The Weekly Extract: April 27, 2020

  • Alex Jimenez
  • April 27, 2020

The Weekly Extract from Extractable is a condensed roundup of digital experience news for financial services institutions, and our take from San Francisco.

Digital Transformation: 4 Key Concepts FIs Should Focus On

Another week of hunkering down at home and working remotely has fueled continued discussions about digital transformation in financial services. Questions we hear most often are “do we need to accelerate our digital transformation?”, “can we afford to delay our digital transformation?” and the more basic, “what is digital transformation anyway?”

In an interview, WPP CEO Mark Read spoke about staying away from the word “digital” altogether, as not to raise the differentiation between analog and digital business.

We resonated with Reed’s thinking; that digital transformation is a change in strategy, structure, and operations of a company to bring innovation to customers. He adds that:

“While companies are organised vertically, consumers experience them horizontally and through digital transformation, companies are attempting to ‘realign’ their functions to deliver customer needs and services.”

At Extractable, we stress the centrality of customers needs as the driving force behind meaningful digital transformation.

For financial service leaders that continue to hedge on whether digital transformation needs to happen now or later, we couldn’t agree more with an opinion piece by Drew Sievers, CEO, Harvest Savings & Wealth Technologies, in Bank Innovation.

Sievers admits to be biased towards digital transformation, as we are. He refers to a bank that has cancelled all digital projects for this year as they begin to feel the pinch of the current recession. Sievers notes that “now is exactly the time not to be slashing your digital budgets.”

He further recommends that FIs should focus in particular on four key digital concepts:

  1. Ensure channels are up and running, and optimized to enable clear communication with customers.
  2. Give customers the digital features they need to understand their financial picture.
  3. Facilitate lending with easy, fast digital origination technologies.
  4. Provide savings and investment services that help you retain deposits.

The reality is that we have seen agile-minded, data-driven, and customer-focused banks responding better and quicker to the current crisis. Many of them aren’t where they want to be in their digital transformation, but their culture and attitude has served them well.

We are not the only ones noticing. Simon Kent from the European consultancy Kearney notes in an article in Crowdfund Insider:

“Looking ahead, those that will survive will be those that have diversified with more digital services. Customer trust is the real test – banks that actively help their customers combat the crisis will be rewarded with increased loyalty, whilst those who don’t go the extra mile will inevitably suffer the most.”

Similarly, Anirban Bose, CEO at Capgemini’s Financial Services is quoted:

“The world has changed dramatically over the last couple of months. Businesses will evolve and emerge from the COVID-19 crisis in different and profound ways. For traditional banks, this will translate into an even greater need for digital experience through further collaboration with Fintechs.” 

Meanwhile, digital transformation isn’t limited to financial services or clients. The way companies approach digital will have longterm applications for the future of work.

An article in Health Finance notes that “Health systems which invest in the digital employee experience will emerge as an employer of choice and retain staff.” A survey conducted by The Workforce Institute at Kronos with Regina Corso Consulting, notes that at “least 95% of all nurses, human resource and information technology professionals said it is important to work for an organization that thinks about the digital experience.”

The Rush to Improve Customer Onboarding

An article in Banking Exchange notes findings by Kasasa of consumer behavior over the past few weeks.  They found that “online account openings at community financial institutions had increased by 14.5% since social distancing was introduced.”

Kasasa reports:

“While digital onboarding has increasingly been a focus of most financial institution’s digital strategy, it is proving more important now than ever.”

“From selecting an account or loan, applying, getting approved, funding and receiving follow-up communications, such as a welcome package or additional product recommendations, a digital experience must be available to consumers.”

Organizations with subpar or non-existent digital onboarding are struggling, particularly when they want to participate in programs like the Payroll Protection Program (PPP).

It is the swift, like the Citizens Bank of Edmond, that can quickly stand up new processes in a matter of a week. Citizens was able to roll out a new small business portal through a partnership with MX for round two of PPP, expected to start funding this week.

