Digital
Banking
Roadmap
An unavoidable transformation
Going Digital
Digital banking goes much further than just using online technologies. It lets people decide how a bank can solve their financial challenges. It means banks can start advising customers on their needs in a consistent way and on the customersʼ terms.
The world out there
Since they first started to appear, FinTechs have pushed a fast, often disruptive transformation of established stand-ards in the banking business.
Global investments in FinTechs more than tripled from 3-4 billion US dollars in 2013 to over 12 billion US dollars in 2014. Nowadays, there are droves of FinTechs stepping into the previously ring-fenced arena of financial institutions. Most of them even only offer existing products but with a much higher and faster adoption rate by customers. How did this happen?
It all started with the so-called ‘millennials’. This generation grew up with technology as part of their daily lives, always connected and embracing new ways of interacting with their friends. They also expect this modern interaction to carry over into all areas of their lives, including banking. As forerunners, they set new standards for older generations.
We cannot ignore a growing customer base that is:
¬ digital and mobile ¬ connected 24/7 ¬ highly informed ¬ social
Because of these characteristics, this customer base has clear expectations. They want:
¬ to have their lives simplified ¬ to be known
¬ to be rewarded
¬ to be coached and advised
Even if the majority of banking customers still come from older age groups, millennials set the bar for any type of customer. Products have to become personal, including financial services.
Products, customers and needs
We already stated the expectations of the regular modern customer. In a word: ‘Individuality’. These days it’s all about the individual, as people seldom have time for other peo-ple’s problems – personal, social or global. This is where FinTechs saw the gap in financial services and crashed through into this ‘restricted’ area, causing a revolution that no-one can ignore.
A major risk for banks today is that they do not yet see the effect that FinTechs will have on their revenues. As was initially the case in the music, travel and book publishing industries, the share of revenue that these new companies take away from established operators (banks) is not yet enough to cause concern. The growth these companies will see, however, will be exponential. Banks which do not take this into consideration early in the game will lose big at the end.
It can also be difficult to understand the extent to which FinTech products differ from conventional ones. Except for very specific cases, most products are essentially the same. This means it is not the products themselves that are key. Other things start to happen when you take a look at how these products are offered.
It makes no sense to design a portfolio of products and then push them onto the customer base with a take-it-or-leave-it approach. Think of your products like cars, telephones, flats and food items. There must be something different. They must be ‘likeable’. Buying a car is fun when you start picking the options (once you’ve decided on the right model and engine size, as well as colour and finish). The degree of per-sonalisation that all major manufacturers offer is noticeable. Or what about smartphones? How many models of the iPhone 5 did Apple release (amount of memory, different colours and sizes – 5s, 5, 5c)? And what about Samsung? How many different models does Samsung offer on the market at any given time?
Customers are individuals – and individuals have individual needs. So it’s best to offer customisable products. And we are not talking about offering credit cards featuring a picture of your pet – we mean serious business. We are talking about made-to-measure credit cards, where the terms and conditions are tailored to the card holder: my terms,my con-ditions, my card. That’s what people will go for.
Empowering the transition
to digital
Now, let’s get down to business and point to four key cornerstones where we can go digital without, in principle, entering other business fields:
¬ mobile payments ¬ real-time decisions
¬ personal finance management (PFM) ¬ digital platforms
In light of the previous chapter, these might sound too specific. But everything has a reason, and there is a reason for this specific, although not unique, selection.
Mobile payments
Banking, especially retail banking, is about payments: sending, receiving, ordering, deferring, cancelling, buying (financial and non-financial products) – to name just a few transaction types. Even you pay the instalments of your loans and mortgages, and get paid by your investments.
In general, don’t assume your customer will have the time to do something at any given time or place. It is up to you to provide customers with the ability to easily perform transactions ‘on the go’. Mobile, social, instant – these are the key words to remember.
Peer-to-peer payments, direct debits, instalments, paying bills, paying merchants – all of these activities are now a part of everyday life for our busy customers and they must be cleared right away.
Customers need the right platform to be able to perform these activities whenever they want – and all this in the mobile space. By combining this with the omnichannel concept, you provide customers with a powerful tool that makes their lives easier.
Real-time decisions
As we have said, first you have to know your customer. Analyse, decide and learn. And those processes have to be fast. Being reactive is no longer useful. Forensics are ok, predictions are necessary, but they will not solve your current problem in the ‘now’.
Next-best action is the key phrase here; actually, it should be the best-next action that you recommend. Because identifying the customer experience in real time will enable targeted and effective offerings. Once a problem or simple situation is handled successfully, the target customer is receptive to new ideas.
This is especially relevant if the situation was a problematic one. Once we sort out the problem, we have to trigger an offer to the customer focused on how to avoid it in the future. A problem we solve today will no longer exist tomorrow. In real time: problems have to be resolved when they are fresh in the customer’s mind, when the customer still has a clear idea of the situation.
