The Extract from Extractable is a condensed roundup of digital experience news for financial services institutions, and our take from San Francisco.
This week we cover the keys to success for digital transformations. We also look at approaches to engage new digital banking users.
Digital Transformation Keys to Success
In these summaries we often talk about digital transformation and the need to embark in such a journey. We feel that the financial services industry needs a continuous reminder that digital transformation isn’t just digitizing physical experiences. We usually don’t dive into specific topics within transformation. However, this week we came across a few articles that delve a little deeper than we usually do.
Where transformation goes astray
In an article in Forbes, Jon Roskill, CEO of Acumatica, explains the ways that digital transformation goes astray. The first barrier Roskill covers is the lack of executive buy-in. He writes,
“This might seem obvious, but lack of C-suite buy-in can come in many forms. Of course, executive leadership sets the direction for the company and signs off on projects and their funding. But with a fundamental change like digital transformation, a simple rubber-stamped ‘okay’ isn’t enough.”
We see this more times that we care to admit. In one case, an executive leader was supportive of digital transformation in his area, but only because he wanted his unit to receive funding. He did nothing to support the transformation, resulting in a failed transformation for his unit while other units moved on.
Peter Drucker famously said “Culture eats strategy for breakfast.”
In the case of digital transformation, Roskill notes that “a culture resistant to change” will result in a faild transformation. He adds,
“Leaders must demonstrate the value of change. Whether through providing compelling answers to big questions or promoting a culture of experimentation, the champions of a digital transformation need to create a narrative to help other employees manage the uncertainty of change.”
Roskill’s next barrier is data silos. He notes that “true digital transformation is a modernization of processes. It’s an opportunity for your business to become fully interconnected. That means synchronizing all records, data sources and systems.” Digital transformation programs that fail to include data are sure to fail.
Finally, Roskill points to fatigue or stress brought on by change. He writes,
“Without solid ground beneath our feet, we eventually lose enthusiasm and motivation. This kind of change can feel chaotic and never-ending, and that’s when large projects like digital transformation can sink into the muck.”
The antidote to fatigue is leadership that “can strip the chaos from the change by providing a clear vision, plan and rationale for the project and making sure that everyone else in the company sees their role and purpose in such an undertaking,” he adds.
How leaders facilitate digital transformation
In another article in Forbes, Karthik Chakkarapani, VP of Digital Transformation & Technology at Cisco, focuses on the importance of leadership in digital transformation. He finds that adopting a beginner’s mindset is a must to drive change. He writes,
“Don’t be afraid to fail, don’t shy away from new environments and, as a leader, you must rise to the challenge to help your team(s) to meet business needs and drive outcomes.”
Recognition of the need to change and responding to urgency is Chakkarapani’s next lesson. He notes,
“True digital transformation is about completely reimagining the way an organization works: from systems to data, to processes, to experiences, to people. To implement, transformation at this level has to be backed by a strong vision and strategy and an airtight operating model to support that strategy.”
We couldn’t have said it better. It is alarming how many leaders in financial services have yet to recognize the urgency to transform.
Clear communication is key in digital transformation. Chakkaparani frames it as having an “open door policy” and “practice progressive transparency.” He writes that “leaders should exemplify radical transparency through consistent, open communications with teams and ensuring that team members feel comfortable sharing their views and opinions. Through all of this, remember that everyone’s experiences are different and respect boundaries as much as possible.”
Chakkaparani echos Roskill on the need to balance strategy and execution. He recommends leaders should “define and align on a high-level strategic vision, develop a strong operating model to support and execute, and continually improve and refine as we go.” He asks leaders to examine their leadership altitude, “effective leaders operate at 50,000 feet with a strategic view, 500 feet with an operational view, and think at the five-foot level as well — focusing on personal awareness and development.”
The role of data governance
In an entirely different type of article in Data Science Central by Bill Schmarzo, I found similar recommendations for successful digital transformations. While Schmarzo’s main thrust is about redefining the role of data governance to make digital transformations work, the lessons he notes can also be applied more broadly. These are:
- Evangelize a compelling vision
- Educate senior executives, business stakeholders, and strategic customers
- Apply Design Thinking and Value Engineering concepts
- Develop a data science team
- Curate a culture built to facilitate customer engagement and operational execution
Schmarzo’s more targeted thesis is a great read on the topic of monetizing of data. I may revisit it on another Extract looking at data strategy, however his high level points spoke to me within the larger digital transformation context.
Digital Banking Engagement
Even as late as the beginning of last year, banking executives continued to think that digital banking was for millennials/Gen Zers or others that are tech savvy. As more people were “forced” to use digital banking through the pandemic adoption of digital channels have reportedly accelerated, particularly for those banking customers that were holdouts. According to an Insider Intelligence study, mobile and online banking rate higher as a top factor in bank selection than nearby branches. This is a change to results prior to the pandemic, when nearby branches edged out mobile banking.
The unbanked
In an article in PaymentsSource by Daniel Wolfe, Editor in Chief, he examines how digital banking novices have been engaged by fintech neobank Current and megabank, Wells Fargo. In the case of Current, they targeted the “unbanked” who needed a bank to receive stimulus or unemployment checks. Their focus was a success, with Wolfe reporting that,
“Current added 100,000 users in April and May last year, reaching 1 million users in June — a number that doubled by November. More than half of these customers were previously unbanked.”
However, as Wolfe notes, “those customers can just as quickly abandon Current if it doesn’t give them a strong reason to stay.”
To engage these new customers, Josh Stephens, VP of Product at Current, says,
“We built dedicated sections in our app for people to get access to information on how to get their stimulus payment information, on how they can update their information with the IRS, etc., and that’s resulted in exponential growth.”
Further, they tracked these customers to “provide rewards on the purchases its customers were most inclined to make.”
For Wells, the challenge has been to keep customers new to digital engaged. Wolfe writes that “Education played an important role in this process, as branch personnel often had to teach customers how to perform…tasks (such as using NFC and mobile wallets).” Wolfe notes,
“For many customers, the first step is the biggest…Even if a customer was reluctant to adopt digital banking or contactless payments, that customer is likely to continue after trying it for the first time.”
The opportunity and challenge in personalization
Getting new customers to use digital is only part of the challenge. A bigger challenge is to grow engagement digitally. In an article in Global Banking and Finance by Aaron Sun, Product Marketing Manager at Redis Labs, makes the point that “the missing puzzle piece” is personalization. He writes, “Banks still have a long way to go in order to tailor products, services, and customer interactions to match their users’ specific needs and preferences.” He adds,
“growing numbers of consumers are now accustomed to interacting with a wide variety of vendors offering fast and reliable online services that incorporate some degree of personalisation, from retailers to on-demand streaming services.”
According to Sun, “banks can build desirable personalised services only if they rethink their data layer strategies.” That’s easier said than done.
“Delivering an effective digital banking service incorporating personalisation depends, above all, on the ability to process and analyse very large datasets at very high speed.”
For most banks, their underlying legacy data infrastructure is a problem. Sun suggests that “many existing banks will need to significantly, or completely, rebuild their data layer to support a genuinely personalised digital banking service.”
If you have personalization in your digital roadmap but are unsure about how to move forward or are looking for help with your digital transformation contact us.
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