How to approach digital transformation in banking

Author
Mobiquity
Publication Date
4 May 2022

Why Digital Transformation is Imperative for Banks

Achieving digital transformation in banking requires more than just offering the basic website, mobile application, and payment platforms that customers expect. It requires a new way of thinking to build value for your clientele, workforce, stakeholders, and business partners.  

While the banking sector has long been receptive to adopting digital technology, considering how fast changes occur, many banks and other financial institutions have catching up to do. 

The institutions that succeed will be those that initiate transformation efforts now and establish leadership into the future. The process of digital transformation enables organizations to improve products and services, providing better and safer banking experiences for customers anytime, anywhere 

Digital Banking Around the World 

The global pandemic certainly supercharged consumer adoption of digital banking tools and, in the process, accelerated transformation in the Financial Services market, overall. Take a look at the global landscape to understand how the industry has and will continue to evolve: 

  • The online banking market is expected to grow at a 13.6% CAGR over the next 6 years. (1) 
  • The total number of online and mobile banking users will exceed 3.6 billion by 2024. (3) 
  • 89% of American bank account holders use mobile banking for account management. For 70% of them, mobile banking is the primary way of managing accounts. (5) 
  • By 2025, 44% of the top 250 banks across APAC will complete their “connected core” transformation — working on platform-based and componentized modernization and API-enablement. (8) 
  • 83% of UAE residents were receptive to adopting fintech solutions by non-financial institutions, and 76% trust at least one technology company with their money over their banks. (9) 

What Can the Financial Services Industry Learn from FAANG?  

Facebook, Amazon, Apple, Netflix, and Google, known as “FAANG”, are a collective powerhouse that take a customer-centric approach to a new level. While brands have come and gone, the Power 5 have prevailed, continually outpacing the growth of the rest of the economy. 

One reason is because the customer is at the core of everything they do, their primary focus is finding innovative ways to improve customer experience and design by tirelessly working to understand the human condition. 

Should the banking sector take a page out of FAANG’s book? The answer is a resounding yes. But where should banks start?   

Core Strategies Banks Should Be Implementing  

How you bring your digital goals to life starts with your digital transformation strategy and finding the right partners for the journey. Whether you decide to utilize a platform like Backbase, Mambu, Finxact, Temenos, or even a composable infrastructure architecture, it’s important to establish a foundation that gives you the most options for executing on the vision you’ve created. The right platform will give you the freedom to set up and create your digital banking experience quickly and securely to mitigate risk. It will also enable you to evolve your program as consumer and stakeholder needs change.  

Rewards and Loyalty Programs 

Rewards and loyalty programs are an effective means to foster customer loyalty - customers today expect to be rewarded for their continued patronage. In the US, Harvard Business Review Analytic Services reported that 72% of survey respondents say optimizing customer loyalty is a top-five priority of senior management at their organization. 

That said, you need to formulate rewards and loyalty programs to support your digital transformation. You can begin by offering incentives to customers who engage in digital transactions. This can help you save operational costs and also learn more about your customer and better personalize their future interactions to their specific needs.  

It’s important to understand that successful digital transformation and great loyalty programs come from the same place – a deep understanding of your customers, and the ability to anticipate their behaviors. Pairing your loyalty efforts to greater overall digital transformation is a great way to ensure your customers’ experience is the centerpiece of your collective effort. 

Mobile Banking 

With so many users engaging in mobile banking, this channel should be a key consideration in your digital transformation strategy. Consider the following:  

  • Among the four largest banks (Bank of America, JPMorgan Chase, Citigroup, and Wells Fargo), mobile banking use has increased from 63% of customers on average in 2019 to 72% in 2020, according to an article by American Banker. (16) 
  •  In the EU there has been a reported 72% rise in the use of fintech apps.(17) 
  • In the Asia Pacific (APAC) region over three in five customers (63%) said they’d be willing to make the switch to neobanks and challenger banks (18) in the next five years. 
  • 96% of African banks regard digital transformation as one of the most important factors in their bank’s growth strategy. (20) 

If you don’t currently have a mobile app, these statistics should reinforce why you should plan on changing that as soon as possible. Even if you currently have a mobile app, you should always track its performance and reassess its effectiveness. Ask yourself: is your mobile app meeting or exceeding customer expectations? Is your mobile banking app user friendly? Are there existing pain points that need attention? Are there features that could be added to enhance the experience? If you suspect the answer is yes (and especially if you don’t have an app to begin with) it is time to find an objective partner who can help put you on the path to better digital customer experiences.  

Finding (and Eliminating) Friction 

If you’re even a little familiar with Mobiquity, you know we are the digital consultancy that spends much more time talking about people than technology. As you start going down the path of improving your digital tools (and those of your competitors), it’s important to fully understand how those tools impact the people who use them. 