If these ideas/offerings are tailored to the specific need of the customer in that very moment, the success ratio will increase dramatically.
This experience is a source of feedback in itself, and you have to track it – in real time. Because mood, perception and state of mind are real-time states and humans are emotional beings.
Personal finance management (PFM)
Because we said we want to get personal, individual, spe-cific, and with PFM allowing to identify behavioural patterns, we will use it to derive feedback on our real-time decisions in order to be sure they are the right ones.
Customers need more than just proactive advice, they need prescriptive advice that goes far beyond just anticipating a sit-uation and instead provides a solution for it before it happens.
As an example, let´s think about an account overdraft. An overdraft itself illustrates misbehaviour on the part of the bank. The fault no longer lies with the customer. In fact, the customer might be thinking:
¬ Why didn’t the bank offer to transfer money from my credit card to cover the incoming payment, thereby avoiding the overdraft?
¬ What’s more, do I now have to pay a fee for this over-draft?
¬ This is the worst experience ever.
¬ You didn’t solve my problem and now I have to pay for it!
Nowadays, this is more than enough reason to lose a cus-tomer. Forever.
An effective solution would have been to foresee this payment and recommend a ‘one-click’ transaction in which the customer can move funds from the credit card to the account. A message, a 3-second transaction, and the prob-lem is solved – before it happens. That is effective financial management. And it’s personal. Add a financial calendar to know when this might happen again and propose a solution before a problem can even arise. Be proactive and recom-mend solutions.
Digital platforms
As a foundation for enabling the three areas discussed above, you will need to put the right systems in place. Integrated platforms that are completely online and customer-centric.
You need to enable mobility and move from the multi-channel concept to an omnimulti-channel approach. Think you already have all of these channels in place? That might be the case, but are they really integrated to provide a seam-less customer journey across the different channels?
You cannot assume you know where your customer will start and finish a transaction. This is again bank-centric, not customer-centric. From now on, a transaction should be at the customer’s convenience and your systems must be ready to handle it.
For instance, it has to be possible for me, as a customer, to start a transaction on my mobile as I sit on the train on my way home, and then finish it off from my computer once I get in. If for no other reason than that it’s convenient for me.
In this case the bank would be adapting to the customer instead of making the customer fit in with the bank’s process-es. This is what caring is all about, it lets the customer take the starring role. These days, that’s what the customer expects.
Also, digital platforms are the key to enabling the real-time decision-making and personal finance management points.
You have to set up the necessary engines that will provide you with the analytics required to perform these activities successfully. We need to collect data, process it, analyse it and be able to get valuable results from it.
This data will be used straight away to personalise experi-ences on the customer side, or used to set a new generation of solutions in the pipeline, solutions your customers will be demanding soon.
Defining a roadmap
So far we have described a scenario and illustrated how solutions should be provided. We have defined four key cornerstones and painted a vision of how things should be.
But as in many cases, the target status is one thing and the actual status is something else entirely. This is especially the case when targets shift and when the customer’s needs and the available technology change as well.
So the next step is to know our place along this path to digital transformation. How mature is our digital platform? What still has to be done?
We need at least two things: a solid foundation and the capabilities to adapt to changes rapidly.
Indicators
Let’s focus on the basics: the foundation and the adapt-ability. Now our four cornerstones make even more sense. Listed below in reverse order, they will give you a preview of what is to come in the foundation (technical) part:
¬ digital platforms
¬ personal finance management (PFM) ¬ real-time decisions
¬ mobile payments
And consider the relevant points about user behaviour (environmental) that we have to keep in mind:
¬ knowing your customer ¬ being social
¬ being heard ¬ being rewarded ¬ being advised
Environmental
Let’s ask a first round of questions to see to what extent the digital transformation philosophy has already become part of the culture of the organisation and its customers. We will call these ‚environmental points’.
Do you know your customers’:
Personal data
Financial profile and history Habits and behaviours Areas of influence
Do you have social media presence?
Corporate website Facebook
Other communities
Do you have a community?
Groups of customers associated by profile as defined by marketing
An internal employee community in the intranet A customers’ community on the internet An open community on the internet
Can queries and complaints be addressed at:
Branches?
Corporate web sites?
Through social media channels? Through a community of users?
Is there a customer rewards scheme in place?
Standard, on average balances per product Based on product usage
By social media interactions
By peer-praised activities in the user community
The more boxes you can tick in this list, the more you are ‘in the game’. A traditional banking approach will tick only 8 to 10 boxes. A modern enterprise geared to digital banking will tick almost all of them, or at least 12.
The list above is one that will define your flexibility. Your ability to react, analyse and learn. But you need a foundation to benefit from this.
Technical
Now we have seen how the environment is set. But we also need a foundation. This foundation must at the very least be built on top of the four topics we are developing, our four cornerstones, which will define the ‘technical points’.
Digital platforms
Is your backbone or backend solid, stable, efficient, online, and available 24/7?
