By: Sarah Kyo
Banks and credit unions are currently undergoing a digital transformation, a type of transition to integrate the latest technology into internal operations, work culture, consumer interactions, and every other step of the process. For example, when you think of new technologies in the financial services industry, you might picture digital banking with online portals and mobile apps. The latest developments in the banking industry’s business model allow clients to conveniently make a variety of transactions, obtain personal funds, monitor bank accounts, and more. For example, Bank of America customers now complete more transactions on the bank’s mobile platform compared with its brick-and-mortar branches.
These types of advancements benefit banking clients, but they can also set up lofty expectations to consistently deliver and maintain this excellent customer experience. Thanks to major tech companies, including Amazon, Apple, and Google, a high bar has been set for providing accessible, efficient resources and tools. That’s why consumers, in general, possess such lofty standards for the quality of web pages, online services, and other digital experiences in all facets of their lives – including with their bank or credit union.
Meanwhile, newer fintech startups, such as Chime and Credit Karma, offer innovative mobile apps and alternative solutions for addressing setting up overdraft protection, monitoring a credit score, and other personal finance needs for consumers. In fact, many investors value U.S. fintech startups at potentially $120 billion, which totals 7 percent of U.S. banks’ total equity. With these additional competitors in the market, traditional financial services feel the pressure to enhance their offerings and make some changes to the way they operate and conduct business.
The Future of the Digital Transformation in Banking
A large reason for this change can be boiled down to competition, even among existing banking institutions: According to a global survey by the Deloitte Center for Financial Services, almost two-thirds of banking consumers are either completely satisfied or very satisfied with their primary bank and would recommend their current bank to their family and friends. Using the latest technology would allow organizations in the financial industry to offer the best services and features in order to keep up with their peers.
Besides making the customer-facing changes, a true digital transformation in banking would require updating infrastructure and processes behind the scenes as well. Undergoing any sort of organizational change can be tricky for all companies and institutions, including a traditional behemoth like the banking industry. To help support a smoother transition, here are four areas that your financial institution can focus on in order to improve your organization’s digital transformation.
Utilize data to make informed decisions
Data is an important component for making business-driven decisions for any organization because it neutralizes the process in order to avoid potential human flaws, enables more confident decisions, and allows for broader and quicker understanding of the logic behind any decision.
When it comes to banks and credit unions, advance data analytics provide access to the information they need to make more educated decisions for their consumers, identify potential business opportunities, save money, and overall do their jobs better. This includes predicting potential loan defaults, for example.
One common way to improve prospect and client targeting is through data mining, or the process of discovering patterns in large data sets. Usually, this is accomplished through machine learning, statistics, database systems, and other methods.
For example, Siam Commercial Bank analyzes payment networks to find potential customers who are affiliated with their current ones. Then the bank reaches out to these prospects to share the benefits of its services and platform. The bank also uses data mining to identify qualities they’re looking for in ideal customers in order to find other similar potential companies.
Establishing a more digital-driven organization
In addition to data analytics, other examples of digital transformation that banks and credit unions may experience include new forms of encryption, virtual reality, and augmented reality. The banking industry can potentially benefit from creatively utilizing technology that has been available in other industries. For example, BBVA has partnered with the Spanish National Research Council to explore the possibilities of quantum computing to assess risks and investments.
While being open to these new ways to utilize advanced technology, financial services have to take extra precautions while handling any sensitive information. For example, in one of the biggest banking hacks in history, a hacker obtained personal information from more than 100 million Capital One customers in 2019. Keeping up to date with cybersecurity measures to protect client data should be a top priority for any financial institution going forward.
If an organization wants data to be the cornerstone of its identity and company culture, then implementing core values communication can help support that change. Financial institutions need to identify this core value, articulate their expectations, and provide guidance on best practices. Part of the process may include encouraging safe, cautious behavior when handling data, along with teaching employees how to use the latest tools and follow new procedures. That way any potential learning curves can be reduced while also increasing awareness and accountability.
Update the operating model
Financial institutions need to use data to make smart business decisions while also having technological and process-related safeguards in place to handle that private information. Using the right operating model can help with organizing these intentions. An operating model is similar to a blueprint for how resources are organized and used in order to get work done. It usually consists of the structure for aligning accountabilities, the speed of making critical decisions, how the organization functions overall with its different teams, technological capabilities, and more.
Re-invention is sometimes a necessary part of evolving a financial institution’s strategy. For instance, some organizations may choose to put all their focus on commercial banking instead of targeting consumers. Meanwhile, other financial institutions may prefer to devote their energies toward servicing specific parts of the supply chain, including manufacturing or distribution. Regardless of how a bank or credit union would like to update its technology, it’s important to consider how its operating model can apply to its mission and vision.
The bank’s CIO and IT play key change management roles in implementing this strategy across the whole organization, especially when it comes to the more technical aspects. To be successful change managers, the CIO, IT, and the rest of the change management team should follow these four steps:
- Approve or deny any change requests while establishing goals and milestones during a digital transformation.
- Manage every phase and stage during the process, including trainings for new digital tools and the efficiency and effectiveness of day-to-day work for everyone involved.
- Create reports to communicate the progress and timeline of the digital transformation with senior management, while also educating your team regarding any expectations, objectives, and requirements.
- Finally, review the digital transformation after the process has been completed, and solicit feedback from your team to learn what went well and what could be improved.
Improve internal communication
While financial service customers want efficiency and convenience in their digital technology experience, it’s essential for banks and credit unions to not lose sight of the human element during this transitional period. Along with assessing the technical aspects and customer services, the banking industry needs to keep their employees informed and engaged. This includes front-line team members who interact with customers at the branches, over the phone, and online, as well as people managers.
Just like with other types of change management procedures, digital transformation in banking requires having clear communication with the rest of your team. Consider what your organization’s goals are, and then come up with a communication plan that will allow you to accomplish them. Using engaging digital content, including videos and infographics, can help you educate employees while making the content conveniently accessible online. Organize that content using communication journeys, or campaigns that can support your communication goals while ultimately driving engagement and action. Emails, posters, and other reach materials can help you reinforce messaging while directing your employees to the content.
The digital transformation in banking is full of opportunities to improve internal processes, decision-making, and the customer experience. New digital tools can help banks and credit unions gather, analyze, and protect data, as well as streamline more traditional ways of conducting business. There may be potential challenges along the way with executing initiatives and getting everyone on board. However, by having a plan in place with a communication strategy, you and your team can manage those changes in a more constructive, productive manner into the future.