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5 Keys to a Successful Digital Banking Transformation

Blog,
Don Bergal – Sr. Vice President, Marketing

Transforming a traditional bank into a truly digital bank is no small task. And many banks will not make the metamorphosis successfully.  In fact, Francisco González, BBVA Chairman, says “The next 20 years will see the world go from 20,000 ’analog’ banks to no more than several dozen ‘digital’ institutions.”

Which institutions will make the digital banking transformation successfully?  It really boils down to those banks that are willing to completely change their operational models.  Many banks have been trying to do this for years, but they’re still struggling.

Consumers expectations are now driven by immediate gratification, on-demand cloud businesses such as Amazon, Google, iTunes, Netflix, and others.  Banks need completely reimagine their business models to service customers in a similar way. Yes, this is a tall challenge for traditional brick-and-mortar banks, but happen it must, and those that embrace it are the same ones that will be profitable in the next decade.

Here are five aspects that any financial institution undergoing a digital banking transformation will need to adopt:

1. Realize Technology is the Linchpin (but humanity is still key)

Legacy systems shouldn’t be a hindrance or excuse to stifle innovation. If your ‘spaghetti’ of loosely integrated networks is laborious to maintain or upgrade, you can’t be as agile as you need to be. Technology is key to making a digital banking transformation successful.

However, whatever technology you adopt absolutely must be human and personal.  The point here is that technology should enable outstanding customer care – not be the focus. Banks are being forced to shift from a product-centric to client-centric point of view. That means adopting “customer-centricity” to satisfy evolving customer needs and expectations and using technology to enable that strategy.

2. Change the Culture

Procedures are inherent at traditional banks and very little gets done without invoking them.  But how does innovation successfully live side-by-side with time-worn procedures?  Innovation, by definition, means looking for a new way to solve a challenge.  Your existing procedures aren’t going to facilitate that.

Embracing innovation means changing your culture to solve your customers’ challenges differently. It means understanding that there are companies in Silicon Valley applying all their mental capacity to figuring out how to beat you. Banks tend to be incredibly resistant to change. You want to be nimble, responsive, and customer-driven.  And that means testing, innovating, and partnering with companies that can help get you there quickly.

3. Be Ready to Pivot

You can’t predict what customers will want in 10 years, so embracing flexibility and the willingness to make changes is critical. That means new financial products need to be brought to market quickly (six months or less) so you can address customers’ current pain points before someone else does. Some banks are partnering with nimble Fintech innovators, like Avoka, to get the technology they need to address challenges.

4. Embrace Chaos vs. Order

Entrepreneurs already know this: innovation can’t thrive in a static, orderly environment.  The risk that’s needed to drive change means a good deal of chaos needs to flourish, too. This goes hand in hand with changing your culture (#2) while promoting innovation and experimentation.

Entrepreneurs don’t say “it can’t be done” or “this is impossible.” Banks need to do the same by forbidding managers to repeat these innovation-killing phrases, and instead, reward their employees for taking risks and adopting a disruptive mentality.

5. Strive for Faster Innovation

Successful banks in the digital world need to strive for continuous improvement and renewal. That means getting much faster in the way they learn, act, and react.

Few banks are quickly producing game-changing innovations. Most are taking the standard approach they’ve always used which means internal debates, committees, small pilots, more committees, and so on. Little wonder that these banks produce few innovations compared to their more agile peers.

The big digital players test and learn. They’re not afraid of failure. They’re agile and experiment in real-time with their customer base. And they use these iterative processes to understand what works and what doesn’t.  The result is they’re bringing products to market quickly, understanding if they satisfy customer needs, and then improving upon them as necessary. It’s fast, a bit risky, and, ultimately, produces a digital banking transformation.

Don’t Wait – Move Ahead Now

The time to undertake a fully digital banking transformation is now – before your competitors do. Remember, your customers want you to make this change because they’re eager to do banking differently. Keeping their needs in the forefront while you’re undergoing this transformation will help you come out a winner.

Contact us to see how we can help with your digital transformation.