Before I invite guests to visit, I always clean my house.
I tell companies striving for a winning digital transformation, particularly in my industry niche, to do the exact same thing.
It’s important to get your internal house in order for self-service before you open the digital door to your customers by first digging in to understand their needs – and then developing digital solutions to meet them. Chasing high-profile activities like pushing out cutting-edge features on your mobile app or dabbling with digital marketing can wait until the foundation is laid.
One positive byproduct of safer-at-home, COVID-19 living is that previously hesitant consumers are turning to digital experiences in droves. Before the pandemic, for example, many older shoppers – including my parents – had never ordered groceries online. But once they realized that stepping into a supermarket could put their health at risk, they embraced the opportunity to shop online for home delivery. Those customers contributed to a 450 percent spike in demand for the grocery-delivery service Instacart from December through mid-April, driving the platform’s first profitability. Videoconferencing – whether for work or digital happy hours – is up nearly 40 percent, and binge-watching your choice of Netflix, Disney+ or other streaming service is up likewise.
The pandemic is disrupting every industry, and people are starting to make these new behaviors part of their lives. With research showing up to 60 percent of consumers who tested digital channels intending to continue, our society’s digital engagement leapfrogged more in eight recent weeks than the previous five years. In the first month of the pandemic alone, one-third of retail banking customers planned to dial-up digital and mobile channel usage, and that number was expected to rise as businesses remained closed.
Pursuing a meaningful digital transformation can no longer be postponed because consumers are living in the digital age today. Banks can and should capitalize on this moment to achieve impressive digital growth. The end goal is simple: Meet customers’ banking needs in the most expeditious, cost-effective way – and make sure they feel good about the experience. But each bank needs to follow the right transformation path for their organization and customers. Below, I’ve put together three basic principles to consider when preparing for that transformation.
Today’s banking customers only walk into a branch or call for one of three reasons: 1) They tried a digital service and it failed; 2) They chose not to take the digital option; or 3) The action they needed to perform wasn't offered online. It’s no surprise, then, that more than half of all banking customers were still attached to their local bank branch, before the pandemic started.
Banks should think strategically about the scenarios that drive their customers to the branch or phone as they approach a digital-first customer experience. The nuance here isn’t just putting your customers at the center of your banking strategy, but understanding what they want and need – and then working backward. Many banks get sidetracked by building products for unproven customer segments that they aspire to gain, when, instead, they need to invest time in understanding their current audience and developing digital products and services designed specifically to deepen engagement and loyalty with them.
Most financial institutions have rich a rich base of customer data, beginning with call center logs and branch satisfaction surveys. Comb through that data and ask yourself on each channel – digital, branch, and phone – which services are most utilized? Which are underutilized? In your existing digital service offering, what hurdles cause customers to drop off and pick up the phone? Partner with your data analysis to shape the digital transformation your bank can deliver for your precise customer needs.
No bank can compete in the marketplace unless it can drive cost out of the customer experience. Increasing the rate of digital interactions improves a bank’s efficiency ratios, as they are a fixed cost and don’t require the ongoing labor cost of customer service employees by phone or in person. But approaching digital transformation purely to save operating costs bypasses other important opportunities – and gains – to disrupt and improve your customers’ experiences. To protect the customer experience, cost savings should be considered more of a side benefit of digital transformation than the primary goal.
Banks need a single strategy that encompasses their primary channels: branch, phone, and digital, not to mention ATMs. Leadership and employees must understand how digital transformation will impact other channels, as well as align with their customer vision. You might be surprised to find that your front-line people think this transformation is about using digital tools to drive more traffic to the branch, but, in fact, doing it right pulls simple, high-volume transactions away from costlier channels. Phone agents and branch staff should be empowered to have deeper conversations with customers to address their more complex financial needs and truly provide advice and service.
Given that intrinsic tension, how will you develop interactions at the branch to drive customers to take advantage of self-service? What high-volume activities can you push to digital servicing? What online capabilities could be eliminated because customers aren’t using them? Only when you have answers to what your customers' needs can you can start delivering.
The simplest entry points for digital transformation are routine, repeatable, and simple transactions. Getting people to sign up for remote deposit or electronic statements generates short-term wins and momentum. As customers increasingly find reasons to come to the bank’s digital storefront, greet them with targeted messages on additional products and services because you’re meeting them precisely when they’re thinking about money.
To build customers’ confidence and trust, tackle the quick fixes of existing digital pain points. Maybe the friction isn’t a technology bug, but the experience you wrap around that process, so the right solution might be clearer instructions on how to use the service. The digital processes should be closely managed and continuously optimized.
Once you’ve established a solid foundation, you can begin moving to more sophisticated digital experiences that introduce additional capabilities and tools that your customers want. Start with those that are easiest to develop and close friction points. Once you’re comfortable that you can fulfill on the promise of digital servicing, you can start pushing customers to the online or mobile experience, which becomes, in essence, your one-stop primary branch.
