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Thriving in the Era of Digital Banking

December 15, 2016

Digital banking is more than offering online balances and a mobile app.

Technology has provided its share of pros and cons for the financial services industry. On one hand, it has created a level of transparency between customers and their financial health, giving them access to their account information and enabling them to apply for loans, transfer funds, pay bills and withdraw funds with the click of a mouse or the push of a few buttons. On the other hand, it has changed consumers’ expectations regarding banking as a whole, expecting a level of service other online sites provide, such as immediate customer assistance and problem resolution.

Banks, therefore, are discovering they need to adopt a digital mindset to be able to compete and thrive in today’s online economy. It’s not enough to have a website; customers today want to be able to access their account information online and in real time, and they want to conduct transactions and other financial-related business whenever, wherever they are, using any type of device.

Beyond account access, banks that can provide digital-first services, such as financial offerings personalized to a user’s needs and even third-party amenities such as insurance, are finding more traction than their non-digital counterparts. These services can help banks reach an online audience of customers and non-customers alike, and differentiate themselves from their competitors.

Indeed, the financial services industry has entered the era of digital banking. The expanded role of technology in providing customers with the right offerings requires IT to lead the conversation in ensuring banks are well-equipped to meet and even exceed customers’ expectations.

Digital Banking – What it Is
The concept of digital banking was borne from consumers’ increased use of the Internet and online services. As sites such as Amazon and eBay made ecommerce mainstream, users became more comfortable with the idea of sharing their credit card information online. It was a natural evolution, therefore, for users to take their banking online, also.

Digital banking is more than offering online balances and a mobile app. It is the use of technology to improve the customer experience through simplicity of design and the removal of friction. Because this includes both customer-facing and non-customer-facing applications, it also enables financial institutions to streamline their operations and reduce costs.

“While the cost-saving opportunity for banks comes in many forms and touches every area of the bank, there are two areas that are especially significant and represent the bulk of the value: automation of servicing and fulfillment processes and migration of front-end activity to digital channels,” wrote ’Tunde Olanrewaju in a McKinsey & Co. report on digital banking. “On automation, banks can realize 40 percent to 90 percent cost reductions in a range of internal processes through careful deployment of workflow tools and self-servicing capabilities for customers and staff. On front-end transformation, beyond diverting existing branch activity into digital channels, digital tools can also be used to augment frontline servicing (for example, with iPad forms rather than paper forms, or videoconference access to specialists to maximize their utilization)—easily doubling staff productivity and enhancing the customer experience.”

Digital banking has the potential to increase both customer satisfaction and the bank’s bottom line—a veritable win-win situation.


"While the cost-saving opportunity for banks comes in many forms and touches every area of the bank, there are two areas that are especially significant and represent the bulk of the value: automation of servicing and fulfillment processes and migration of front-end activity to digital channels." ’Tunde Olanrewaju in a McKinsey & Co. report on digital banking


The timing couldn’t be better for banks: A 2015 study by Accenture found that more than three-quarters (79 percent) of survey respondents view their relationship with their bank as purely transactional. Similarly, 10 percent of respondents aged 35-54 years old said they had switched their primary financial services provider in the past 12 months. That number jumped to 18 percent for respondents aged 18-34.

It’s clear that loyalty no longer plays a role in a consumer’s decision where to bank. Rather, consumers are looking for results—they want their financial institutions to help them make their life easier while improving their ability to manage money more effectively.

Digital banking is designed to do just that. Beyond the obvious benefits of easier access to their financial information and anytime banking, customers can enjoy the myriad ways digital banking can improve their banking experience, from improved communication to personalization of services and beyond.

Digital banks, for example, can extend their palette online to provide services that go beyond the norm, such as car-buying services and research on particular brands and models of cars, or to offer advice such as the best time of year to buy a new car. As an extension, they could offer online calculators to help their customers determine how much they would pay per month for a car loan, and even offer car insurance through third-party agencies. Such services would go a long way to helping make their customers’ lives easier and help them save money. They also could help increase customers’ feelings of loyalty toward the bank.

The Impact of Digital Banking on Financial Institutions
Digital banking is the great disruptor to the traditional banking model. Financial institutions started feeling the effects when customers demanded online banking capabilities, and further pressure of competition from non-traditional banking entities is forcing many to adopt a “digital-first” attitude toward their operations, from their internal processes to the services they offer and their communication with customers.

Even the branch office, which traditionally served as the “face” of the bank, is changing to accommodate new digital attitudes. The Accenture survey found 66 percent of consumers plan to use the branch in the future as often as they do today or more. “The branch network is not irrelevant; it just needs to offer a different experience,” the study noted. That spells opportunity for banks that recognize the importance of technology in today’s customer banking experience.


