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Digital transformation: It just never ends

The important questions for banks and credit unions are now more focused on setting the right strategy and the right pace for their transformative journey.

Oct 17, 2022 / Digital Banking

One of the wonders of conducting a Google search is that pretty much any common-language search term seems to yield at least a handful of viable hits. But here’s a query that returns nothing, a total whiff: “Why digital is not the future of banking.”

In some ways, it shouldn’t be a surprise that not a single contrarian is out there flogging the idea that the industry’s urgent move toward all things digital—accelerated, of course, by the pandemic—will for some credible reason reverse itself.  The important questions for banks and credit unions are now more focused on setting the right strategy and the right pace for their transformation.

Via this BAI Executive Report, we offer relevant insights for banking institutions regardless of where they are in their digitalization journey.

Our lead article by contributing writer Katie Kuehner-Hebert identifies a handful of universal truths that banks need to embrace for a successful digital transformation. Among them: Know your customers and their wants and needs, be bold enough to challenge today’s way of doing things, and accept the fact that the transformation is never-ending.

Her reporting highlights experiences and lessons learned by a pair of midsize regional banks as they proceed along their respective paths. Leaders from both institutions emphasized that digital transformation should not be thought of as simply a project to get through, and that the range of work involved in the makeover extends well beyond the hardware and software being installed.

A big part of the reason why this work is never finished is that digital technology is continuously evolving, creating more ways to apply it to the banking sector. One of those ways that’s generating a lot of buzz these days is “embedded finance”—the ability to bundle banking with other services.

Contributing writer Lauri Giesen uses Regions Bank as a case study to examine how banks and credit unions can integrate embedded finance, which was pioneered by fintechs and other nonbanks. Regions’ initial foray into embedded finance in 2020 involved commercial credit cards, but the bank has since broadened into other loan and payment services, and is looking at even more opportunities down the road.

And speaking of opportunities down the road, I give you the metaverse. Some big banks are starting to poke around in this virtual realm even as most of us are still trying to figure out what it is. You can check out my interview with Sandeep Vishnu from the global consulting company Capco to learn more about the metaverse and how banking institutions might venture into it.

Also in this Executive Report:

Transformation centered on the customer: Rebecca Martin from Total Expert tells us that banking institutions should focus on the interactions that matter as a way to achieve lasting benefits when doing a digital makeover. In her view, what counts in growing relationships is engagement. She walks readers through four foundational questions that banking leaders should answer as they determine their future technology needs.

Synthetic identity fraud heats up: Eric Tran-Le from NICE Actimize digs into this fast-growing form of fraud, in which real and fake personal information can be combined to create a new persona, and explores what banks can do about it. Among other angles, he explores synthetic ID fraud efforts related to car loans; buy now, pay later; and even obtaining information about children via social engineering for scams that may evade detection for years.

Making connections via connected TV: Stephenie Williams from Vericast offers her take on the effectiveness of advertising via internet-powered television as part of a multichannel strategy to target banking customers and prospects. What’s needed most, she says, is transparency that enables advertisers to know who they are targeting and how that audience responds. That information can provide insights on how to improve future campaigns.

The power of payment networks: Michael Reed from Deluxe writes that banks are now at a pivotal point for adopting digital payments to save time, cut costs and improve the customer experience. He makes a case for using a payment network directory to send payments and store payment information, stressing that a key value of such an approach is that changes take place in the middle of the payment process, with no changes required of the bank.

Terry Badger, CFA, is the managing editor at BAI.