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

Part III of our How-To series. Read Part I and Part II.

6. Get strategic with analytics

The management, utilization and monetization of data will play a key role in the digital shift. Many banks look to big data as the silver bullet in profiting from the massive amounts of information they hold on their customers. These insights help banks to provide personalized recommendations and more contextual advice. However, most banks use data operationally, not strategically. 3 areas should be addressed to reverse this:

  • Integrate different sources of data – Banks use transactional data as their main data source, which is a good starting point. However, this data fails to present the full picture of their customer's financial life. Most of us bank with several financial institutions. A 2013 Gartner study indicated that in Western countries more than 75% of people have accounts with 3 or more financial providers. Given this reality, banks should allow clients to incorporate data from multiple providers by offering account aggregation. When asked if they would like to see all of their financial accounts in one place, nearly half (46%) of all customers agreed that this was of interest. To make transactional data even more valuable it should be integrated with contextual data, which means the data available in social media and other online sources. Moreover, mobile can help banks understand how people are interacting with each other behind the transaction.
  • Improve customer service without violating privacy concerns – Does the previous point raise some red flags? It should! The question of how far banks should go in mining customer data is an extremely sensitive one. Banks must ensure that customers see the use of their data as valuable and that their privacy has not been violated. It is clear that customers believe that banks shouldn’t use their data for advertising, for example. It should be used to help customers to improve their financial behavior and well-being. This requires a careful approach in presenting data and offers to the customer.  Brazil’s Bradesco Financiamentos managed to build such a strong relationship with their customers that they themselves asked the bank to use their personal information in designing personalized offers. They even encouraged the bank to check their social media likes to provide them with the most relevant offers.

  • Invest in the capability to use the data effectively – Banks have a unique view of their customers and yet many lack the analytics capabilities to turn this into a competitive advantage. Banks need to invest in both the required technologies and people (data scientists) to make the digital transformation a reality.

7. Embrace the cultural shift

One of the most important—and perhaps most difficult—change ahead for traditional banks is a mindset change. The digital age is fundamentally impacting organizational culture as it forces banks to shift from a product-centric to client-centric point of view; from planning cycles to “test- and-learn”; and from silos to inclusiveness (A.T. Kearney Analysis & EFMA, 2014).

The bank executives surveyed by A.T. Kearney & Efma highlight 3 cultural attributes that are vital to a successful digital transformation:

  • Forward thinking – Training and communication must involve everyone in the bank, including departments not directly impacted by digital. Participants are focusing on providing clear, action-oriented content such as ready-to-launch services and new technology uses. Some banks are appointing “digital communication ambassadors” to usher in the new culture.

  • Empirical approach – Leading banks are developing the “test-and-learn” approach, with some asking employees to practice digital products at work during business hours to fully understand them and be fully aware of what is happening in digital.

  • Openness – Employees should be curious about new digital practices, new services, and technologies. For leaders, this means accepting errors from the test-and-learn process, and collecting and frequently sharing feedback among teams, clients, and partners.

    At the center of the leading digital transformations are the banks’ leaders—specifically CEOs—who must become Chief Cultural Transformation Officers. To lead the bank to this new digital-focused culture, leaders will have to initiate and lead the conversation about digital vision and increase the bank’s ambition.

Going forward

Compared to the way digital disruption has transformed other sectors—such as music, entertainment, telecommunications and retail—it is clear
that retail banks have barely scratched the surface when it comes to the necessary speed and magnitude of change.

The biggest challenge for banks will be the adoption of “customer centricity” as their main strategy to meet evolving customer needs and expectations. Banks need a new set of competences enabling them to deliver on this strategy, only a handful of which have been outlined in this How-To series.

To recap:

  • Forming strategic partnerships with a capable FinTech partners is one way to catalyze this process, enabling quick access to the latest digital banking solutions with minimal time-to-market lag.
  • It is important that banks adopt a segmented approach toward mobile to ensure a seamless experience and to increase adoption. 
  • Both transactional and contextual data need to be leveraged strategically to offer the most relevant products and services and to help customers to improve their financial well-being, while simultaneously generating new revenue streams for the bank itself.

Digital banking is not just about developing the next killer app. It’s about turning the traditional business model on its head and embracing disruption head on. Bank executives have a major role to play in this shift by fostering an organizational culture of openness and innovation and by encouraging customer-centricity across the board and beyond.

Topics: Disrupting Banking, FinTech, Digital Transformation

Author: Artak Vardanyan, Product Marketing Manager on Apr 27, 2015

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