Digitalization Becomes the Baseline!

Last year, the financial services industry went into overdrive to keep businesses afloat and help customers in great need. Digitalization programs accelerated rapidly as innovation and adaptability rose to the top of the bank agenda. As self-development expert Brian Tracy reminds us, “It doesn’t matter where you came from, all that matters is where you are going”.

In this first of a 2-part blog series we consider what to watch for in 2021.

Universal Digital Transformation

The pandemic has forced the pace of bank digitalization. Pre-pandemic most banks had plans to transform over time, but now they are pursuing digital with renewed urgency, verve and commitment. The fundamental objectives remain the same (to offer an enriched customer experience that is seamless and secure; to have the flexibility to innovate and adapt; and to reduce operational costs), but now the pressure to deliver is greater.

Customers have high expectations. Banks that are empowered by new technologies and better information will achieve operational excellence and win more customers. With the rise of digital-only banks, distance is no longer a barrier to great service. Digital banks have also redefined (and continue to redefine) bank cost structures and aligned processing costs with business success.

Can a Great Customer Experience Coexist with Processing Efficiency?

Yes. What constitutes a “great customer experience” is somewhat subjective and open to debate; there is no singular definition. However, common characteristics that are essential include: *

• Personalization – Unique, personally relevant, with enriched impact
• Trust – Stems from a source, context and situation that provides the customer with reason and need to care and willingly receive
• Timely – Not tomorrow, not later today, not after the completion of a lengthy half-automated process, but right now
• Engaging – Helpful, intuitive, interactive, whole and complete (and dare we say, enjoyable)

These are worthy objectives, but the challenge for banks is to deliver a great customer experience in parallel with increased operational efficiency. Once again, there are many schools of thought regarding the particulars. There is, however, some consensus regarding the need for operational excellence to do this sustainably. In financial services, this can almost always be reduced to three key elements:

• Focus on the customer – Increasing perceived value: better, faster, cheaper
• Focus on processes – Automating and removing waste wherever possible
• Prepare for and accept dynamic change – Understanding each customer’s needs and the bank’s delivery process so well that change becomes part of business as usual; enabling the bank to adapt dynamically and in a proactive rather than reactive manner

A unique benefit of digital transformation is the ability to improve the customer experience and reduce costs simultaneously. Nevertheless, embarking on a digital transformation journey is a daunting prospect as it touches every area of the bank, and strategic planning will be required. But there are some universal requirements; for example a quality digital banking experience relies on real-time core processing and event-based marketing, so these offer a good starting point.

Real-Time Core Processing

A real-time core not only offers competitive advantages, it’s also quickly becoming table stakes for banking success. The growing financial ecosystem – in which banks need to participate to stay relevant – is increasingly orchestrated in real time by application program interfaces (APIs). A real-time core is also essential to integrate instant payments and other related services within the bank.

In practice, adopting a real-time core is about much more than processing; it is about people, how work gets done and the business outcomes delivered. With a real-time core, a bank can challenge the mindset of how things were done in past to re-examine, rethink and redesign business processes surrounding such diverse activities as funds availability, exception processing, fraud management, transaction processing and customer communications. The benefits of moving to a real-time core are clear, substantial and sustainable.

Research shows that there is widespread awareness among banking leaders regarding the need for digital transformation, as well as recognized and appreciated sense of urgency, but slowness in the realization of full delivery and adoption lingers. I believe in 2021 we will witness a full “lean into” for real-time core processing across financial services, not only in technology solutions but also for product and service design and delivery.

Event-Based Marketing

Banks can harness the power of live “moments in time” data (events) to increase customer engagement by offering exciting digital experiences tailored to customer interactions as they occur. In this way, multi-step processes can be personalized and automated to meet customer needs more closely with minimal customer input.

In this context, an event can be defined as a change in state or an action taken within a system, and an event stream is a time-ordered sequence of events that can become a powerful marketing tool.

An event-driven solution architecture empowers a bank to integrate all data sources and centralize customer events in real time. The bank’s systems can access and analyze event streams and respond to customer events immediately. Coupled with a real-time backbone, a bank can reduce the need for multiple systems to ingest all the data, which can help reduce many of the challenges and costs associated with data warehousing.

More Trends to Watch in 2021

In my next bi-weekly blog, we’ll consider the likely evolution of new business and deployment models, including Banking as a Service (BaaS), Low Code/No Code development, and the pivotal role of APIs in delivering digital bank success.

* Guiding Principles of a five-star customer experience strategy” Alex Atzberger The Future of Customer Engagement and Experience https://www.the-future-of-commerce.com/2019/06/25/guiding-principles-customer-experience-strategy/