FIs have resisted focusing or improving their digital onboarding because of risk concerns. The balance between providing a smooth digital experience and reducing risk has been too much for many FIs. As the need for digital experiences grows exponentially, some organizations have turned to data-driven approaches.

PYMNTS reports of Quontic Bank’s recent upgrade of their digital onboarding focusing on “identity verification and eliminating many common authentication and fraud protection friction points.”

Patrick Sells, Chief Innovation Officer at Quontic, notes:

“That [onboarding] process at most banks takes eight, nine, 10 minutes and is slow and cumbersome,” he explained. “The process we [rolled out] takes about … three minutes. It is much easier for the consumer and much safer for the bank. The key to how we have been able to shorten that experience and process is by using data [regarding] who a customer is to verify [their identities].”

Quontic is said to be using “alternative data streams such as geolocation, online shopping behavior or mobile app analytics” to identify legitimate users at the onboarding stage.

Creating More Value from Data:

We came across an excellent article in the Harvard Business Review examining use of customer data for good.

Deloitte’s John Hagel and Joe Ucuzoglu write “businesses that harness the power of data to create more and more value for their customers are the ones that will be most likely to grow trust and gain privileged access to data.”

They challenge businesses to think “How is the data about customers being used to help customers?”

Deloitte suggests three points that businesses can use to “demonstrate compelling consumer-centric value and create trusted data relationships with” customers:

  1. Use the data you already have to benefit the customer.
  2. Think about the whole customer, across the whole life cycle.
  3. Prepare to refocus your operations.

Banking in the Cloud

When digital transformation is discussed with financial service IT teams, the topic of the role of the cloud is sure to follow. PYMNTS has a report titled: Digital Banks And The Power Of The Cloud Tracker®.

The report aims to examine “how cloud-based tools are becoming part of banks’ digital transformations worldwide and how they are overcoming obstacles that can come with implementing these technologies.”

While the big driver to moving to cloud should be better processes to serve customers better, the report notes that banks can reduce costs for up to 50% by moving operations to the cloud.

In the immediate result of the current crisis, such cost reductions should be a way to justify digital transformation to those bank executives that refuse to acknowledge the strategic imperative of digital.

In Broker Newswire, Anton Zujev, Head of Business Development at Fininbox, a Banking Software as a Service (SaaS) provider, notes that “cloud-based solutions should be seen as the ‘only way forward’ due to their flexibility and convenience.”

Broker Newswire quotes a prediction by Oracle that says that “90 percent of all manual IT operations and data management tasks will be completely automated” by 2025.

Avoiding Threat Rigidity

Heidi Gardner and Randall Peterson wrote in the Harvard Business Review about the anxieties executives and boards face. They warn that they “could could fall victim to “threat rigidity” — that is, essentially freezing innovation and resorting to actions that have worked in the past rather than coming up with crucial new approaches.”

We are already seeing signs of some of these behaviors within financial services.

Gardner and Peterson provide great advice in dealing with the natural traps of narrow thinking, deferring to the leader, and conformity.

Where is Alex?

Our Chief Strategy Officer, Alex Jimenez, was interviewed recently by AI Chatbot Company Engati for their Engati Engage podcast and video series. Catch the episode as he  discusses the fintech landscape, the use of AI and Automation in #banking, and more.

This past week, he also co-hosted Breaking Banks with Brett King. Alex and Brett are joined by Lee Wetherington and Benjamin Metz of Jack Henry Digital to discuss the future of customer experience, and what steps financial institutions will need to take in order to meet the growing demand in digital advancement.

Finally, Alex and Joe Salesky, CEO of CRMNext are hosting an interactive webinar this Wednesday, April 29th, at 2:00 PM EDT. They’ll discuss how to make sound decisions in a COVID-19 world. You can sign up here.

Let us know what you think of the Weekly Extract. Stay safe. And don’t forget to follow us on LinkedIn and on twitter.

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