Most banks – particularly medium- to small-sized banks, don’t have the resources to differentiate themselves on technology, but they can distinguish themselves through the digital design, user experience and delivery of the products their customers need – which means focusing on doing your core offerings better than anyone else. When building and managing your digital experience, strive to deliver an end-to-end digital solution. Offering an existing solution digitally makes it easier for customers to use the service and drive up volume; if the back office is still finalizing those transactions manually (e.g. disputes), you actually see an increase in overall costs.
Measure customer satisfaction in every channel. It might be hard to compare results across channels, since the experiences are different, but you can still focus on improving results within each channel. Remember how I talked about how consumers go the branch or call because they couldn’t get the technology to work, didn’t want to use it or couldn’t find it? Those are the customers that need your support the most, because, as expected, fluent digital customers are the most satisfied.
Measure the performance within your digital channel. Key metrics for success include enrollment in digital servicing, app downloads, digital transactions, and account openings. Digital transaction numbers can rise very quickly and prompt a lot of internal “high fives,” but unless transaction volumes are going down in other channels, you can’t claim victory. Until customers fully adopt self-service, you won’t get operational savings to reinvest elsewhere. Tight coordination across channels and strong management of digital capabilities are needed to realize savings.
You’ll also want to watch for customer attrition because it’s never been easier to digitally move accounts to other banks. While direct attrition is bad enough, at least it has the benefit of eliminating operating costs. What you should be more concerned about is silent attrition, where the customer just doesn’t engage. This problematic metric indicates you aren’t giving customers something they need and value, and you might need to rethink the experience before you lose additional relationships.
Finally, as eluded to above with strong management of digital capabilities, it’s not uncommon for the digital capability team to get overly excited about creating products and services and skimming over their performance. Just as in traditional channels, digital offerings require accountability and management – including marketing, gathering feedback, and developing the next innovative product or service so it’s ready when customers need it. Just because you built it, it doesn’t mean that customers will use it.
A few years ago, I attended a conference where a speaker said that anyone in the room who didn’t know where their company would be in five years shouldn’t be in the room. I take the opposite view: Anyone who knew where their company would be even in three years didn’t belong in that room. If you think you know, you’re not challenging the thinking hard enough. The digital world is ever-evolving. Reflect for a moment on how much the world changed since the beginning of January 2020. No one really predicted this.
Digital transformation is an ongoing journey, an exploration of all the “what ifs?” Keep tracking where innovation is taking us. By understanding where the world is going, you can act nimbly at the right moments that matter for your customers. You need to build your processes and systems to be as nimble as possible. It is critical that medium- and small-sized banks not over-commit their limited investment resources. They must fully understand the core customer need that they are investing to address, then put the effort required behind these new capabilities to fully realize their potential.
A winning digital transformation starts with understanding your customers and their needs, then working back from there. Our team can guide your business through a digital transformation that delivers the efficient, timely service that your customers expect, while helping you save operating dollars to reinvest in other priorities.
If you would like to read more, my latest white paper, “Disruptive Innovation and Digital Transformation: A Win-Win for Banks,” discusses how banks can no longer wait to pursue meaningful digital transformations because their customers are living now, more than ever, in the digital age. Download your copy now – and make sure your organization doesn’t miss any important step in making this journey successful for your bank and your customers.
Not too long ago, banks primarily served their communities through their expansive network of branches, with customers walking in and out of physical locations dotted across their institution’s footprint. In recent years, digital transformation efforts to meet customers online and through applications have pushed traffic away from those traditional brick-and-mortar branches.
Risk Management & Regulatory Compliance, Issue Management, Governance & Policy 6 minute read
The Big Picture Digital transformations are designed to make things easier for customers and banks. In the process, however, companies often face unexpected hurdles. Using these moments to address emerging challenges is important, but there’s also much to gain from taking a step back – and, when necessary, leveraging an outsider’s eye and experience – to see if other meaningful opportunities have been overlooked.
Customer Channels & Operations Management, Data & Analytics, Risk Management & Regulatory Compliance 1 minute read
As I look back at the evolution of Spinnaker and on the learnings we’ve collected over our engagements to date, I see one common thread: our best solutions come out of need, and oftentimes a place of frustration. They rarely come from, “Hey, wouldn’t it be interesting if…” or “You know what I really want…”. They come from an individual, or a group of individuals, working towards a goal where they themselves cannot identify a solution – they need guidance and consultation on how to get to the best version of “there”, and how to do that efficiently.
Data & Analytics 2 minute read
Like how we think? Subscribe to have our articles delivered direct to your inbox each month.
Headquarters: 8000 Franklin Farms Drive, Suite 100, Richmond, VA 23229
©2023 Spinnaker Consulting Group. All rights reserved.