Digital Transformation In Banking- The Four Key Pillars
Traditionally, Banks and Financial Institutions had no trouble acquiring new customers, but over time customer’s demands and preferences have evolved, and the rise in competition. Today, customers gravitate towards businesses that have strong online presence across their products and services.
Digital Transformation goes beyond moving from a traditional banking system to digital. The digital transformation journey begins with understanding the customer behaviour, their preferences, likes, dislikes, and other factors. While these elements are all industry agnostic, the one element that Banks need to transform is making a shift from branch centric to customer centric approach.
In a survey carried out by Boston Consulting Group, around 43% of the banks admitted to not having a digital strategy, while the remaining said they were completely onboard the digital adoption journey. But over 85% did agree that digital is the way forward.
While banking systems and consumer behaviour patterns vary across markets in different geographies, if banks hope to attract new business and customers, they need to redefine their business models and strategies, led by the Top management.
Another survey by Deloitte indicates that consumers are ready for an increased digital engagement from their banks. While quite a few already interact with the available digital channels quite frequently, there is a large number of people who still prefer walking into a branch, or to the ATM to withdraw cash or check their account balance. But overall, the results are promising — 72% use mobile apps and 84% use online banking to carry out all bank related transactions.
In order to get started on the digital transformation journey, Banks need to focus on the four pillars, priority areas:
- Redefining business models
Customers today demand high levels of service, convenience provided by digital channels and an experience similar to the one they received with human intervention. Banks should therefore look at redefining their business model by incorporating both human and automation tools into the system.This is bound to increase customer satisfaction levels, while optimizing operational costs.
Two key options to consider when redefining the business model are:
1. Add an entirely new range of products that are completely digital. This will work in Banks that have already embarked on their digital transformation journey. For others, it might lead to increase in investment and the need to hire new resources.
2. Incorporate a few digital solutions into the existing business, up-skilling resources so they can migrate to new systems and offer these services to existing customers.
- Reinventing the consumer journey
Digitizing a customer process is not just about optimizing what currently exists. There is also the digital disruption that change brings(method of working, human element and so on) requiring strong buy-in from the parties involved and cross-functional thinking as well. When a bank offers rapid onboarding or automated digital loan process, it automatically adds to the customer experience offered. From offering information, sending out targeting marketing messages, pushing sales of a specific product/service, customer onboarding, seamless transactions, the entire customer journey needs to be reinvented. When a bank does achieve digital transformation, they will be able to increase efficiency of their taskforce, optimise operational cost and boost customer experience.
- Creating a digital driven organization
In order to drive a digital mindset within the bank, there needs to be a complete shift in the management to working culture. And this change as mentioned earlier needs to be driven top down, across levels, and through the business strategies as well, including the budget, resources, with a focus on achieving business agility and growth. It would also help for banks to look at Fintechs for partnerships and collaborations as the fintech ecosystem is a good way to evolve from traditional banking models to the current market demands and trends.
- Data & data analytics
One medium to understanding customers better is to gain insight into their profiles. This can be achieved through data gathered from various sources. While traditionally, banks relied on their network to help bring in new customers, today they can use surveys, social media and other channels to obtain data and build leads. With the help of behavioural analytics and advanced analytics tools they can classify customers into various categories and create customised plans to retain customers who are loyal. Similarly, using payment networks, banks can reach out to non customers/ family members of existing customers to market their solutions and draw their attention. Above all, banks can use data analytics to create customer profiles and use the reports to target customers who are similar — background, spending abilities and so on.
As the image indicates, customers are likely to increase their use of digital channels if banks assure them of data security, better customized products/services and offer real-time updates along with instant support to resolve queries. At Neutrinos we offer customer-focused digital banking solutions to forge stronger relationships. To understand how you can achieve digital transformation within your business, reach out to us now.