How to Modernize Your Payments Strategy

2020 induced widespread digital transformation in response to the coronavirus pandemic.

In payments, we saw the rise of options for contactless payments, digital wallets, P2P transfers and more. The challenge for banks was that consumers often did not have to go through their bank to use any of these solutions.

The developments in the payment space over the past year make one thing clear: Banks should keep up with the newest available consumer technology to retain and attract customers, and modernize their digital payments strategy for future success as well.

Consumer demand remains strong, and the experience companies provide matters more than ever. After leaning so heavily on digital solutions for the past year and a half, they expect everything to be easy and instant. It is now relatively easy to find payment apps that provide real-time payments, P2P, bill pay and more. Banks that don’t offer similar solutions runs the risk of losing market share to non-banks that do.

Customers are weighing their banking experience against their experience with fintech apps as well as  any other experience they have when shopping online, ordering food or taking a rideshare. Any good customer experience — no matter the industry — is one that the bank must now measure up to.

Take artificial intelligence (AI) and machine learning, for example. While not every financial institution is using AI and machine learning today, retailers like Amazon.com use AI and machine learning to predict consumer behavior, knowing what they need and when they will need it. They estimate when consumers will repurchase a product or try something new. A bank that is not doing the same is falling behind in providing the experiences that many consumers are growing accustomed to.

Where to Start?
By leveraging technologies like AI and machine learning, banks can use the tremendous wealth of customer data at their disposal to provide a more personalized experience. This is a tremendous advantage over non-bank competitors that do not have access to the same consumer information. It can seem like a challenge to effectively put customer data to use, but there are a few steps banks should take to make the change a successful one.

First, a bank must set clear goals for what it wants to achieve when updating its payment platform or adding a technology like AI and machine learning. For most, the goal will be to provide a better experience, but it is helpful to dig even deeper than that. Ask: Do we want better customer satisfaction? More engagement with the platform? More bill pay users? More account-to-account (A2A) transactions? More P2P transactions? Be as specific as possible with goals, as these form the roadmap for the remainder of the process.

Once goals are set, find the partner that can help achieve those goals. Look for a partner that shares the bank’s vision for payments and has the right skill sets and capabilities to achieve those goals. Finding the right vendor partner will ensure the bank is successful in the end.

Clear goals and a like-minded vendor ensure that the tech a bank uses can help meet its goals. Just as Amazon uses AI and machine learning to predict a consumers’ purchases or recommend a product, banks can predict customers’ payment habits or make proactive payment recommendations to manage their financial health. The use cases of AI and machine learning are versatile, and can serve many different purposes to help banks reach their unique goals.

Finally, do not lose sight of the future. It is easy for banks to get concerned with what will make them successful now, but keep looking ahead. Work with your vendor to think about where both the industry and your bank are going. Be sure to choose solutions that can grow and change with the bank and its customers for years to come, rather than focusing too heavily on the here and now.

Change can be intimidating, but following the right steps to implement a tool like AI will ensure success by creating a better customer experience. Revitalizing your bank’s digital payment strategy is a process, but done right, the stronger digital relationships you build with your customers will be worth it.

The Robust Potential of Robo-Advisors

When the New York Stock Exchange closed its doors on its physical trading floors in March of 2020, the immediate future of investing looked fraught with trepidation. The Dow Jones Index had plunged nearly 3,000 points on March 16 — the largest point drop in its history — and many saw this as a grim indicator of the months to come.

Others saw an opportunity.

During the second quarter of 2020, at the onslaught of the pandemic, Apex Clearing’s Next Investor Outlook Report saw a 27.5% increase in volume of trades as compared to the first quarter. A Charles Schwab study found that 15% of U.S. investors entered the market for the first time during 2020. Robinhood claimed 13 million users by the end 2020, a number some now believe to be near 20 million, according to the news publication CNBC.

Interest in investing has arguably never been more popular, and this trend has no signs of slowing down. CB Insights’ State of Wealth Tech Q1’21 reported that the wealth tech sector raised $5.6 billion in capital in the first quarter of 2021, surpassing the total amount raised during all of 2020 ($5.2 billion). Investors plowed the most money into retail investing, with $4.2 billion raised during the first quarter.

