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The Digital Banking Transformation: A How-To Guide (Part 1/3)

The next 20 years will see the world go from 20,000 “analog” banks to no more than several dozen “digital” institutions.

                                                               -Francisco González, BBVA Chairman

These days, “digital transformation” tops the list of mission-critical issues for banks. Most have been on this journey for years now, but are only halfway there and struggling. This is unsurprising given the breakneck pace of emerging trends such as Internet of Things, mobile ubiquity and wearables, combining to create a new and unfamiliar set of customer behaviors and expectations. 

To keep up in this ultra-dynamic market, traditional banks need to adapt or reinvent their operational models. As Standard Chartered CEO Peter Sands put it: “Banks have invested huge sums in technology – automating processes and enabling customers to bank online – but we have not yet seen the fundamental transformation of business models that have taken place in other sectors, such as music" (a sector we already disrupted in a past life - fun fact!)

Today’s financial consumer standards are set by on-demand cloud services such as Spotify and Netflix – not by other banks. This is particularly true for younger generations, fondly (or not!) referred to as “Millennials.” As one bank executive observed at the Bank Governance and Leadership Network (BGLN) conference in New York: “Millennials don’t bank… This is not just a technology question; this is about a cultural shift.”

So how should banks meet this imperative head on? What strategies should they adopt in transforming their digital banking propositions to meet evolving customer needs and expectations? In an attempt to answer these pressing questions, we’ve put together this handy guide - split in 3 parts for easier reading.

Happy transforming!

  1. Become customer-centric (for real)

Banking in the digital age requires a drastic, profound reset of how banks react to changing customer needs and expectations – not just in words, but in deeds! Instead of working “inside out”, banks must adopt an “outside in” approach where existing business models are rethought & acted upon. The starting point should entail moving to where customer is, not trying in vain to drag them to the branch.

In their joint research, A.T. Kearney Analysis and Efma identified that bank executives define customer centricity based on 3 indicators:

  • Proximity & anticipation of customer expectations: This requires a change in mindset and practices, resulting in customers’ becoming the center of the bank. Some key practices include monitoring social networks, engaging with clients there, and using those channels to develop concept spaces—new offers and services, CEO discussions, or closer client interactions—where banks can get a more realistic sense of actual customer behavior. 


  • IT responsiveness: An enhanced customer experience will go a long way, so a bank’s technology must be leading-edge and responsive. In digital, the bank’s IT is naked in front of the customer. The ability to capture the full potential of new technologies starts with an agile IT organization and cross-functional teams that can soak up customer desires like a sponge, and craft the corresponding products & services.

  • Rethought branches: What does the physical branch of the digital future look like? In the ideal scenario, banks have flagship shops that beautifully and intelligently showcase their customer-focused retail brand and strive to offer face-to-face advisory services in a warm, welcoming way.

  1. Make flexibility part of your DNA 

The market is moving so quickly that it’s impossible to predict what will customers want in 10 years. Flexibility must therefore become a dominant gene in banks' DNA. Moreover, 10 years is a laughable timescale in this brave new world - the time-to-market of new financial products, services and upgrades should be in the range of 6 months or less (A.T. Kearney Analysis & Efma, 2014). Many leading global banks including Deutsche Bank, Bank of America, Barclays, UBS, BNP Paribas and BBVA tackle this need for speed by forming strategic partnerships with nimbler providers of white-label FinTech solutions.

Another major roadblock hindering banks from building technological flexibility is their existing legacy systems, which are often jokingly described as “spaghetti” – a mess of loosely integrated networks, many of which still require manual interventions or are older than the Internet itself. Without addressing this issue, banks don’t stand a chance in becoming as agile as they need to.

Topics: Disrupting Banking, FinTech, Digital Transformation

Author: Artak Vardanyan, Product Marketing Manager on Mar 30, 2015

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