Digital transformation has hit the financial services industry. All firms, from large national banks to small regional credit unions, are beginning to disrupt the status quo within their own organizations. We see it in Goldman Sachs’ wildly successful consumer banking division, Marcus. We see it in PSECU’s innovative application of digital communication capabilities across the lifecycle. The question isn’t will you transform, it’s when and how? The time is now, but it’s not that simple. Many banks are riddled with legacy technology, processes and mindsets. But most recognize the urgency to compete, stay relevant and give their customers what they want, and quite frankly, expect.
All too often, we see organizations attempt to rapidly evolve by slapping a digital front end on a very messy back end. The pressure to deliver a digital solution is ever increasing, as customers are becoming more and more demanding. Unfortunately, digital transformation doesn’t happen overnight (beware of any vendor who tells you otherwise). Banks should be careful to not offer more to their customers than what they can actually deliver. Here are some best practices to begin responsibly transforming.
- Decide on your direction. Some organizations are creating entirely new digital spin-offs, like Marcus from Goldman Sachs. It operates as an independent bank for the most part, and it’s identity is solely digital. Other institutions are attempting to digitize their existing infrastructure and products. Spin-off or wholesale transformation? There isn’t a right answer for every organization, but deciding on a clear direction before making investments is critical.
- Start small. Transformation can be a misleading term. It suggests big, strategic projects run by cross-functional teams wielding with massive budgets. These are usually the traits of failed digital transformation initiatives. Successful, sustainable transformation requires small, but impactful changes within your organization. Be intentional and realistic in these decisions. Start by using digital capabilities in very specific and defined areas of your bank to improve the overall interactions you have with your customers. Use digital capabilities to fill in the gaps throughout your organization and expand from there.
- Don’t overpromise. When marketing to your customers, help them understand that you use digital to help accommodate and improve the customer experience. Don’t pledge to deliver a fully digital experience (unless completely sure you’ll be able to). It may make a great advertisement or annual report for your shareholders but setting expectations too high leads to disappointed customers and higher attrition rates.
- Keep the customer in mind. Digital banking capabilities are powerful tools for improving your customers’ experiences and delivering new value to them. However, it is important to keep in mind that digital technologies are simply a means to an end (better serving customers) not the end in and of itself. It’s easy to get so locked into the ‘fintech arms race’ that you lose sight of the objectives justifying those investments. If you find yourself unable to quickly articulate the customer use case for a new technology or justifying a technology investment by citing a Gartner Magic Quadrant, take a step back and refocus on your customers.
Bank executives are under pressure from customers, shareholders, industry analysts, and competitors to digitize their businesses. While enthusiasm is important, it is even more important to do digital transformation well. Streamlining the customer onboarding process is great, but it will be much harder for you to deliver a great customer experience if you don’t ensure the rest of your processes and infrastructure are ready for it.