Consumers, specifically new individual investors, are showing that they want in on the action. And banks are in a prime position to introduce their customers to all types of services associated with wealth management via robo-advising technology.

Implementing robo-advising capabilities is an affordable way for banks to provide personalized financial advice to a broad segment of customers. There is typically no asset minimum, and services are available at any time. Also worth noting, banks don’t have to pull professionals away from their high net worth clients and accounts.

Robo-advisors aren’t strictly rooted in investment capabilities. Robinhood and other similar retail investment technology platforms get a lot of press, but there are hundreds of wealth management companies around the world that offer retirement, personal finance management, savings, onboarding, back office automation, reporting, portfolio analytics and aggregation, as well as automated trade execution services.

ABAKA, for example, is a London-based fintech that uses its artificial intelligence technology to offer bank customers retirement, wealth management, banking, workplace and mortgage advice, among other services. Their technology isn’t limited to one sector of wealth management, and customers are in control of what type of advice they seek out depending on their current needs.

Bambu takes a similar stance when it comes to offering individuals specific financial advice at specific moments in time. “Everybody wants a better financial life,” says Ned Phillips, CEO and founder of the Singaporean digital wealth management technology developer. And while this is a universal want, the path to financial security is as unique as snowflakes are.

Phillips points out that the banks that will succeed in keeping customer accounts will be the ones that understand their goals and desires, and subsequently provide personal and actionable advice, as well as recommended next steps. “You need a smaller, nimble company to provide that tech,” he adds. And currently, he thinks fintechs are much better positioned than a bank to understand how to make this attainable for each individual user.

While robo-advisors are an incredible way to both democratize and personalize financial advice, they do not diminish the importance of professional advisor and management services a bank may offer. There will be customers whose needs surpass the services a robo-advisor can offer, and should be transferred to a physical advisor when the time comes.

There isn’t enough time in the world for each individual person to sit down with a financial advisor, but wealth techs with robo-advice capabilities can at least offer it as an option to bank customers. For many, this may be the first time they ever receive financial advice that is tailored to their wants and needs.

Making these services accessible to all will be what sets a bank apart from the rest. And Phillips believes that we’ve barely scratched the surface regarding robo-advising technology and its potential impact on consumer financial wellness. “Today, we’re not even at the beginning.”

Tactical Pillars for Quick Wins in the Challenging Operating Environment

The challenges of 2020 included a landslide of changes in financial services, and the sheer effort by banking professionals to keep operations running was nothing short of historic.

Although there will be some reversion to prior habits, consumers in 2021 have new expectations of their banks that will require more heavy lifting. This comes at a time when many banks in the U.S. are engaging in highly complex projects to redesign their branches, operations and organizational charts. Fortunately, there are some quick win tactics that can support these efforts. Consider the following three “pillar” strategies that offer short-term cost savings and guidelines to set a foundation for operational excellence.

Portfolio Rationalization
Portfolio rationalization need not involve product introductions or retirements. But, given the changing consumer landscape, executives should consider taking a fresh look at their bank’s product portfolios. Due to the many changes in accountholder behavior, certain cost/benefit dynamics have changed since the pandemic began. This fact alone makes re-evaluating and recalibrating existing portfolio strategies a matter of proper due diligence. Rationalizing the portfolio should include revising priorities, adding new features and reassessing risk profiles and existing project scopes.

Process Re-Engineering
Banking executives have been under tremendous pressure recently to quickly implement non-standard procedures, all in the name of uninterrupted service during socially distanced times.

Though many working models will see permanent change, it is critical to optimize these processes early for long-term efficiency, security and customer experience. As the digital curve steepens, banks will need to map out the customer journey across all digital channels to remain competitive. Some process re-engineering methods include eliminating workarounds, streamlining processes and updating legacy policies that are no longer relevant.

