5 components of digital transformation in banking

Mohammad Nasar
5 components of digital transformation in banking

In banking, it’s easy to confuse digital transformation with table stakes. True digital banking transformation starts on the inside with these five components.

Digital transformation is a hot issue in nearly every industry, but in banking, it’s an essential step to take your business from surviving to thriving.

It’s easy to think about digital transformation in banking as implementing a few digital services for your customers. But offering online banking, account alerts, or 24/7 account access isn’t transformation – it’s table stakes.

True digital banking transformation comes when you transform the inside of your organization by examining internal policies, procedures, and communication to change the way you do business externally.

Get the knowledge you need to develop your bank’s approach to digital channel enhancements.

1. Start at the top

Organizational alignment is critical. It is important for senior management to break down structural silos so that the organization can focus on customer growth, experience, and innovation across all lines of business. Additionally, if your bank is investing in new systems while still supporting legacy solutions, it’s spending its money (and time) twice. True investment also involves a shift in how your bank does business, and that direction needs to start at the top. Senior management should: 

  • Establish consistent, concise organizational communication that illuminates the organization’s progress and upcoming milestones and recognizes team and individual efforts
  • Set clear organizational goals that are aspirational but also realistic for your digital strategy 
  • Dedicate organizational leadership and resources to digital transformation
  • Support delivery and service in an omnichannel business model
  • Demand plans and actions to discontinue or recalibrate ineffective legacy distribution channels
  • Redeploy resources to invest in the digital channel in terms of business development, selling and onboarding, quality control, and relationship management

With senior management support, you can marshal the right resources throughout the bank to break down barriers and execute the strategy. Your bank leadership should drive development of the digital channel to be an integrated, effective, competitive, consistent, and personal customer experience.

2. See your nice-to-haves as must-haves

Bankers historically have viewed digital transformation as adding online and mobile banking features, including the ability to take new account applications online. Certainly, these are foundational requirements to digital banking, but just having technical capability is not transformation. 

Bankers have realized that just offering automated tools and conveniences does not mean that customers will adopt them or that the bank will gain a meaningful level of new customers. However, a high percentage of banks don’t have what we consider to be the table stakes of digital transformation. In many cases, what some banks view as nice-to-haves – such as real-time card-use notifications, account controls and notifications, access to all accounts, and responsive device management – actually are must-haves. 

Here are the customer self-service technology must-haves your bank should be implementing:

  • Responsive device orientation
  • Visibility into all owned accounts (loan, deposit, and other financial services)
  • Ability to turn a card on and off 
  • Account balance and activity notification controls
  • Real-time account alerts
  • Ability to add digital services in real-time (such as bill pay, e-statements, new accounts, peer-to-peer payments, and bill payment access and execution)
  • Account-to-account sweeps and transfers
  • Online application for new, noncustomer accounts

How do you get customers to interact with your bank digitally? It is not enough to just have these self-service technology features. True digital transformation is how your organization will be able to deliver, support, and manage your customers’ ongoing engagement with these self-service conveniences.

Additionally, customers should gain valuable insights from your bank so that they want to interact with your digital channels on a consistent basis. Perhaps customers could receive invitations to purchase certificates of deposit for large deposit balances or sign up for rewards programs based upon spending habits. Your bank could offer general budgeting advice, an outlook on the markets for investments, or perhaps webinars on finance topics.

3. Collaborate using data

You’ve likely heard about integrating your technology into an external omnichannel experience – but where do you start? With internal data. You should capture and integrate live data around every single step of your customer experience, from online to phone to mobile to a branch or the ATM.

Your bank can use that data to create a standard customer relationship management system and make sure your processes and technologies support real-time updating from every customer touchpoint to every member on your team. Your technologies will need to capture current activity so it’s available, indexable, and searchable (not just in scanned documents), and employees should be encouraged to share any contact data across departments. While control of data and risk management are important, you can still follow processes to correct errors, mitigate fraud, and protect privacy while enabling collaboration.

If a customer has a phone call with your bank and then makes a trip to a physical location, that branch staff should have visibility into all customer interactions and data and be able to pick up where the call left off. This isn’t just a goal – this is a customer expectation, and it’s vital to the reputation and success of your bank.

4. Empower your front-line staff

The biggest transformation your bank can make might not be with technology. Your front-line staff – whether in person, on the phone, or online – typically focus on responding to customer requests or transaction-initiated activities. But what if you empowered them to guide the customer experience?

Using data the bank should capture, your staff could make personalized recommendations to customers, such as informing mortgage clients about refinancing rates or offering budgeting recommendations to customers who might be frequently overdrawing their accounts. Another example would be to invite personal banking customers who might be operating microbusinesses to apply for a business account online.

Does this sound like old-fashioned relationship banking? It is. Digital transformation should not push your customers away but instead position your staff to be highly effective communicators and relationship managers before – and when – customers need help.

On a broader scale, you can use your data to identify and permanently solve recurring issues instead of spending resources addressing the same problems over and over and risking customer service issues. For example, your bank is not providing efficient service if your customers are unable to digitally activate overdraft protection and your staff has to manually provide overdraft rebates regularly to support customer satisfaction. Empowerment of your staff should not just be at the point-of-sale (POS) contact, but also at the point of self-service.

5. Measure for success

Understanding where, when, and how your customers interact with your bank is the best way to know your customers, evaluate your digital services, and identify where you might need to improve. More importantly, banks win because of relationships. Winning a new customer, expanding services to existing customers, and defending against the loss of your customers all can be traced to the strong relationships bankers have with their customers. How can banks establish or even have a relationship with a customer who they never see, don’t know, and never interact with?

Generally, 80% usage of any service or feature is considered successful and should be your goal. If you’re not there, think about how your internal teams can help communicate these services and features to customers. Emails, text alerts, and mailers might be standard, but a transformational system can allow staff members to see which services customers are using – or not. Make it part of your customer service process to ask your customers about underused services or features at every opportunity and then report that data to your team. Analyze how customer activity trends are affected by agile adjustments to digital self-service systems and POS customer service adjustments. Turning the data into information and communicating that information across your organization is one key to success in digital transformation.

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A true digital banking transformation requires a coordinated, collaborative effort on the inside. Wondering where to start? Our team of specialists can work with you to help put a digital banking transformation plan in place.
Mohammad Nasar
Mohammad Nasar
Principal, Financial Services Consulting