Moving beyond Internet Banking – Digital Transformation in the Financial Services sector

As we enter into 2016, businesses, more than ever, are looking to engage the digital consumer with better, friction-free experiences. From hailing a cab, ordering a pizza to planning a holiday, buying clothes and groceries, customers are increasingly demanding brand experiences that are convenient, seamless, engaging and personalized to their needs. The same is true for customers in the banking and financial services sector though according to a retail banking report by Capgemini and Efma, customer experience levels at banks are stagnating across the world.

Banks are finding it extremely difficult to keep up with growing expectations around seamless and personalized customer experiences that customers have come to expect from non-bank players with their agile and innovative value propositions. While banks understand the urgent need to digitally transform their customers banking experience, finding a place to start can be a challenge.

As per a McKinsey report, Banks have three to five years at most to become digitally proficient before they risk entering a spiral of decline similar to laggards in other industries. The report also goes on to say that digital laggards could see up to 35 percent of net profit eroded while winners may realize a profit upside of 40 percent or more (see exhibit).


The question remains, are banks delivering the right product and services to the right customer?

Forty-three per cent customers say their banks don’t fully understand their financial needs. One of the most coveted demographic groups, Millennials, choose non-traditional banking like PayPal (91%) and Google Wallet (16%) for making payments. Less than 50 percent of Millennials globally are likely to remain with their primary banks. As a generation of ‘digital natives’, Millennials expect their banks to be digitally accessible from a mobile or online channel, integrated into their cars and home appliances and be able to pay their bills automatically. This clearly indicates the need for banks to start providing highly-personalized, high-tech services coupled with the convenience of anytime, anywhere banking.

Challenges, clear and present

The pace of change in technology has made it difficult for traditional banking, burdened with legacy IT infrastructure to keep up with agile and digitally-savvy non-traditional players and new entrants such as Apple Pay or crowdfunding sites. The competitive landscape has changed drastically with Fintech Start-Ups and Technology Giants offering digital financial services solutions; giving banks a run for their money.

Banks and Financial Services companies are fiercely competitive with each other but new threats are coming from outside, including retail. New apps like peer-to-peer payments are fragmenting traditional banking but customers prefer an integrated experience. With the new players in the sector bringing in disruptive technology and futuristic customer service, there is a serious need for a service makeover. One factor, however, remains constant; the need to engage customers on their terms, when they want, where they want and how they want.

A common theme amongst these Fintech Start-Ups is the ease with which customers can sign up for their services and the quality of customer service thereafter. In other words, these companies are using technology to acquire, onboard and service their customers.

One might argue that since these new firms built everything from scratch using agile methodologies, it’s easier for them to achieve digital transformation as compared to traditional banking and financial firms who have invested millions of dollars in their legacy IT systems and entrenched contracts. While true to a certain extent, it doesn’t mean that traditional banks and financial firms can’t extend their investment in existing IT applications and systems of record including CRM/BPM/ECM Platforms. The perception is that it’s hard to transform, but there is a way that’s not complex or expensive.

Starting the digital transformation journey – put the customer first

So where can banks and financial institutes start? What firms need to realize is that it is no longer enough to have a transactional internet banking system that allows customers to transfer money and pay their bills. They need to come up with digital banking solutions that provide customers fluid and frictionless service across all products and customer touch points, from acquisition to onboarding and servicing.

The first step is to identify which business processes need to be digitally transformed. Common processes in the Banking and Finance industry are:

  • Know Your Customer (KYC) processes
  • Generating Statements of Advice
  • Insurance Claims Processing
  • Home Loan Applications processes
  • Procurement and Contract Generation
  • New Employee/Customer Onboarding
  • Travel Approval
  • Ad hoc/event triggered high-volume Letter Generation etc.

The second step is to understand at what level of digital transformation that business process is in. In his blog, Joe Shepley of Doculabs cites the typical path to digital transformation in fourlevels:

  • The first level is Paper Based and Manual processes.
  • The second level is Paperless, with elements of Manual processes.
  • The third level is Paperless and Automated
  • The fourth level is having a process that is digital by default, meaning that a process starts and ends digitally, i.e., with no documents (paper or electronic). (See fig below)


 Source: Doculabs 2015

Let’s take a home loan application process and plot it on the different levels above. Which level does the home loan application in your bank relate to? Is there paper involved or is the process completely paperless and automated? Perhaps it is somewhere in between level 2 and level 3. Once this has been identified, you can move on to the next step.

The third step is to look for a digital transformation platform that is mobile ready and can connect to existing IT systems of record, like CRM and Core Banking platforms to amplify or extend your existing investment. This platform should be easy to use so that it empowers business users to design, manage and deploy engaging business applications without depending on an IT team. By putting the control in the hands of the business user, the business can save on expensive IT costs in the form of delayed projects and IT manpower.

The platform should be able to replace paper and pdf web forms with guided, adaptive engagement experiences based on the customer’s personal preferences.

Other things to consider are the methods of deployment of the solution, i.e. on-premise, cloud or hybrid. With little investment needed and the ease of updating IT infrastructure, cloud services provide banks and financial services firms with an opportunity to simplify operations, drive product innovation and deliver exceptional customer service.

By approaching digital transformation of core business processes from the customer’s point of view, banks and financial services firms can streamline operations, gain value and increase positive customer experience levels.

The future of banking

Next-gen banking is already here. Soon, technology will touch every aspect of bank operations; from product development to risk management and human capital management. Technology like enhanced multichannel experiences, social media interactions, and mobile technology can enable banks to achieve success. Banks needs to start applying IoE-driven intelligence to achieve specific business goals and take customer experience to the next level.

Banks today continue to focus on building personalized products and services suited to the need of each individual customer. However, they will need to dig deeper to closely understand consumer spending and decision-making patterns. They will have to take ‘personalization’ to the next level by being able to provide trustworthy advice on savings and investment.

Technology and digitalization will soon change the face of retail banking and financial institutions need to be ready to adapt to this change today. Because in the digital world, tomorrow is already too late.

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