Intelligent Automation
Banks are increasingly leveraging technologies classified under the umbrella of intelligent automation. These include machine learning, robotic process automation and artificial intelligence — all of which have become especially relevant to deal with multiple types of high-volume, low-value transactions. Automated workflows remove the clerical aspects of the process from the experts’ plates, allowing them to focus time and energy on more high-value activities. When executed well, intelligent automation works alongside humans, supplementing their expertise rather than replacing it. For example, areas like fraud and underwriting are becoming increasingly automated in repetitive and known scenarios, while more complicated cases are escalated to personnel for further analysis.

Supplier Contracts
Auditing invoices for errors and evaluating vendor contracts might be the last place a banker would look to establish a quick win. However, our benchmarks suggest they can be a critical stepping-stone to bottom-line opportunities. Existing vendor contracts often include inconsistent clauses and undetected errors (such as applications of new pricing tiers missed, etc.). Eventually, minor errors can creep into the run rate that adds up over the years to significant dollar discrepancies. With extensive due diligence or someone in the know, it’s possible to find a six to seven figure lift, simply by collecting intelligence on the prevailing market rates, the available range of functionality and reasonable expectations for performance levels.

While the financial services industry has been keeping operations running uninterrupted, there is no time like the present to optimize operating processes. Accomplishing a few results early  on can free up resources and support long-term gains. Executives should take the time now to optimize operating model structures in order to brace for what comes next. Looking into the increasingly digital future, consumers will continue to expect banks to reinvent and build up their operating models to greater heights.

How to Reduce Application Abandonment and Grow Revenues

Banks drive significant portions of their revenues through products such as credit cards, mortgages and personal loans. These products help financial institutions improve their footprint with current customers and acquire new customers. The coronavirus pandemic has increased demand for these products, along with an excellent opportunity to improve revenues.

But applying for these offerings has become a challenge due to changes in the in-person banking environment and the limited availability of customer support outside traditional banking hours. Even though customers and prospects are attempting to apply for these products online, financial institutions are experiencing low conversions and high drop-off rates. Simple actions — such as an applicant not checking an agreement box or not having clarity about a question — are behind over 40% of the application abandonment instances.

Financial institutions can tackle such situations to improve the application journey and reduce instances of abandonment with products such as smart conversion that are powered by artificial intelligence (AI).

How Does Smart Conversion Work?
AI is being increasingly incorporated into various functions within banks to help tackle a variety of issues. Incorporating AI can enhance customer service, allowing customers to become more self-sufficient and quickly find answers to questions without long wait times or outside of bank hours.

In smart conversion, an AI-powered assistant guides applicants throughout the application process, step by step, providing tips and suggestions and answering questions the applicant may have. Smart conversion achieves this through its AI co-browsing capability. In AI co-browsing, the AI assistant snaps on to the application form and proactively helps fill out the application form if it sees a customer slow down. If an applicant has questions, it helps them at the moment of doubt and ensures they continue with the application. This enables applicants to complete the form with ease, without additional assistance from someone within the financial institution.

Say there is a portion of an application that stops an prospective customer in their tracks: They are not sure of its meaning. Smart conversion will proactively assist them with the clarification needed at that moment. Applicants can also interact with the smart conversion assistant at any time to ask questions. For applicants already in the system, the smart conversion assistant can autofill information already available about them, making the application process more seamless and efficient.

The smart conversion assistant provides complete flexibility to the bank to choose the parts of an application that should deliver proactive help to applicants. It also offers insights on the customer journey and details why applicants drop off — continually enabling financial institutions to improve the customer journey.

Better Business with Smart Conversion
Smart conversion helps financial institutions increase revenues and enhance the customer experience by assisting applicants and improving application completion rates. These tools have proven to increase conversions by up to 30% — a considerable improvement to financial institutions of any size.

Financial institutions must look at the current offerings in their technology suite and explore ways to incorporate valuable tools to become more efficient and grow. They should consider leveraging smart conversion to reduce application abandonment rates and the assistance needed from the call center or internal staff while growing revenues.

In a time when banks are fiercely competing for customers’ valuable business and relationships, AI-powered tools like smart conversion that can be set up easily and deliver results swiftly will be key.

