I went into a bank branch not too long ago. Only because I didn’t have another choice.
After recently selling one house to move to another, I needed to deposit a generous escrow account that exceeded limits for a mobile transaction. It quickly got complicated, both for me and my bank. The check was made out jointly to my wife and me, but I’d failed to have her endorse it. The bank wanted both signatures. I had one foot out the door to go home and get her to sign the check when the branch staff agreed that an account in both of our names meant my sole John Hancock would suffice.
It should never be this difficult. And it doesn’t have to be. In fact, I would have preferred to deposit those funds safely in my account without leaving home.
My story is just one of millions that banks must recognize as they develop an enterprise strategy to move them into the next decade.
Advocating for digital transformations in banking is based on three truths that serve as my North Star. Think about why customers get in their cars, drive down the road and walk into a branch, and the answers are clear: The service they wanted didn’t work online. They chose not to do it online. What they need to do doesn’t exist as a digital capability.
In my case, I wanted to deposit the check using my smartphone, as I have with countless others for many years. But the bank’s limitations forced me into the brick-and-mortar location – eating up valuable time for me and the branch staff – because of a mashup of the other two reasons.
So far, most banks have done a fairly good job of providing coverage for their high-volume services and transactions, which most customers can manage. Their technology platforms routinely and accurately complete 99% of transactions. That mere 1% gap to perfection leaves a tremendous area of opportunity and even competitive advantage – as long as they navigate the tough challenges ahead.
You can only serve your customers if you know who they are, and so your digital journey must focus on those who already trust you as their financial partner.
More so, this initiative isn’t about pushing the older generation to learn new tricks with technology. Instead, a good number of people walking into physical locations today are their kids and grandkids. Indeed, 56% of those ages 18 to 34 visit their branch at least twice a month. And, in every case, more than 85% would like their bank to help them set up a budget, learn about budget monitoring services or even sign up for automatic savings plans to meet long-term goals.
As a society, we don’t talk about money. Historically, individuals have established their own comfort zones, but more recently schools are striving to weave financial education into their curriculums. Even still, a disconnect remains in bridging financial literacy and empowerment with capabilities enabled by technology.
Without question, the coronavirus outbreak solidly shoved digital adoption a giant leap forward. Americans who weren’t able or comfortable to go to the grocery store quickly mastered online ordering. Video streaming rates skyrocketed. There was a need, and companies that escalated or launched digital capabilities filled demand (and their own pockets). Walmart alone, a pioneer in the “big box” retail store concept, saw online sales jump 45% in a year.
Three-fourths of Americans already were using mobile banking last year, and that rate is expected to jump by another 50% this year. We also know that millennials lead the pack in digital usage, with 93% adoption of smartphones. At a time when low interest rates are reducing revenue streams, banks need to focus on greater efficiency through digital engagement to reduce costs. Continuing to harness this already technologically savvier younger generation into digital banking is a sweet spot.
Anecdotal evidence provides clues of where you might find digital successes and opportunities, but mining your data should be the driving analytical force in verifying any hypothesis. Through a robust gap analysis, you can understand how your customers are engaging with your bank, overlaps that exist between digital and conventional offerings, and whether you have the right digital services. If you immediately find holes, put those on your prioritization list.
You should also be looking to your data to calculate uptime and dropout rates for digital transactions, including whether the process was broken or if customers decided to exit on their own. Those insights allow you to treat each digital capability as a standalone product, with detailed monitoring of its own.
In fact, once customers master digital features, they’ll probably use them even more often. Take checking their balances on saving accounts. Not too long ago, customers had to bring passbooks to branches, where tellers ran the transaction and wrote in new balances. With such a cumbersome process, maybe customers checked it once a month. Digital banking delivers that information with a keystroke or two, prompting customers to check balances multiple times a day.
True engagement of a digital capability means that usage of that same service goes down in other, more-costly channels. So, if you’re seeing remote digital check deposits or balance transfers increasing, then you better see fewer of those transactions in your branches or by telephone.
If you’re not lowering the volume of higher-touch transactions, then you’re not getting the full benefits of digitalization. Granted, you’re improving your engagement exponentially, but you’re not actually harvesting the cost savings that are equally at the heart of effective digital transformations.
A primary aim should be to migrate customers from assisted channels to self-service. However, customers have to be ready to meet you where you want them to go.
Mortgage applications, for example, present great potential for streamlining through online capabilities. Mortgages also are one of the most complex products that banks offer, and customers simply might want to continue to know their trusty branch or phone banker is standing by to answer questions and hold their hands. The depth of information required might push them into process fatigue before they get even halfway finished. Of course, you probably want to get your feet wet with simpler digital offerings.
Focus on those high-volume transactions that your bank executes every day, your business’ bread-and-butter. Balance transfers and check deposits are great examples, as there is little downside risk to digital capabilities.
In a few cases, such as disputes, banks must weigh whether risks outweigh benefits. You’ve made it easy for customers to check accounts online. If they can just as easily alert you to a charge they don’t recognize, they will – and they will do it often. Your interactions just went up, but for a high-cost function as you assign a back-office individual to investigate. Granted, easier alerts could translate into earlier fraud detection.
But if customers want to move money between accounts every day, go ahead. You won’t lose money, whether it’s a daily transaction or thousands of times a year. Consider the upside too: Those customers repeatedly come to your website or app, where you can control their experience and cross sell other products or services.
While banks should strive for straight-through digital processing, sometimes the right-now answer is to digitize only part of a service or product. For disputes, perhaps you find ways to automate some back-end processing. After all, greater automation in routine, repeatable tractions ultimately eliminate human errors and boost regulatory compliance.
Of course, we can’t talk about digital transformation without talking about technology, which can make everything happen – or be a blockade. Banks are notorious for milking the same technology for decades. In contrast, today’s digital apps are updated nearly every month.
Whatever you do in the digital space, it will be short-lived. You can’t waste a year on human-centric design, interface creation and testing before you get your idea to market. By then, it’s already past its lifespan. Don’t be afraid to put something out there – be content (for just a minute) launching your minimum viable product - and iterate.
And acknowledge that everything you do in technology is wrong. What I mean by that is it might be the right solution today, but over time there will be a better answer. Don’t wait for perfect because the horizon will move and the market will go right past you.
Developing your enterprise strategy and boosting digital engagement must start with studying your customers’ current experiences with your banks. That data provides clues and suggests paths where you can better serve up the right products supported by digital tools, making it simpler and safer than ever for them to bank from wherever and whenever they want. If you have not read it yet, here is my most recent white paper on Disruptive Innovation and Digital Innovation: A Win Win for Banks. It discusses how to build out digital product offerings based on what we know about our customers – who they are and what they need both now and as their relationship with their bank matures. Contact me to learn more on how to leverage these customer stories into your enterprise strategy.
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