Five questions to answer before starting a digital transformation

It’s often said that to get the right answers, you first have to ask the right questions. So what are the right questions that financial institutions should ask when developing or revising their digital strategies?

We asked five bank technology experts what key question they would need answered when undergoing a digital transformation.

What they came up with covers a broad territory, from nuts-and-bolts practical for getting specific plans made or jobs done, to more philosophical about the often complex relationship between financial institutions and their customers.

1) What is our future business model and, specifically, where will the revenue come from?

Peter Redshaw, practice vice president for global financial services at the Gartner Group, says many banks think they have a solid strategy in place, but in reality, most of them don’t.

“Every single bank we talk to has a digital strategy or a transformation initiative or a disruption program,” Redshaw says. “But when you dig a little deeper, 90% of those strategies are not strategic at all.”

Most plans just optimize what the bank is already doing, Redshaw says. “It amounts to applying technologies to make services a little faster, cheaper or more reliable.”

To achieve true transformation, he says, banks need to create completely new revenue streams. “They need to add new products and services that did not exist in their portfolio before, or re-engineer things to do them in a completely different way.”

2) How will our digital strategy adapt to protect the customers’ and banks’ financial health from data breaches and identity fraud?

In an age of rampant cybercrime, there is growing concern about the massive amount of personal information stored electronically and the vulnerability that creates, says Jim Van Dyke, CEO and co-founder of Breach Clarity.

“Security can no longer be primarily seen as a backend prevention function,” Van Dyke says. To protect customers, banks need to consider each consumer’s unique data breach history, and “based on this history, it’s possible to understand which cybercrimes are most likely. Banks can leverage this previously untapped personal breach fingerprint to start loss-prevention efforts earlier in the potential cyber fraud lifecycle.”

Additionally, banks need to deploy new customer engagement tools so that customers understand and can act on advice that closely fits their safety needs.

“The $5 billion annual spending on identity protection services proves that customers are seeking more protection,” Van Dyke says. “Prescribing highly personalized action steps that are seamlessly integrated with digital banking channels simplifies the answers.”

3) Are our data and analytics solutions ready to deliver a personalized digital banking experience to our customers?

In order to deliver personalized banking experiences, banks need to take an enterprise view of a customer’s relationship, says Tiffani Montez, senior analyst at Aite Group.

“Can a financial institution use the information it has about customers to help them manage their accounts more effectively, offer proactive advice and guidance that aligns with the customers’ financial goals, and provide the actionable advice through intelligent engagement?” asks Montez.

Asking this question should allow a bank to see if its data is clean, categorized, accessible, and able to give the insight so that real-time action can be achieved, she says.

4) How will we improve the financial lives of our clients?

Banks must ensure that their focus never strays from the customer impact of their actions, says Robert Meara, senior analyst for banking at Celent.

“We are witnessing a small but growing number of banks whose ‘customer first’ mantra goes beyond providing the same service more conveniently with less friction,” Meara says. “Instead, they are reinventing their value proposition in ways that improve their customers’ financial lives.”

Banks have to remember that, for clients, value is not about sales and additional products, but rather a personalized experience that makes them feel their needs and financial wellbeing come first, Meara says.

And customers need to be aware of the value that they derive from their banks.

“Many retailers powerfully reinforce the value of frequent shopper programs by a simple statement at the bottom of sales receipts, such as, ‘Your loyal customer status saved you X dollars today,’” Meara says. “Banks similarly need to create mechanisms that reinforce the value they bring clients.”

5) What roles do we play in people’s lives?

“For over a century, this aspect of banking has been taken for granted,” says Peter Wannemacher, principal analyst at research firm Forrester. “But that era is ending. Going forward, a bank will only be able to achieve sustained, profitable growth by knowing where it fits in the lives of customers and prospective customers.”

Without answering this question first, the bank’s digital business model, brand strategy, product road map and resource allocation will be misaligned, he says.

And while most banks will give the same traditional answers, others will find unique answers that they would not have expected a few years ago.

“We’ll start to see some banks thrive by answering this question in a way that would have been unthinkable as recently as 2015,” Wannemacher says. “Specialization will drive organic growth and impressive margins at some banks, while others will recognize that their unique role is one that isn’t highly visible to end users.”

Lauri Giesen has spent more than 25 years writing about banking technology and payments for numerous business and financial publications. In the 1990s, she founded and edited Financial Service Online, a magazine covering Internet-based forays into banking and investment services.

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