Best Practices to Achieve True Financial Inclusivity

According to the Federal Reserve’s report on the economic well-being of U.S. households in 2019, 6% of American adults were “unbanked” and 16% of U.S. adults make up the “underbanked” segment.

Source: Federal Reserve

With evolving technological advancements and broader access to digital innovations, financial institutions are better equipped to close the gap on financial inclusivity and reach the underserved consumers. But to do so successfully, banks first need to address a few dimensions.

Information asymmetry
Lack of credit bureau information on the so-called “credit invisible” or “thin file” portions of unbanked/underbanked credit application has been a key challenge to accurately assessing credit risk. Banks can successfully address this information asymmetry with Fair Credit Reporting Act compliant augmented data sources, such as telecom, utility or alternative financing data. Moreover, leveraging the deposits and spend behavior can help institutions understand the needs of the underbanked and unbanked better.

Pairing augmented data with artificial intelligence and machine learning algorithms can further enhance a bank’s ability to identify low risk, underserved consumers. Algorithms powered by machine learning can identify non-linear patterns, otherwise invisible to decision makers, and enhance their ability to screen applications for creditworthiness. Banks could increase loan approvals easily by 15% to 40% without taking on more risk, enhancing lives and reinforcing their commitment towards the financial inclusion.

Financial Inclusion Scope and Regulation
Like the Community Reinvestment Act, acts of law encourage banks to “help meet the credit needs of the communities in which they operate, including low- and moderate-income (LMI) neighborhoods, consistent with safe and sound banking operations.” While legislations like the CRA provide adequate guidance and framework on providing access to credit to the underserved communities, there is still much to be covered in mandating practices around deposit products.

Banks themselves have a role to play in redefining and broadening the lens through which the customer relationship is viewed. A comprehensive approach to financial inclusion cannot rest alone on the credit or lending relationships. Banks must both assess the overall banking, checking and savings needs of the underbanked and unbanked and provide for simple products catering to those needs.

Simplified Products/Processes
“Keep it simple” has generally been a mantra for success in promoting financial inclusion. A simple checking or savings account with effective check cashing facilities and a clear overdraft fee structure would attract “unbanked” who may have avoided formal banking systems due to their complexities and product configurations. Similarly, customized lending solutions with simplified term/loan requirements for customers promotes the formal credit environment.

Technology advancements in processing speed and availability of digital platforms have paved the way for banks to offer these products at a cost structure and speed that benefits everybody.

The benefits of offering more financially inclusive products cannot be overstated. Surveys indicate that consumers who have banking accounts are more likely to save money and are more financially disciplined.

From a bank’s perspective, a commitment to supporting financial inclusivity supports the entire banking ecosystem. It supports future growth through account acquisition — both from the addition of new customers into the banking system and also among millennial and Gen Z consumers with a demonstrated preference for providers that share their commitment to social responsibility initiatives.

When it comes to successfully executing financial inclusion outreach, community banks are ideally positioned to meet the need — much more so than their larger competitors. While large institutions may take a broader strategy to address financial inclusion, community banks can personalize their offerings to be more relevant to underserved consumers within their own local markets.

The concept of financial inclusion has evolved in recent years. With the technological advancements in the use of alternative data and machine learning algorithms, banks are now positioned to market to and acquire new customers in a way that supports long-term profitability without adding undue risk.

Banks Risk Missing This Competitive Advantage

Artificial intelligence is undergoing an evolution in the financial services space: from completely innovative “hype” to standard operating technology. Banks not currently exploring its many applications risk being left behind.

For now, artificial intelligence remains a competitive advantage at many institutions. But AI’s increasing adoption and deployment means institutions that are not currently investing and exploring its capabilities will eventually find themselves at a disadvantage when it comes to customer satisfaction, cost saves and productivity. For banks, AI is not an “if” — it’s a “when.”

AI has proven use cases within the bank and credit union space, offering a number of productivity and efficiency gains financial institutions  are searching for in this low-return, low-growth environment. The leading drivers behind AI adoption today are improvements in customer experience and employee productivity, according to a 2020 report from International Data Corporation. At Microsoft, we’ve found several bank-specific applications where AI technology can make a meaningful impact.

