7 Imperatives Financial Institutions Need to Drive Digital Programs to Success.
Three days, two stages, and a thirteen-hour flight from San Francisco…and that’s a wrap for Backbase Connect 2018. After a whirlwind of exhilarating talks from digital-first movers — our wheels on the insights gained in Amsterdam are still turning.
To kick it all off, Backbase CEO Jouk Pleiter level set the audience to the new digital world landscape with reference to Marc Andreessen’s Wall Street Journal essay, “Why Software Is Eating The World.”
Andreessen’s 2011 essay foreshadowed the impending software takeover of every industry, “from movies to agriculture to national defense.” Andreessen’s vision was a strong lens from which to assess the future of digital-first banking, in which he declared that “practically every financial transaction, from someone buying a cup of coffee, to someone trading a trillion dollars of credit default derivatives, (will be) done in software.”
Seven years later, Andreessen’s vision has come to fruition. Software companies have come to take over, and the intensity and high technology state of the financial services world is here…
Rounding out his keynote at Backbase Connect 2018, Jouk set the imperatives that are necessary for financial institutions to be situated in the direction for success—we at Extractable couldn’t have agreed more with his assessment:
1. Platformication
Jouk talked about the importance of the banking platform – bringing to life the thinking shared by Ron Shevlin, Director of Research at Cornerstone Advisors, in his 2016 piece coining the phrase in the Financial Brand.
The scalability and benefit of the platform model to your financial institution is paramount. Platform winners outside of banking; like Uber, AirBNB, and Amazon, have proven that building with an open platforms enables scale. For example, Amazon Web Services is generating six billion per quarter. Cloud infrastructure, open APIs, and microservices are the future – but you can’t truly enjoy those benefits until you get the platform right.
To see a great example of a leader that’s heavily investing in digital transformation, look no further than DBS Bank. Their heavy investment in digital transformation has paid off. Today, DBS does more revenue in digital than the entire business does in traditional.
DBS BANK – Digital vs. Tradition Customer Profit, Cost, Revenue Comparison
2. Culture
An underrated cornerstone to any successful transformation is culture. “Getting culture right is the key to success in a digital world and resolving culture issues is no longer optional,” researchers from Mckinsey and Company say.
An organization’s culture is immensely important in supporting the shift toward greater client-centricity. A company’s cultural patterns can encourage innovation, growth, market leadership, ethical behavior and/or customer satisfaction.
Banks and credit unions that shake up their culture by addressing shortcomings in organizational structure and driving customer centricity into everyday operations will see the most results.
3. Team Size
In conjunction with the last takeaway, Jouk made some great points about team size in relationship to effectiveness and productivity. Jeff Bezos is rumored to have a rule at Amazon that if a team cannot be fed by two pizzas, then it’s too large. More people equals more bureaucracy, inefficiency, and slower progress.
Smaller teams of smart, qualified, motivated, people are often able to collaborate and communicate better than bigger ones.
The size is important as it relates to down to a matter of structure. As companies grow, hierarchies tend to add more complexity. The more hands and levels of approval a project needs to pass through, the greater the risk it can be watered down or held back.
Plain and simple, small teams are able to get more things done. This is especially true in a space with high review processes, regulatory and compliance.
4. Personas
Having a personas strategy is of vital importance. A persona is the profile of an ideal customer based on information from a range of sources. It’s a tool that gets your entire team on the same page and helps your marketing programs stay on track. Those buyer personas will serve to fully understand your customer’s goals and motivations.
In a meeting recently, a senior leader took issue at the suggestion from a colleague that they needed a Millennial strategy… And he was right.
Financial institutions don’t need Millennial strategies as much as they need digital first banking strategies and experiences.
However, Millenials are a population of 86 million, seven percent larger than the Baby-Boomer generation, and as their spending power increases so too does their influence over the financial services industry — and this generation expects the best in digital.
Credit Unions and Banks must see Millennials as an important demographic to capture roughly 40% of those looking for a new bank or credit union are under 30 years old. Failing to compete in this segment spells doom for financial institutions. If organizations can capture Millennials now, they will be able to build long-lasting future relationships. But, what’s most imperative is courting all demographics, especially Millennials, and utilize a persona strategy that understands the needs.
5. Onboarding
Opening an account at your FI should be frictionless. Backbase is hyper-focused on seamless onboarding. So seamless, in fact, that their goal is less than four minutes. They are centralized on creating a frictionless, safe, and mobile friendly process—for all— corporate, commercial, and small business consumers. The onboarding process should be of the utmost simplicity and ease, but customers are constantly dismayed by how challenging opening an account can be.
The bottom line? Onboarding should be as flexible and frictionless as possible. When customers see the convenience, speed, ease, security that can be demonstrated by frictionless onboarding, their positive perception of the brand — as well as the likelihood they will become a customer — is reinforced.
6. The Importance of CX
The digital customer experience should be at the forefront. It’s no surprise Jouk didn’t leave this off his list.
The champions of this are Uber, AirBnB and others in the same league who are not outsourcing CX projects to low-cost, fixed-fee vendors. For those digital first companies, getting the experience right is paramount.
They are customer obsessed and leverage strategies to power user and design thinking to yield experiences that convert better and succeed at generating new business. They know that every inch of improvement in experience connects directly to the bottom line on the P&L and they understand how to harness data to develop digital experiences that yield better outcomes for all those involved.
For financial services companies, customer experience is crucial in maintaining trust. Exceeding customer-experience expectations leads to increased advocacy, especially for customers who are unhappy with their financial providers.
As digital technologies provide greater capabilities to personalize experiences, consumers are asking their banks for customized solutions more than ever. However, as digital consumers become more demanding, most financial institutions are falling further behind in improving the customer experience, despite recognizing CX as a top objective.
Bottom line, having a customer-centric organization is more than just a good thing — it’s become a matter of survival.
7. AI
The future is here, and AI is here to stay. From movies, telection, and business innovations, AI is virtually ubiquitous. While still in its early stages across the financial services industry, it’s anticipated that AI adaptation will accelerate in the coming years.
In many use cases AI automating routine tasks and is augmenting human decision making. A study by Accenture detailed that 77% of banks plan to use AI to automate tasks to a large extent in the next three three years.
Additionally, a recent study conducted by Autonomous Next indicates the potential cost savings of using AI “could total $450 billion across the banking industry by 2030.”
In the banking world smart assistants will be commonplace. Chatbots like Bank of America’s Erica and Capital One’s Eno will be the norm.
In summary, Backbase is investing in, and committed to, leadership in the financial services category. Jouk outlined what the new mission in banking is—Moving beyond digital banking, and transforming to be a digital-first bank. We salute his company’s dedication to supporting the industry and share his passion and dedication to help financial businesses move towards becoming resilient, innovation-driven organizations.