The Weekly Extract: May 26, 2020

  • Alex Jimenez
  • May 26, 2020

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

This week we look at how digital transformation itself is being transformed by the pandemic. We also discuss how laggard financial service companies are playing catch up in digital banking, and finally we wonder whether anyone will go back to the office at all.


The Transformation of Digital Transformation Itself

As we have recommended to our clients, most organizations have changed their immediate priorities in response to the pandemic. The first priority is to address today’s reality. The second is to step back and reexamine your long-term digital strategy to define what needs to be re-prioritized for the long term.

A recent survey by S&P Global confirms this direction, at least for the majority of businesses surveyed. The results of the survey are discussed in an article in Forbes by Ami Gal. Investments in IT have been funneled towards employee communication and collaboration tools, addressing the immediate need. The survey also notes that:

“49% of enterprises are executing their digital transformation” while another “34% are either in the consideration or evaluation of their digital strategy”.

Ami believes that given the current economic reality, “this isn’t the time to embark on long-term, costly digital transformation projects,” but time “to get on the digital bandwagon as soon as possible”.

In an article in CIO, Eric Knorr, Editor in Chief for CIO, notes that IDG Research’s CIO COVID-19 Impact Study confirms the same re-prioritization. CIO’s are looking to reduce expenses in the immediate future, but they do see increased focus and spend on digital transformation and work from home efforts. Eric writes

“IT leaders are already thinking ahead and, in some cases, using the crisis as a pivot point to modernize operations and put an end to wasteful practices and projects”.

Paul Daughterty, Group CEO and CTO at Accenture in an interview in the weekly podcast DisrupTV with Ray Wang, CEO of Constellation Research and Vala Afshar, Chief Digital Evangelist at Salesforce, describes how successful companies are responding to the crisis. Paul notes that the current crisis is not about cutting costs, but about change, acceleration, and pivoting to new models. The crisis has increased the gap between digital leaders and laggards. Companies, like Accenture, have been able to deal with three years of digital and cultural transformation condensed to three months because their existing digital foundation. Paul also makes the point that digital transformation is not just about technology, and requires leadership that is focused on humans, employees and customers alike.

For banks and credit unions, quickly reducing costs in this environment is essential, says Simon Wilson in a Payments Journal article. However, relying on existing infrastructure is not going to result in any level of digital transformation. He quotes McKinsey, ”banks will need to reflect on how to organize themselves for change, possibly by running some of their payments businesses in a completely different way”.

We agree that empathetic leadership focused on giving the right tools to their teams to serve customer needs, should be the driver of digital transformation. Perhaps the silver lining of this situation is to move the focus away from the next shining technology but to what drives the organization.


Laggards Play Catch up in Digital Banking

Digital banking is having its moment. According to a Williams Mills Agency survey up to 73% of consumers are said to have used digital banking during the pandemic. That would mean a 10% gain over the digital banking adoption figure of 63% from 2019’s McKinsey Banking Journey Pulse Benchmark study. Further, in an article in Bloomberg,

Elisa Martinuzzi quotes McKinsey as saying that “the pandemic has accelerated the shift to digital banking by two years”.

Will FIs leverage the situation to permanently increase adoption? This is the question posed by Alan McIntyre in an article in Forbes. He notes that despite the pressure of neobanks and fintech firms, it is the legacy FIs’ digital banking that are in the limelight as adoption of new entrants remains low. Additionally, legacy FIs enjoy higher levels of trust despite the 2008 crisis.

Alan notes:

“Last year, Accenture ACN research found that only one in eight traditional banks (12%) has truly embraced digital, with another 38% somewhere on the path. But half of banks were lagging, and their digital deficit was becoming visible in a profit gap emerging between the digital best and the rest. What the pandemic has done has forced the laggards to play catch-up with both the incumbent leaders and the new entrants.”

The question of digital banking capabilities is top of mind with Credit Union executives also. According to a PYMNTS / PSCU survey 41.4% of CU executives see neobanks as a threat in coming months.  PYMNTS notes:

 “the primary draw of challenger banks…is that many consumers believe they would be able to offer easier-to-use, more convenient services than CUs, with 35.9 percent of CU members saying as much”.

Nearly 29 percent of CU members “believe challenger banks’ mobile apps would be of higher quality”. CUs are feeling the pressure to up their digital banking game.

Russ Edwards, SVP of retail banking at Civista Bank and Paul Vargo, Regional Manager of Retail at Peoples Bank, told the Cleveland Jewish News, that they are seeing an increase in use of digital banking at their institutions. Paul notes that Peoples has had to make some policy changes to accommodate the current situation, such as allowing new customers to access bill pay within 7 days instead of the usual 60 days. While the policy changes may result in increased risk, it is a necessity to continue the relationship with customers.

While banks and CUs examine how to improve their digital banking capabilities and policies, the Financial Health Network and the AARP offers recommendations on how to engage those clients new to digital. The tips noted by Steve Cocheo, in a Financial Brand article are:

  1. Choose imagery that’s inclusive
  2. Emphasize reliability
  3. Offer online demos that don’t require commitment
  4. Customize, customize, customize
  5. Don’t forget the human element
  6. Test with senior citizens
  7. Invest in “wayfinding”
  8. Keep tutorials available — and keep them fresh
  9. Make it easy to pause automated services
  10. Provide a Plan B for functions like password resets

We wonder how many organizations are willing to make the commitment to digital banking —even after the pandemic. Simon Wilson in the aforementioned Payments Journal article recommends FIs to establish “a clear strategy and target architecture, (outsource) non-strategic (functions) and (leverage) cloud-based open source technology”. The result will not only “reduce costs and increase resiliency” but will lay “a foundation to adapt to the uncertain times that lie ahead and support consumers and businesses through them”.


The Future of Work — Distributed

Organizations continue to invest in work-from-home technology. While it’s clear that the open office trend is likely dead, the question remains — are we going back to offices at all?

Matt Mullenweg writes in his blog about all of the companies that announced their adoption of distributed work this week:

While there has been a trend towards distributed work, which is evident by the speed that many of us exhibited in facing the crisis, Matt posits that we haven’t move forward as we could have because of fear. He adds, “what’s going to be newsworthy by the end of the year is not technology companies saying they’re embracing distributed work, but those that aren’t. Those who thought this couldn’t work have been forced by the pandemic to do it anyway, and they’ve now seen that it’s possible.”

Surely, we will go back to some level of in-person collaboration, but the genie is out of the bottle and many of us will not be back to the office. As Matt writes,

“some will return to physically co-working with strangers, and some employers trapped in the past will force people to go to offices, but the illusion that the office was about work will be shattered forever”.

The future of work, like the rest of digital transformation, will have winners and losers. Which financial institutions will step up and which ones will continue to stick their heads in the sand?

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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