One is a front-office applications that create personalized insights for customers by analyzing their transaction data to generate insights that improve their experience, like a charge from an airline triggering a prompt to create a travel notification or analyzing monthly spend to create an automated savings plan. Personalized prompts on a bank’s mobile or online platform can increase engagement by 40% and customer satisfaction by 37%; this can translate to a 15% increase in deposits. Additionally, digital assistants and chatbots can divert call center and web traffic while creating a better experience for customers. In some cases, digital assistants can also serve as an extension of a company’s brand, like a chatbot with the personality of “Flo” that auto insurer Progressive created to interact with customers on platforms like Facebook, chat and mobile.

Middle-office fraud and compliance monitoring are other areas that can benefit from AI applications. These applications and capabilities come at a crucial time, given the increased fraud activity around account takeovers and openings, along with synthetic identity forgery. AI applications can identify fraudsters by their initial interaction while reducing enrollment friction by 95% and false positives by 30%. In fact, IDC found that just four use cases — automated customer service agents, sales process recommendation and automation, automated threat intelligence and prevention and IT automation — made up almost a third of all AI spending in 2020.

There are several steps executives should focus on after deciding to implement AI technology. The first is on data quality: eliminating data silos helps to ensure a unified single view of the customer and drives highly relevant decisions and insights. Next, its critical to assemble a diverse, cross-functional team from multiple areas of the bank like technology, legal, lending and security, to explore AI’s potential to create a plan or framework for the bank. Teams need to be empowered to plan and communicate how to best leverage data and new technologies to drive the bank’s operations and products.

Once infrastructure is in place, banks can then focus on incorporating the insights AI generates into strategy and decision-making. Using the data to understand how customers are interacting, which products they’re using most, and which channels can be leveraged to further engage — unlocking an entire new capability to deliver business and productivity results

In all this, bank leadership and governance have an important role to play when adopting and implementing technology like AI. Incorporating AI is a cultural shift; executives should approach it with constant communication around AI’s usage, expectations, guiderails and expected outcomes. They must establish a clear set of governance guiderails for when, and if, AI is appropriate to perform certain functions.

One reason why individual banks may have held off exploring AI’s potential is concern about how it will impact current bank staff — maybe even replace them. Executives should “demystify AI” for staff by offering a clear, basic understanding of AI and practical uses within an employee’s work that will boost their productivity or decrease repetitive aspects of their jobs. Providing training that focuses on the transformational impact of the applications, and proactively creating new career paths for individuals whose roles may be negatively impacted by AI show commitment to employees, customers, and the financial institution.

It is critical that executives and managers are aligned in this mission: AI is not an “if” for banks, it is “when.” Banks that are committed to making their employees’ and customers’ lives better should seriously consider investing in AI capabilities and applications.

 

Three Reasons to Prioritize Digital Customer Service

Consumers and businesses are increasingly choosing to complete financial tasks in digital channels, but banks have largely failed to evolve their customer service and support strategies.

Traditional phone service models that banks have relied on for decades are notoriously frustrating and inefficient not only for the consumer, but for the agent as well. Forcing customers to leave the digital channel to connect with a service agent via a time-consuming phone experience is detrimental to customer satisfaction and loyalty. Not to mention, this channel hop leads to higher costs and inefficiencies for the bank. It’s time for banks to take a digital-first approach to customer service.

Digital customer service has experienced significant acceleration in recent months. Banks that modernize their customer service strategies with digital-first communication and collaboration capabilities will be able to enhance the customers’ and employees’ experiences. There are three top reasons banks should adopt digital customer service: modernize communications, boost operational efficiencies and increase customer engagement.

Modernize Communications
The coronavirus pandemic has amplified the use of digital this year, more than anyone could have predicted. With fewer customers visiting branches, digital banking usage has skyrocketed. While this shift made banks realize that the digital experience should be their top priority, many are neglecting the glue that makes digital transformation work: digital customer service.