Finding friction or gaps in mobile banking experiences can be difficult. The Mobiquity Friction Report exists to help you by analyzing thousands of customer reviews in both the Android and iOS App Store. How will you refine your mobile app to create the best possible customer experience?  

Digital Payments and Digital Wallets 

It is important to think about the payment platforms that your customers use every day. The pandemic has pushed more people to online transactions, resulting in a usage  surge for digital wallets, also known as “e-wallets,” and other payment platforms. These contactless payment methods have become increasingly popular and allow for ease when checking out online.  

We’re seeing contactless payments on the upswing at restaurants, to pay for groceries, and even to pay for things like medication and telemedicine visits. Consider the integrations that you can implement to enable easier digital payment for your consumers.  

Mobiquity recently took part in a panel discussion with Brett King, best selling author and futurist, where we discussed what Brett calls the “Smart Wallet Wars.” The idea is that digital payments, and more specifically, digital wallets are the major piece of technology that will drive personal finance into the future. 

Apart from convenience, they also offer better protection against fraudulent purchases.  US News (and many others) highlights how mobile contactless payments are not only quicker but also provide multilayered security that plastic cards can’t match. (23) 

Voice and Conversational AI 

Success in online banking is contingent on users having convenient ways to communicate and get technical support and customer service. This can take the form of conversational artificial intelligence (AI) technologies like chatbots and virtual assistants. 

Arm your chatbot with answers to the most frequently asked questions and how-to guides to ease customers’ woes. Consider integrating voice recognition so users can get answers hands free, preventing typos and enabling the use of technology in situations where multitasking is required such as while navigating, cooking, or exercising.   

 

In addition to removing friction from the experience for customers, voice technology and conversational AI is hugely beneficial from an operational standpoint. By reducing the amount of time and energy spent by employees on basic, frontline customer service, you free up resources to be applied more strategically to grow the business and better serve customers in the long run. 

Online Portals 

Online portals are equal in importance to your mobile app and should work seamlessly to ensure that your digital offerings are leaving a positive impression on your customers. Remember that every single interaction a customer has with you, regardless of the platform it takes place, can have a massive impact on your brand. One bad digital experience can impact your customers overall experience and impression of your institution. Signing into your website to access financial information should be as seamless, secure, and efficient as using your mobile applications.  

Safe to Spend AI/ML 

Banking is all about helping customers achieve their financial goals, and part of that necessitates harnessing the power of artificial intelligence (AI) and machine learning (ML). 

AI and ML have been empowering people to analyze data in real-time, spot trends and patterns, and act on recommendations. More than that, banks can use this technology to help clients decide when it is safe to spend and when they need to save, enabling them to make the most out of their money. 

Making AI and ML your ally can also minimize the occurrence of fraud. You can, for instance, program online portal and mobile banking app algorithms to detect fraudulent activity and issue alerts for you and your customers’ protection. Is your bank using AI/ML to the best of its ability? 

How Mobiquity Can Help Banks with the Digital Transformation Process 

To paraphrase an old saying – the best time to embrace digital transformation was several years ago; the second best time is right now. 

Regardless of where you are in the digital transformation journey in banking, it’s time to give your customers the digital tools they need to complete frictionless digital banking transactions. At Mobiquity, you take great pride in our ability to help you move your digital transformation forward from any stage in the process. We work with Financial Service organizations of all sizes to create the strategies and experiences that enable complete digital transformation or improve existing digital banking services.  

Take a look at a sampling of our past work or reach out and we’ll set up a time to assess your needs. 

 

References

1) https://balancingeverything.com/banking-stats/

3) https://www.bloomberg.com/press-releases/2020-03-03/juniper-research-digital-banking-users-to-exceed-3-6-billion-globally-by-2024-as-digital-only-banks-catalyse-market

5) https://www.forbes.com/sites/ronshevlin/2020/07/20/the-online-bank-insurgency-of-2020/?sh=57712069371f

8) https://www.backbase.com/press/11926/three-in-five-to-use-digital-banking-offered-by-neobanks/  

9) https://www.penser.co.uk/fintech/the-rise-of-fintech-in-the-middle-east/

16) https://www.americanbanker.com/news/digital-banking-is-surging-during-the-pandemic-will-it-last

17) https://www.forbes.com/sites/simonchandler/2020/03/30/coronavirus-drives-72-rise-in-use-of-fintech-apps/?sh=139d455a66ed

18) https://www.backbase.com/2020/04/22/best-fintech-digital-banking-articles-in-asean-of-april-may-2020/

20) https://www.backbase.com/digital-banking-transformation-in-africa/

23) https://money.usnews.com/credit-cards/articles/what-is-a-digital-wallet#:~:text=Making%20contactless%20payments%20with%20your,plastic%20cards%20can%E2%80%99t%20match

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