Fine-tuning digital banking after COVID-19

The pandemic has provided a showcase for the capabilities, while also highlighting where more work is needed.

“Almost overnight, you had an environment where customers had to figure out how to interact with their bank electronically,” says Bob Contri, global financial services industry leader for Deloitte Consulting. “People didn’t stop buying houses, they didn’t stop needing credit. It suddenly needed to happen digitally.”

Adoption of tools and platforms by retail customers had been slowly progressing prior to COVID-19, but starting in the spring of 2020, with branch lobbies forced to close, acceptance and usage of digital started skyrocketing. And when the moment of critical mass suddenly arrived, some digital services worked—and some needed more work and will require refinement in the days ahead.

The digital vulnerabilities exposed during the pandemic underscore the pressing need for “more diligence and investment and innovation to protect against cybercrime and financial crime,” according to Contri.

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Jim Baxley, executive director of global market strategy at nCino, says the pandemic put enormous pressure on the back office.

“The back office sometimes gets lost in this conversation,” says Baxley, a former bank CIO.

“During the pandemic, some banks put up a storefront and made it look and feel as digital as they could. It may look that way to the customer, but it really disadvantaged the people in the back office.”

In too many cases, a purely digital customer experience fell short amid the scramble to duplicate the in-person experience, Baxley says.

“Customers could start a transaction, but when they went to execute, they had to talk to somebody. Or taking it one step farther, they had to fill out a form and were told, ‘We’ll get back to you.’”

Another digital banking function in need of improvement is the interface with government systems, Baxley says. He points specifically at the challenges encountered when the first round of the Paycheck Protection Program was quickly rolled out in the first months of the pandemic. Noting that banks will continue working with government loan programs, Baxley says the interface will require more standardization.

Despite the digital snafus, Baxley says, the industry made progress toward providing customers with a relatively seamless online experience in making requests and getting them fulfilled.

Further digital transformation is about making sure a bank’s datasets are organized, managed and visible so data can be optimized, Baxley adds. “It’s not just on an individual basis when loan pricing, for example, but also on an aggregate basis when banks are making sure reserves are appropriate and that they are meeting regulators’ expectations.”

Deloitte’s Contri echoes Baxley’s sentiment that smart use of data will support the digital transformation of banking in a post-pandemic world.

“The winners in the financial services sector will be institutions that do the best job of aggregating information—both within their organization and externally—and then being able to extract insights from that,” he says. “The big tech companies are making acquisitions and making all kinds of strategic moves that are just about collecting data. They understand that data has value.”

Data will allow financial services organizations to perform mass customization of its product and services offerings, which Contri sees as one of the top digital trends of the future. He also expects to see growth and refinement of point-to-point payment solutions and further development of credit-decisioning engines to expedite loan decisions.

But the inability of many banks to effectively gather, store and extract insights from their data will inhibit the advance of mass customization. “They don’t aggregate data very well. They don’t have a place to house it,” Contri says. “And they don’t have the tools to put on top of the datasets to extract value. That is one of the main factors driving banks to the cloud.”

Still, Contri cautions that effective use of data is no silver bullet. “Data has a lot of challenges. There is an ever-increasing burden around data privacy, data consent and data protection. It is challenging from a regulatory management standpoint.”

He adds, “It is going to be critically important for the winners of the future to strategically transform themselves and provide digital services to their clients through a comprehensive data strategy.”

Learn from industry leaders and understand best practices with the insights shared in the BAI Executive Report, “The changing intersection of banking and technology.”

Edmund Lawler is a BAI Banking Strategies contributing writer.