For many consumers, this is the first time they’re relying on digital for more-complex tasks like opening accounts and applying for loans. Customers must have the ability to be met with full support and guidance within digital channels by bankers that can see their issue in real time and help them find a resolution.

Boost Operational Efficiencies
Contact centers have traditionally fielded simple requests, such as determining account balances and transferring money between accounts, but now self-service and automation allows most customers to handle these more straightforward tasks themselves. As a result, bank agents are typically met with more complex requests and inquiries. This has created a need for contact centers to become more sophisticated, with more highly-trained and specialized employees.

Savvy banks are recruiting AI to help with this transition — not just for customer-facing inquiries but agent training as well. Bots can speed up customer service by surfacing relevant information during interactions, alleviating agents from manually retrieving data from back-end systems. They can also recommend the best next action and pre-approved verbiage for customer responses, reducing time and effort for agents and increasing compliance with bank policies. As agents accept or decline the suggestions, the bank’s system can capture more data to optimize and improve bot recommendations for more accurate, targeted assistance in the future.

Digitizing customer service and enlisting bots to assist agents gives banks a way to save time, increase operational efficiencies and boost staff morale and satisfaction. This is especially important now, as they navigate thin margins and the pressure to do more with less.

Increase Customer Engagement
Today’s phone-centric customer service models typically include long wait times and disjointed experiences. Once customers connect with an agent, they have to spend time reauthenticating and providing context around the issue at hand. Meeting customers where they are in the digital channel instead — whether that’s through chat, video or voice — ensures that the agent can see the issue in real time, eliminating any guesswork. Agents should never have to ask ‘How can I help you?’ again. This more-seamless option leads to a better customer experience and increased engagement and loyalty.

Customers expect their financial services providers to know and understand them, just as big tech companies and major retailers like Amazon.com and Netflix do. Through digital customer service, banks can better, more quickly access relevant customer information necessary to tailor responses and interactions, ultimately boosting customer loyalty. In fact, it’s common for banks that leverage digital customer service to experience 20% improvements in customer satisfaction, reflected in net promoter and customer satisfaction scores.

Banks are increasingly realize that a phone-first approach to customer service will no longer cut it, especially in the increasingly digital world.  In fact, the most-advanced institutions are removing phone numbers from their websites entirely, replacing them with flexible, digital-first communication options. Those that embrace digital customer service will be well positioned to keep and grow customer relationships, increase profit margins and secure a strong competitive position.

The Promise, and Peril, of Risk Technology

The pandemic has underlined how essential risk technology is for proactive and responsive financial institutions.

Prior to the coronavirus outbreak, bank risk managers were already incorporating such technology to manage, sift and monitor various inputs and information. The pandemic has complicated those efforts to get a handle on emerging and persistent risks — even as it becomes increasingly critical to incorporate into day-to-day decision-making.

Data, and getting insights from it, has always been central to how risk managers have worked. That hasn’t changed,” says Sandeep Mangaraj, an industry executive at Microsoft who focuses on digital banking transformations.

Prior to the pandemic, concerns about operational risk had increased “somewhat” or “significantly” among 51% of CEOs, chief risk officers and directors responding to Bank Director’s 2020 Risk Survey, which was completed just before the pandemic. More than half also revealed heightened concerns around cybersecurity, credit and interest rate risk, and strategic risk.

That survey also found respondents indicating there was room for technology to improve their compliance with Bank Secrecy Act and anti-money laundering rules (76%), know your customer (50%) requirements, and vendor management requirements.

One way executives and risk managers can keep up is by incorporating risk technology to help sift through reams of data to derive actionable insights. These technologies can create a unified view of risk across exposure types and aggregation levels — product, business line, region — so executives can see how risk manifests within the bank. Some of these solutions can also capture and provide real-time information, supplementing slower traditional sources or replacing end-of-day reports.

But the pandemic led more than half of respondents to Bank Director’s 2020 Technology Survey to alter or adjust their technology roadmaps — including 82% of respondents at institutions with more than $10 billion in assets. Two-thirds said they would upgrade existing technology; just 16% planned to add technology to improve regulatory compliance.

