Consumers around the world are quickly adopting digital banking. Incumbents have a short period to command this reality ... or become obsolete.
In today's digital age, with increasing strategies and best practices targeting increasing value for the digital consumer, becoming aware of the need for change is the first challenge that bank CEOs face. The next challenge is to take leadership in the development and execution of a holistic change program that simultaneously addresses the culture, systems, and capabilities required to be a financial institution in an increasingly digital landscape.
According to perspectives by McKinsey & Company, digitization is rewriting the rules of how banks compete. Banks that fail to grasp this risk damaging franchises built over generations. For example, the escalating drive to automate and digitize repetitive, low-value, and low-risk processes boost productivity and facilitate regulatory compliance. Digitization is a means of fostering innovation across products and business models. Examples of this include social marketing and crowdsourced support, as well as “digitally centered” business models.
Globally, innovative banks and financial institutions are moving rapidly to embrace digital. Most have invested heavily in transaction migration. They have also significantly upgraded web and mobile technologies and created innovation and testing centers. In addition, according to McKinsey, banks increasingly realize that to succeed with digital, they must adopt the habits and culture of digitally native companies: for example, opening up the banks’ application programming interfaces, pursuing agile development, or hosting hackathons to foster intensive digital collaboration. Moreover, most banks are only in the early stages of developing the capabilities and culture of digitally native organizations, which include key elements.
User-Centered Customer-Journey Design
Customer journeys should be compelling and highly differentiated, combining personalization, speed, and ease of use for all processes, including applying and getting approved for a loan, opening and understanding how to make full use of an account, and reconciling payments. To make this leap in the delivery of customer journeys, banks need to act quickly to acquire deep capabilities in user experience and user interfaces.
Personalized Content, Leveraging Advanced Data
Most data still go unused. Yet there is significant value in applying advanced analytics to create targeted offerings for cross-selling and up-selling. This is achieved by making data usable in real time, such as at the point of sale, and combining the data with analytical tools to generate insights provided by “next product to buy” models or risk assessments, for example.
Rapid Experimentation & Agile Methodologies
Banks need to learn to rapidly acquire or imitate high-value initiatives, while showing tolerance of failures in trials. Banks often struggle with this trialing and testing culture. In addition, they need to move to agile delivery, with weekly sprints, from a “waterfall” approach in which there are months between releases. They must achieve this agile model at scale but still recognize that agile isn’t the right answer for every development effort.
The Good News
For CEOs, the good news is that each of these ways of creating value through digital can be applied to every bank function. However, developing a digital agenda and driving a digitally centered transformation is a complex task. It requires an unusually high level of coordination of cross-bank initiatives spanning prioritization, resource allocation, and collaboration in execution.