The Weekly Extract: September 14, 2020

  • Alex Jimenez
  • September 14, 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 discuss the reality of ROI for Digital Transformation. We also examine recent surveys looking at changing consumer behaviors and the likely impact on financial services organizations. Finally, we discuss the rush to catch up in tech capabilities – specifically around personalization.


The True ROI of Digital Transformation

Recently, I was interviewed for a podcast by Suyash Deo, Functional SME at Softweb Solutions, covering digital transformation in banking. Deo asked me how organizations go about proving the ROI for digital transformation. I noted that this is a question that bank executives bring up often when we talk about this topic.

I indicated that the ROI for digital transformation exists. However, there is a lack of leadership and strategic thinking about how we approach the question. Generally, those managers that are asked to prove the ROI for transformative changes lack the wherewithal to commit to the results of a model change.

What we do instead, is work backwards from the corporate hurdle and back into an ROI that will give us a minimum change, resulting in a low target and often a subpar customer experience.

So how should we approach the question of ROI?

In an article in Forbes, Blake Morgan, Customer Experience Futurist, Keynote Speak, and Author, tackles this question. While her focus is on the Customer Experience, we at Extractable believe that digital transformation is all about the Customer Experience so the question is the same.

Morgan notes that the “ROI of customer experience is actually quite staggering.” She continues, Consider this:

  1. Customer-centric companies are 60% more profitable than companies that don’t focus on customers.
  2. Brands with superior customer experience bring in 7 times more revenue than competitors that lag in customer experience.
  3. 84% of companies that work to improve their customer experience report an increase in their revenue.

As we do with our clients, Morgan recommends focusing on the right metrics and analyzing data.

As an example, she says that this year:

“more than 40% of all data analytics projects will relate to an aspect of customer experience. To highlight the ROI of customer experience, changemakers need to connect money and data to key aspects of the customer journey.”

Morgan further details several strategies to prove the ROI of CX:

  • “Lead with the financial benefit to the company.” This seems obvious but most business cases lead with the overall costs.
  • “Show the benefit over time.” In this step, customer lifetime value (CLV) is key. In my 25 years of banking experience, I have seen CLV in a business case a handful of times only.
  • “Be clear and concise.” Morgan references a Forrester a study that says the pitch should be a single sentence.
  • “Tie CX to time, not just money.” Morgan suggests that lost opportunity should be included in the financials. “Add a timeliness approach to customer experience by showing how much money the company is losing each month on negative calls and lost sales.”

As I noted in the podcast, organizations that fail to transform in the current environment will suffer the same consequences that Blockbuster faced when they failed to keep up with Netflix.

This is a matter of strategy and leadership — not technology or resources. Organizations that see the ROI and pivot will be the long-term winners.


Increase in Digital Banking Here to Stay

This week we saw two surveys that should bring both good news and concerns to financial services organizations.

In Credit Union Times, Michael Ogden, Editor in Chief, writes about a new report from BAI that found that:

“More than 50% of consumers have used digital banking applications more since the start of the pandemic. Furthermore, 87% of consumers plan on maintaining their increased usage after the end of the pandemic.”

These results are in line with previous research we have seen during the pandemic.

Payments Journal presents the results of an Experian report that found that:

“consumers are engaging with businesses online more than ever before. The study found there has been a 20 percent increase overall in consumer online transaction activities, including a 41 percent increase in online grocery shopping, a 40 percent increase in applying for loans online and a 22 percent increase for both ordering food online for delivery or for takeout.”

The good news from the BAI report is that “a majority of digital banking users increased their digital banking usage as 69% reported that they found the digital banking applications intuitive and figured out how to use them on their own. Consumers also report high satisfaction with digital banking, with 92% indicating that their financial services organization’s digital tools met their needs.”

In turn, the Experian survey found that “41 percent of customers would give an organization more business if they felt they were treated fairly during the pandemic.”

Karl Dahlgren, managing director at BAI, notes that their study shouldn’t mean that FIs can ease their digital efforts:

“financial services leaders must continue to invest in digital banking tools and resources moving forward since the percentage of consumers who would prefer to use a branch after the pandemic ends decreased compared to our survey conducted in January 2020.”

Steve Wagner, global managing director of Decision Analytics for Experian, makes the point that behavior changes,

“require sustainable business operations that support meaningful connections with consumers – more than ensuring physical health and safety measures, but also safe, accessible and convenient digital experiences especially at a time like now when they need it most.”

The Experian study found that:

“Only 32 percent of businesses have made operational adjustments to meet new consumer demands to date but are planning to make strategic adjustments to give consumers greater access to goods and services and manage customer relationships.”

Yet organizations seem to suffer from self-delusion, since “53 percent of businesses surveyed believe their operational processes have mostly or completely recovered since Covid-19 began.”

Both surveys point to what many of us have witnessed or experienced. We have had to alter our behavior and perform more activities digitally.

In some cases, those experiences were excellent and will result in sustained changes. In others cases our digital experiences have been frustrating and have us either moving our business elsewhere or demanding changes. FIs should have thoughtful assessment of current customer experiences that should drive their strategy going forward.


Banks Rush to Fill Technology Gaps

Having looked at the very recent past, we can turn to the expected demands in the future.

In an article in Forbes, Daphne Foreman, Assigning Editor at Forbes, covers an American Banker CEO Forum held September 10. She notes that the common theme was:

 “the goal post-pandemic is not to revert to prior business practices in banking.”

Foreman summarizes the recent situation starting in March through today. Looking at today’s situation she quotes Navy Federal Credit Union CEO Mary McDuffie:

“banking is all about the relationship. And people ‘are very emotional about their money; you have to put that into the equation.’ As she phrased it, being great at digital is now table stakes. Banks and credit unions need to focus on the critical roles their frontline people play, to balance the digital experience.”

Foreman also quotes Dino Trevisani, General Manager, Financial Services Market, IBM North America, regarding consumers’ increasing comfort levels with video and artificial intelligence:

“Covid-19 is accelerating the pace of change within the financial services industry, suggesting that banks and credit unions will be making 10 years’ progress in something more like five to seven years.”

Expected changes in the industry are likely to common in the areas of personalization as FIs focus on customer experiences.

In an article in The Fintech Times, Manisha Patel, Digital Marketing Coordinator, writes about a Zafin survey that:

“reveals bank loyalty is more easily shaken for younger generations, Netflix-like personalization is needed among all consumers.”

Patel writes:

“across all generations surveyed, 88% of respondents believe it is important for their banks to provide recommendations relevant to them based upon their financial product usage and behaviors.”


 “41% of respondents stated their current banks do not proactively offer them products, bundles, pricing and other services relevant to their financial situation, needs and goals.”

This gap points to the opportunity that FIs must take seriously. As Navy Federal McDuffie notes, “It’s a human business at the end of the day, no matter how digital we make it.”

There are clear generational differences in expectations, according to the Zafin survey. Patel notes “for Gen Z and millennials, online and mobile banking capabilities are the most important factor when choosing a bank; whereas pricing (e.g., lower overdraft fees) is the most important factor for those near or at retirement age.”

Alexandra Roddy, CMO and EVP of partnerships at Zafin, summarizes the challenge “many banks have not been prepared to match consumers’ desire for a more personalized banking experience because of their outdated legacy systems. This survey shows expectations have changed, and banks now have a massive opportunity to reevaluate how the systems they have in place may be holding them back from the modernization they know their customers want and need.”


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