Even the branch office, which traditionally served as the “face” of the bank, is changing to accommodate new digital attitudes. The Accenture survey found 66 percent of consumers plan to use the branch in the future as often as they do today or more. “The branch network is not irrelevant; it just needs to offer a different experience,” the study noted.


Financial institutions have closed branches to save costs, but those that remain open are being “reinvented” to better position them to be more valuable players in the digital economy. Specifically, their role is to bolster the online experience of customers, such that their interaction online flows seamlessly to interactions at the branch (and vice versa).

A number of branches are being equipped with the technology to help customer service agents offer more personalized products and services to customers—and do so proactively. Although the majority of consumers today use mobile and online banking to perform most of their transactions, those who bank online more than once a week are still 60 percent more likely to also utilize retail branches. With that in mind, digital banks are looking to make the most of the branch experience, investing in customer relationship management tools and analytics to help tellers and other in-branch professionals determine areas in which customers are most likely to need financial assistance based on their transactional and financial history, and offering personalized offerings that would hold the most appeal to those customers.

On a more pedestrian level, many branches are now being equipped with technology designed to further extend the customer relationship. Wi-Fi has become ubiquitous, as branches encourage customers to access sites to check on loan rates in real time, for example, or just surf the web. What’s more, digital signage, interactive kiosks and customer service representatives equipped with tablets and smartphones are deconstructing the traditional banking environment, enabling instant deposits anywhere in the bank from any device and freeing the flow of traffic, conversation and information.

Videoconferencing technology is also increasingly being used at the branch level, enabling financial advisers to communicate with clients via video rather than meeting at the branch, yet still providing customers access to one-on-one interaction.

Video is being used beyond the branch, also, to enable customer service reps to interact with customers online to answer questions, solve problems or provide information. Communicating face to face has its benefits in retaining customers and increasing loyalty: In a 2010 study on customer engagement by PeopleMetrics, researchers found 76 percent of fully engaged customers had in-person interactions versus 48 percent of customers who were considered actively disengaged customers.

Indeed, for many, the ability to communicate with a live person is integral to a positive customer experience. Technologies to enable real-time communication online, such as click-to-call or click-to-chat capabilities on the financial institution’s website, are a must for the digital banking experience.

Security, Compliance Implications
Of course, the ability for digital banks to service customers via multiple channels and multiple types of transactions does come with its share of risks. Perhaps most critical is the risk to customer information. Breaches to online sites that compromise customer data are a real threat digital banks face. Cyber threats extend down to the mobile app level, as more hackers target the mobile device as a potential weak link in the security of a digital data chain.

With security risks come compliance issues as well. Government regulations are imposing strict guidelines on the security, privacy, integrity and availability of financial information, and regulations at the state level have served to provide some level of security of customer data. Digital banks must be ever-vigilant in ensuring their customers’ data is secure, even as customers ask for more transparency in their interactions.

Therefore, digital banks must put a much larger emphasis on their cybersecurity efforts, including improving their data networks and network security, even as they continue to improve customer access to accounts.

The Network is the Key
Digital banks rely on technology; therefore, they need networks robust enough to meet the needs of the technologies that power a seamless, secure customer experience. To deliver the best possible banking experience no matter where their customers are located and what devices they’re using, digital banks must put a greater emphasis on technology to provide services to foster that experience.

The network is a critical element in delivering the digital banking experience. As such, the network should provide high availability, high bandwidth and redundancy to deliver a seamless and continuous customer experience from all locations of a financial institution, from corporate headquarters to branch offices, websites to kiosks.

To ensure always-on connectivity today and provide the path for advanced technologies down the road, financial institutions should look for a network service provider who can provide a secure, high-performance network that can be adjusted according to bandwidth needs. A good network service provider will address current demands and anticipate future needs to guarantee the financial institution can continue to provide its customers with a stellar experience both online and in-bank.

In order to provide services that meet the needs of today’s digital-focused customers, banks should work with service providers that can support a full line of dedicated, broadband and Wi-Fi connectivity services, ensuring an always-on, always-connected environment that works for everyone. 

Look for a network provider who can handle every aspect of the network, from provisioning to management and field technology services, for installation, maintenance and repairs. That helps banks focus on providing the best customer experience possible, instead of tending to their networks.

Conclusion
Financial institutions have felt the impact of technology on their relationship with their customers. Online experiences have changed consumers’ expectations regarding banking as a whole, expecting a level of service other sites provide, such as immediate customer assistance and problem resolution. Digital banking is helping financial institutions meet and exceed those customer expectations, from financial offerings personalized to a customer’s needs to social media interaction and even providing third-party amenities. Their network, therefore, must provide a seamless, connected experience customers have come to expect with the required level of security and compliance.

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