Digital Transformation In Banks – The Four Key Pillars

Traditionally, banks and financial institutions had no trouble acquiring new customers, but over time customer’s demands and preferences have evolved, and the rise in competition. Today, customers gravitate towards businesses with a sturdy online presence across their products and services.  

Digital Transformation goes beyond moving from a traditional banking system to a digital one. The digital transformation journey begins with understanding customer behavior, preferences, likes, dislikes, and other factors. While these elements are all industry agnostic, the one area where banks need to transform is changing from a branch-centric approach to a customer-centric approach. 

In a survey carried out by Boston Consulting Group, around 43% of the banks admitted to not having a digital strategy, and the remaining banks said they were onboard the digital adoption journey. But over 85% did agree that digital is the way forward.

While banking systems and consumer behaviors patterns vary across markets in different geographies, if banks hope to attract new business and customers, they need to redefine their business models and strategies, led by the top management.

Another survey by Deloitte indicates that consumers are ready for an increased digital engagement from their banks. While some customers already interact with the available banking digital channels, many customers prefer walking into a branch or to the ATM to withdraw cash or check their account balance. But overall, the results are promising – 72% use mobile apps and 84% use online banking to carry out all bank-related transactions.

Four Pillars to Focus On

To get started on the digital transformation journey, Banks need to focus on the four pillars or priority areas. They are:

• Redefining Business Models 

Customers today demand high levels of service, the convenience provided by digital channels, and an experience similar to the one they received with human intervention. Banks should look at redefining their business model by incorporating both human and automation tools into the system. This method will increase customer satisfaction levels while optimizing operational costs.

Two key options to consider when redefining the business model are:

• Add an entirely new range of digital products. It will work in banks that have already embarked on their digital transformation journey. For others, it might lead to an increase in investment and the need to hire new resources.
• Incorporate a few digital solutions into the existing business, upskilling resources so they can migrate to new systems and offer these services to existing customers.

• Reinventing the Consumer Journey 

Digitizing a customer process is not just about optimizing what currently exists. Digital disruption comes with change (method of working, the human element, and so on) requiring strong buy-in from the parties’ involved and cross-functional thinking. When a bank offers rapid onboarding or automated digital loan process, it automatically adds to the customer experience. Providing information, sending out targeted marketing messages, pushing sales of a specific product/service, customer onboarding, seamless transactions, the entire customer journey needs to be reinvented. When a bank does achieve digital transformation, it can increase the efficiency of its task force, optimize operational costs, and boost customer experience. 

• Creating a Digital-Driven Organization 

There needs to be a complete shift in the management to working culture to drive a digital mindset within the bank.  The change should start from the top management, expand across levels, and incorporate through the business strategies. Banks should keep an eye on the budget and resources, focusing on achieving business agility and growth. Banks should look at Fintech for partnerships and collaborations as the Fintech ecosystem is ideal for banks to evolve from traditional banking models to the current market demands and trends.

• Data & Data Analytics 

One medium to understanding customers better is to gain insight into their profiles. It is achieved through data gathered from various sources. While traditionally, banks relied on their networks to help bring in new customers, today, they can use surveys, social media, and other channels to obtain data and build leads. With the help of behavioral analytics and advanced analytics tools, they can classify customers into various categories and create customized plans to retain loyal customers.  Similarly, using payment networks, banks can reach out to non-customers/ family members of existing customers to market their solutions and draw their attention. Above all, banks can use data analytics to create customer profiles and use the reports to target customers with similar backgrounds, spending abilities, and other factors.

As the image indicates, customers are likely to increase their use of digital channels if banks assure them of data security, better-customized products/services, and offer real-time updates along with instant support to resolve queries. Neutrinos‘, one of the leading digital banking platform providers, offers customer-focused digital solutions for enhancing banking customer experience. 

Check our Fintech Solutions to know how you can achieve digital transformation within your business. 

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