firms, such as McKinsey and amp; Company, that have already implemented the digital model, which entails robot greeter, service terminal, interactive digital walls, and video conferencing room. It is called a smart branch employing a range of tech solutions and full serviceability at any time. The model will have a dramatic impact on consumer experience, and there is more accountability as you can accuse the head of digital when things are not going in the right direction. It is the most appropriate for banks and credit unions as they have already progressed in the digital transformation domain.

Moreover, there is a new strategy with a focus on acquiring a technology stack and new customers. The new economies and capabilities can have a rapid impact, and there are no legacy systems to get in the way. The institutions can make use of off-the-shelf products that are being rapidly launched.

Conclusion

From the above illustration, it is clear that digital transformation should be a part of the banking industry. The new native digital banking solutions and money apps are outpacing traditional banking in terms of growth and customer acquisition. It is also seen that adapting policies to meet the changing customer demand and to adapt to new technologies quickly is an essential side of digital transformation in banking. And, once the digital culture is achieved, digital platforms and services can offer a great deal value to consumers, and even more in special cases by AI (artificial intelligence), big data, automation, and blockchain.

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