What Does Digital Transformation in Banking Really Mean?
Digital transformation has been a buzz word for some time, with banks of all sizes scrambling to adopt it across the board. But, if you’re moving towards digital transformation, what does it actually mean? Digital transformation in banking largely entails the shift to offering online and digital services, as well as the massive number of backend changes required to support this transformation.
Many banks make mistakes by taking on a series of separate digital initiatives, which struggle to succeed because they don’t have the support or coordination to compete with digital-native solutions. Instead, digital transformation in banks must entail a top-down approach, integrating digital systems, customer experience platforms, apps, and infrastructure in the form of AI, big data, and blockchain technologies.
While digital transformation in banking can and does mean many things, the following tenets will get you on the right track to strategizing your own bank’s digital transformation journey.
Create a Digital Customer Journey
All banks have a website, most have some form of a digital app, and likely online services and features to go with it. These digital features encompass most of what people think of as “digital services” but don’t encompass digitization in any way. However, they do allow you to take a major step towards digital transformation, which is digitizing the customer journey. How? And what does it entail?
Traditional customer journey or sales pipeline often starts with marketing building leads, transferring those leads over to sales, and then transferring those sales over to customer service. An individual must go through several departments before they ever receive a product or service, resulting in a disjointed and disconnected or often impersonal result.
Creating a digital customer journey means taking steps to integrate everything into a single online platform so that the customer is handled through the same tooling, sometimes by the same people, and with the same information throughout the process. Here, practices like changing how teams are organized, integrating technical people into sales teams, and possibly merging marketing and retail into the same team can help a great deal.
The most important aspect of digitizing the customer journey is that the customers are moved seamlessly from marketing to sales as part of an online application for financing through in-app billing, all the way to customer support, directly in the app. Achieving this means mapping the customer journey and building tools and applications around it, with a focus on specific critical points. For example, a digitized customer journey allows a customer to click on an ad, sign up for an account online, receive tutorials and on-boarding information through their app, receive automated loan decisions, and pay bills or send funds online.
Most banks have too many customer journeys to map all of them, but focusing on key consumers and mapping points like initial prospecting, sales, onboarding, transactions, and management will cover most of your base needs.
This sort of digitization in banking means understanding customer wants and needs and investing in those wants and needs. However, it will save you money in the long-term as it improves customer satisfaction, frees up staff for value-added activities such as relationship building, and eventually saves time by automating processes.
Digitalization and Big Data in Banking
Modern banks have more data than ever before. The more digital services you offer, the more data you automatically collect. This data allows you to take huge steps in terms of updating and managing your operational model, your customer service, and even your business strategy. Data allows you to understand customers in new ways, using that information to identify opportunities, optimize products and services, and automate solutions.
Data mining and big data in banking play into every part of the organization, but sales and marketing are among the most obvious. Here, big data allows you to use customer information to create targeted marketing campaigns. This same data usage works with reducing churn by creating offers and solutions to prevent customers from leaving. Analytics can predict when customers want or need loans when loans default when customers are preparing to leave, or even when a cross or up-sell will likely be useful. This data, in turn, allows banks to offer highly personalized offers and solutions, either through a representative or as an automated offer or solution inside an app or online portal.
Automating and using digitally-driven solutions like chatbots and AI are also part of digitization. J.P. Morgan Chase takes this to an extreme level, integrating COIN to handle and process loan agreements. The same AI integrates into customer service, offering assistance, account creation, and much more. Here, solutions like self-service, chatbots, and 24/7 service offer business advantages while improving customer experience.
A Focus on Change
While there are many aspects of digital transformation in financial services, one of the most important is readiness and ability to adapt to change. Banks are often held back by security, legislation, and strict frameworks intended to protect customer data and privacy. At the same time, new digital-native banking solutions and money apps are outpacing traditional banking in terms of growth and customer acquisition. Adapting policies to meet changing consumer demand, to quickly adapt to new technologies, and to respond as the market changes is essential to digital transformation.
This can mean that true digital transformation requires changing the organization from the inside out, focusing not on outward services like online portals and chatbots, but rather on how the organization reacts to change. You will need both to become and maintain a truly digital organization.
Digital transformation is easier said than done, as many of today’s banks are failing at their own digital transformation goals. With reasons ranging from a lack of consistency or support across new digital applications to lack of internal agility, banks can make this shift and continue their digital transformation by changing approach, replacing legacy frameworks, and working to develop a digital culture internally before developing single-use digital features. Once the digital culture is achieved, digital platforms and services can offer a great deal of value to consumers, especially when supported by automation, AI, and big data.