Customer Engagement and the Digital Transformation

May  30 
Marc DeCastro  Research Director, IDC Financial Insights 

How financial institutions can leverage innovation to fuel growth and efficiency

Does your financial institution do a great job using the information they have about you to improve your experience? Mine certainly doesn't.

I recently closed out a line of credit at my neighborhood bank. A week later, I walked into that same branch to make a deposit and the teller – reading from a script – asked me if I was interested in opening a line of credit. Couldn't he see that I had just closed mine? Shouldn't my bank know enough about me to make a more relevant offer?

An increasing number of financial institutions are using data, analytics and digital technology to do better. That doesn't mean knowing everything about a customer or member. But, at a minimum, financial institutions should have a 360-degree view of every customer relationship, including current and previous products and services, to make timely and relevant offers in every channel.

That's just one example of how innovation can fuel growth, efficiency and optimum consumer experience for your financial institution.

A Maturity Model for Innovation

At IDC Financial Insights, we've identified a maturity model to examine how financial institutions are leveraging innovation, particularly as it relates to omnichannel and digital transformation.

Many financial institutions believe they're further down the path of becoming an innovative organization than they really are. Twenty-four percent of U.S. banks have done little to no work in applying technology as part of the digital transformation, according to IDC Financial Insights' Industry IT and Communications Survey.

Most banks and credit unions are still in the early stages of integrating innovation into repeatable models that can be applied across business lines. Some feel adding capabilities such as Wi-Fi to the branch is a way to handle branch transformation. Others believe creating a Twitter or Facebook account checks the box for social media innovation.

While those are good first steps, they're just scratching the surface of true innovation.



The Next Wave of Innovation

Digital transformation refers to the continuous process by which financial institutions adapt to or drive disruptive changes for their customers and possibly across the industry. Organizations accomplish that by leveraging digital competencies to innovate new business models, products and services that seamlessly blend digital and physical experiences for businesses and consumers while also improving operational efficiency and performance.

The key? Innovation needs to go beyond customer-facing solutions. Most financial institutions have invested in robust mobile and online experiences, but the next wave of innovation is about mobilizing the workforce and providing enhancements to employees that equal what's offered to consumers.

Making a Connection With Today's Consumer

Consumers' engagement levels vary based on many things, including where they bank, where they are in their personal financial journeys and how they feel about protecting their privacy. From our research, we find younger generations are more open to sharing their personal information. In fact, many millennials seem resigned to the belief that nothing about their financial health is private anymore.

Our annual customer survey reveals most people feel the role of the bank is simply to handle deposits and withdrawals. Just 35 percent of U.S. consumers want a deeper relationship with their bank or credit union, and many are open to the idea of creating a blend of providers for their financial needs. But, of course, we believe consumers should be looking to their primary financial institution for more actionable advice based on their specific needs.

And that comes as the branch network continues to shrink. Our survey found teller-assisted branch visits are down 10 percent since 2016.

Those shifts create a branding issue for financial institutions, particularly if we see a wider acceptance of nonbanking branded applications or services that aggregate financial information and control the experience.

Increasing Engagement

If consumers are using different mobile applications, rarely visit a branch, screen their calls and toss their mail, how can financial institutions effectively market to them?

It goes back to effective use of the information financial institutions have about their customers and members – what they want, need and expect – and delivery of an innovative digital experience.

We have not yet lost this battle. There is still time to implement the necessary tools to increase customer engagement – and keep consumers connected to your brand.