Digital Banking: Transformation or Trepidation?

Jul  07 
Colin Murphy  Vice President, Marketing Strategy and Consumer Engagement, Digital Channels, Fiserv 

The right strategy can open the door to new innovations, enhanced consumer experiences

The rise in online and mobile banking related to the COVID-19 crisis is accelerating the need for digital transformation in retail banking to meet shifting consumer expectations.

Financial institutions know digital transformation can usher in innovative ways to keep up with evolving technologies, new competitors and changing consumer preferences. But risk-averse cultures, large branch networks, manual processes, data-management challenges, and legacy systems and technology lead many financial institutions to experience trepidation when taking transformative action.  

Digital transformation involves changing business and organizational activities, processes, competencies and models to fully leverage the opportunities of digital technologies in a strategic and prioritized way. But only 38 percent of banks say they have the necessary digital and leadership capabilities required for digital transformation, according to a 2019 report by the Capgemini Research Institute.

Banking leaders understandably are cautious about embarking on the journey. Orchestrating a successful digital transformation is challenging, and the payback can be hard to quantify.

Business Drivers of Digital Transformation

There are strong business reasons for undertaking a digital transformation. Chief among them is meeting consumer expectations for seamless, end-to-end digital experiences. People want the same technology-driven innovations and personalized digital services from their banking solutions as they do from other technology applications.

For some financial institutions, the impetus for digital transformation is financial, such as reducing operating costs, driving savings through automation and growing revenue with new digital products and services. The benefits are real for banks and credit unions, but many are struggling to find the best path forward to transformation.

Digital transformation should embrace practical creativity by developing and integrating solutions that solve real customer problems and align with your institution's business goals.

What Is the Right Digital Transformation Path?

Banks and credit unions face plenty of barriers to digital transformation, including a lack of budget, resources or conviction to embrace change. Creating a clear digital strategy and aligning business priorities can help.

Financial institutions that fail to overcome those barriers fall short of maximizing the benefits of digital transformation, whether it's reduced costs, enhanced customer experiences, accelerated innovation or counter-digital disruption in a competitive marketplace.

With that in mind, the first step toward digital transformation is strategy alignment. It's essential for financial institution leaders to change how they think and how they approach getting work done.

Digital transformation is not a technology-driven initiative with waterfall development and delivery and defined budgets and milestones. It requires continual development and agile delivery of strategy-driven innovations based on the integration of consumer experiences, new technologies and business priorities.

Focus on Improving the Consumer Experience

For most financial institutions, a digital transformation should focus on improving the consumer experience. For example, if an institution prioritizes mortgage lending as a business growth priority, it should map the homebuyers' entire journey rather than just focusing on the online mortgage application and approval process.

Start by mapping the consumers' needs and actions. What motivates them to buy their dream home? What action do they take first? Do they download a homebuying app? What happens next?

Consumers likely need to assess their finances and may need some financial planning tools to help them set a savings goal for a down payment. Does your institution provide financial goal-setting as part of your mortgage lending platform? Does your institution offer a new-home savings plan that provides alerts? Is that digital savings product integrated with your digital mortgage platform?

Digital transformation should embrace practical creativity by developing and integrating solutions that solve real customer problems and align with your institution's business goals.

Digital transformation is an ongoing journey, not a destination.

Digital Decoupling Enables Faster Transformation

Practical creativity also means being pragmatic about what digital technologies and services your institution can effectively transform and when. That can include digital decoupling, which is often described as using new digital technologies, development methodologies and migration methods to build new systems that execute on top of legacy systems.

That enables financial institutions to be more responsive to changing requirements and shifting priorities. It also allows banks and credit unions to realize incremental benefits to justify and offset subsequent digital developments.

Decoupling digital priorities between core business services, integration layers and the digital front end can help financial institutions move faster. For example, banks and credit unions could identify digital front-end sales and marketing transformation for fast-lane releases, while grouping new product innovations or API platform enablement into slower-lane releases. By doing that, financial institutions can manage digital transformation at a supportable pace. 

A Roadmap for Digital Transformation

Digital transformation is an ongoing journey, not a destination. Here are some guiding steps to help your financial institution get started.

  • Define and Align – Begin by identifying two to four digital focus areas that align with your organization's strategic business priorities. Then work to gain executive commitment to an ambitious and clear digital transformation strategy and plan
  • Map and Adapt – Map your customer experiences with your products and services in the focus areas. Adapt your approach and processes to brainstorm the ideal user experience. Develop a proof of concept, leveraging innovative tools and solutions
  • Involve and Evolve – Organize your resources and teams and start projects that close the gaps between current and future digital experiences. Nurture an operating model and digital culture of practical creativity, agility and innovation
  • Perform and Transform – Sequence the fast-lane digital projects from the more complex initiatives. Prioritize and launch the work that has a swift payback. Track your progress, keep your leadership team updated and pivot quickly, if necessary

The need for digital transformation and its opportunities will continue to expand as the pace of change and competition accelerates. Banks and credit unions can embrace new ways of creative problem solving, agile development processes, new digital competencies and streamlined operating models to fully leverage the revenue and efficiency gains digital transformation offers.