The top four digital challenges in financial services—and five ways to meet them
A new BDO study finds that financial service organizations remain challenged in the area of digital transformation. Clearing up the confusion surrounding digital transformation is also the subject of a recent BAI Banking Strategies podcast with Kim Capps of Southern Bank. Both the study and podcast suggest that when it comes to ideas versus actions, there’s a disconnect that keeps digital transformation from achieving the best results.
While most organizations have a strategy—or are developing one—only one in seven actually implement it, the BDO study finds. Whether meeting shifting customer expectations or blunting new competition from fintech startups, established players must sharpen employee skills and refine business models. Challenging? Yes, but there are effective solutions.
The four top challenges
Today’s customers want more and want it faster. They expect to bank whenever and wherever they want. That compels institutions to provide omnichannel services that range from easy-to-use mobile apps to traditional brick-and-mortar branches. Retaining customers will hinge on delivering the best, most innovative user experiences. Emerging technologies such as virtual assistants enable the quick, frictionless transactions customers desire.
Digital disruption has hit many industries and now the financial sector stands in the crosshairs of change. Much attention has been paid to fintechs that offer new credit and/or payment solutions, but a recent Financial Stability Board report suggests “BigTech” firms—with their established networks and big data—could impact traditional financial services models even more. One Forbes writer notes: “BigTech players could offer lower-cost (or even free) services since they could use the data obtained through these services for a variety of businesses.”
Evolving employee skills
According to Gartner, artificial intelligence (AI) will create more jobs than it eliminates. However, workers will need skills to participate in the human-machine collaboration shift already well underway. “For the greatest value, focus on augmenting people with AI,” offers Gartner’s Svetlana Sicular.
Finding new business models
While many institutions are on the path to digital transformation, few have a digital culture so baked into their DNA that it routinely generates new revenue streams and other business opportunities. With continued low interest rates and thin margins affecting profitability, institutions that fail to innovate will struggle to stay alive. According to McKinsey, legacy financial institutions that don’t digitally evolve will see a 20–60 percent drop in profits by 2025.
Five solutions and opportunities
While plenty of challenges face financial services organizations, disruption and digital transformation bring a host of opportunities too. Banks can improve speed and accuracy as they free up resources to become leaner and pivot to new revenue streams.
Focus on the customer
Technological advances open up new avenues to give customers what they want and keep them coming back. Leveraging all the data now available, winners will quickly determine which solutions work with customers and which ones don’t. This kind of “fail fast” mentality—which uses collaboration, innovation and agility—has served the tech industry incredibly well. Financial institutions should not just focus on what customers need, but also anticipate and remedy pain points before the customer even knows they were there.
Develop the right omnichannel experiences
Listen to the customer. Meet them where they are. Those who still want the brick-and-mortar bank branch experience for major transactions such as a loan may also prefer something light and simple for daily transactions. Either way, make those experiences easy. Frustrated customers don’t stick around. Studies show more than half won’t return after one bad experience.
Change your culture
Banks were once a prized destination for bright young minds fresh out of college but many of those recruits now gravitate towards tech-sector jobs. Beyond changing the perception of the financial sector, the solution lies in fostering the type of innovative culture those people will prefer.
Implement new technology solutions
Technology will remain key to finding efficiencies and improving customer experiences. AI for example is used by many institutions to automate processes and transactions, while at the same time power customer service chatbots. Yet good customer experience doesn’t always have to ride on the coattails of a chatbot. Reliable, helpful service also wins with customers and innovations such as Self Healing Technology leverage AI and automation to help bank branches function at peak performance.
Partner with experts
There’s no reason you can’t find the expertise you need to succeed. Many advancing organizations have allied with trusted third-party partners to develop and test ideas. That gets products and innovations to market faster, even as it nurtures an atmosphere of innovation.
Putting it all together: Digital transformation, the next formation
What will mark the next significant disruption in financial services? Will it come froms frontiers already rife with exploration—digital currency, biometric, and data mining—or something completely new? Established institutions must be agile, embrace change and learn from innovators. Don’t just focus on short-term returns. While you can’t anticipate all developments, the health of organizations down the road also requires a thought-out, long-term strategy.
Digitally speaking, we absolutely live in transformative times. When we harness this energy rather than resist it, we will soon discover that we can transform the times as well.
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