Do you have a multichannel strategy? Do you have an omnichannel strategy? Are your applications responsive?
Personal finance management
Do you provide customers with graphical, visual or forensics reports of their finances?
Do you have an alert system for the financial events your customers experience?
Can your customers set financial objectives and track them?
Are you able to issue prescriptive solutions to avoid undesired situations or issue forecast recommendations to customers?
Real-time decisions
Do you have a big data cluster?
Do you store customers’ information for processing? Can you take real-time decisions depending on customer actions?
Can you push ad-hoc, real-time offers, products or recommendations to customer apps or devices?
Mobile payments
Are your websites/apps able to handle all kinds of money transfers?
Do you also provide peer-to-peer (P2P) payment options?
Do you have NFC (or similar) payment solutions? Can you start a payment from a picture
of a bill or from a PDF?
Again, a traditional banking approach should get around 8 points and a fully digitally oriented approach would score at least 12.
An enterprise scoring 16 has the necessary foundation to be on track and cope with the pace of digital transformation. But your work is never done. As we have said again and again, customers’ needs will change and so will technologies.
Roadmap
We have seen a lot of points (36, to be exact) in the two previous sections, and these can be used to evaluate your digital transformation maturity. You may find others – and tomorrow they may change. But they are valid indicators that will help you define a roadmap. For sure, these points alone don’t define the roadmap, they are merely mile-stones to achieve on the roadmap.
Keep in mind the importance of also considering these areas:
¬ organisational culture ¬ business models ¬ service portfolio ¬ processes
For these four areas, and taking our listed points as milestones, we basically have to run these classic exercises:
¬ actual analysis ¬ target analysis ¬ gap definition ¬ remediation/enhancement activities ¬ setting of priorities ¬ strategy definition
Remember, these exercises must be completed for all of the four areas. None can be excluded from this exercise. The organisational culture component, together with the existing processes in your organisation, will mainly define how you approach the different milestones on your roadmap.
The key is that our indicators (the 36 points listed above) can be considered, in a sense, as SMART goals on the roadmap. (The SMART acronym: Specific, Measurable, Achievable, Realistic and Time-bound.)
If you are missing several points for the roadmap and you are unsure of how this will impact the four areas, start with the ‘time-bound’ aspect. Then the keyword becomes ‘prioritisation’. And this prioritisation, as we said, is done with particular con-sideration to the organisational culture and existing processes within your enterprise. They will define which of the objectives are most likely to be achieved first. For the rest of letters in the SMART acronym, there is no issue, as the missing S, M, A, and R components don’t need to be discussed.
Building a roadmap in this way, you will take the necessary steps to influencing all areas: from ‘organisational culture’ to ‘processes’. You will see how they change as you progress along your roadmap. You don’t have to make your organi-sation change by force, it will change as it evolves with the roadmap.
Go for it
As we stated in the first section, the world out there is changing the rules of the game. Just sitting back and looking at the changes you might be overwhelmed by the speed, noise and tumult of what’s going on. In this situation being nervous won’t help, but being systematic will.
As we have seen, while this remains a relatively general-ised scenario, we were able to identify four cornerstones, 36 objectives and the areas in an organisation where we can start being systematic.
This is already the best basis for working out a roadmap. The way we structure this roadmap and the different goals within it, will help your organisation evolve, change and live out the culture of getting the customer experience right. Step by step, steadily.
This, will put your organisation back on track and ready to run this race. And this is the key. It’s only important to be in the race, not to win it. Your customers will be the ones who win as their expectations are fulfilled. And they will, knowing it was you out there helping them.
It’s about taking pride in putting customers right at the centre. Ready to start?
Featured specialist
Juan Antonio Artigas
Senior Consultant
Juan Antonio Artigas is a senior consultant at GFT and responsible for our overall digital banking offering. In addition to developing the overall offering, he maintains ongoing relationships with GFT clients, supporting them in their digital transformation projects. During the last 14 years Juan Antonio has been responsible for many different projects involving technology infrastructure and platforms for numerous commercial channels within Deutsche Bank, and from 2010 he assumed management responsibility for a number of international projects. Juan Antonio stud-ied Telecommunications’ Engineering at the Universidad Politécnica de Cataluña (UPC).
About GFT Group
GFT Group is a business change and technology con-sultancy trusted by the worlds’ leading financial services institutions to solve their most critical challenges. Specifi-cally defining answers to the current constant of regulatory change - whilst innovating to meet the demands of the digital revolution.
GFT Group brings together advisory, creative and technology capabilities with innovation culture and specialist knowledge of the finance sector, to transform the client’s businesses.
Utilising the CODE_n innovation platform, GFT is able to provide international start-ups, technology pioneers and established companies access to a global network, which enables them to tap into the disruptive trends in financial services markets and harness them for their out of the box thinking.
Headquartered in Germany, the GFT Technologies SE achieved consolidated revenue of around EUR 365 million in 2014 and is represented in eleven countries with a global team spanning 3,300 employees.