Artificial intelligence holds a lot of promise in helping banks more efficiently and effectively comply with regulations and manage risk. Many banks are still early in their risk technology journeys, and are working to identify areas or situations that can be serviced or assisted by risk technologies. Forty-six percent of respondents to Bank Director’s Technology Survey say they are not utilizing AI yet.

Those that have are applying it to situations like fraud monitoring, which generates large amounts of data that the bank can correlate and act on, Mangaraj says. Others have applied it to process intelligence and process improvement, or used it to enhance the control environment. Key to the success of any AI or risk-technology endeavor is finding the right, measurable application where a bank can capture value for heightened risk or capabilities.

“We have a client who uses AI to monitor trader conversations that can proactively flag any compliance issues that may be coming up,” he says. “There are lots and lots of ways in which you can start using it. Key is identify cases, make sure you have clear measurement of value, monitor it and celebrate it. Success breeds success.”

The addition and incorporation of innovative risk technologies coincides with many banks’ digital transformations. While these changes can often complement each other, they can also make it difficult for a bank to manage and measure its risk, or could even introduce risk.

A strong management team, effective controls and active monitoring of the results are essential keys to a bank’s success with these technology endeavors, says James Watkins, senior managing director at the Isaac-Milstein Group. Watkins served at the FDIC for nearly 40 years as the senior deputy director of supervisory examinations, overseeing the agency’s risk management examination program.

“It’s time for a fresh look of the safeguards and controls that banks have in place — the internal controls and the reliability of the bank system’s and monitoring apparatuses. All of those are extremely important,” he says.

Bank executives and boards of directors must have the processes and procedures in place to ensure they’re using this technology and contextualizing its outcomes in a prudent manner.

“I think the importance of general contingency planning, crisis management strategies, thinking strategically — these are all areas that boards of directors and senior management really need to be attuned to and be prepared for,” Watkins says.

Enhancing Risk & Compliance

Financial institutions increasingly seek to use technology to efficiently and effectively mitigate risk and comply with regulations. Bank leaders will need the right solutions to meet these objectives, given the amount of data to make sense of as organizations include risk as part of their decision-making process. Microsoft’s Sandeep Mangaraj explains how banks should explore these issues with Emily McCormick, Bank Director’s vice president of research. They discuss:

  • How Risk Management is Evolving
  • Adopting AI Solutions
  • Planning for the Future

Four Digital Lessons from the Pandemic

2020, so far, is the year of digital interactions.

Without the ability to interact in the physical world, digital channels became the focal point of contact for everyone. Industries like retail and restaurants experienced a surge in the use of digital services like Instacart, DoorDash and others.

This trend is the same for banks and their customers. In a survey conducted by Aite Group, 63% of U.S. consumers log into financial accounts on a desktop or laptop computer to check accounts at least once a week, while 61% use a smartphone.

The coronavirus pandemic has certainly accelerated the move to the digital channel, as well. In a Fidelity National Information Services (FIS) survey, 45% of respondents report changing the way they interacted with their financial institution because of the pandemic. The increased adoption of the digital channel is here to stay: 30% of respondents from the same survey noting they plan to continue using online and mobile banking channels moving forward.

The same is true for payments. FIS finds that consumers are flocking to mobile wallets and contactless payment to minimize virus risks, with 45% reporting using a mobile wallet and 31% planning to continue using the payment method post-pandemic.

This pandemic-induced shift in consumer preferences provides a few important lessons:

1. Experience Matters
Customers’ experiences in other industries will inform what they come to expect from their bank. Marketing guru Warren Tomlin once said, “a person’s last experience is their new expectation.” No matter where it came from, a great digital experience sets the standard for all others.

Banks should look to other industries to see what solutions can offer a great customer experience in your online and mobile banking channels. Customers’ service experiences with companies like Amazon.com’s set the bar for how they expect to interact with you. Their experience making payments with tools from PayPal Holdings, like Venmo, may inform their impression of how to make payments through the bank.

2. Personalization is Key
Providing a personalized experience for customers is key to the success of your bank, both now and in the future. Your bank’s online and mobile tools must generate a personalized experience for each customer. This makes them feel valued and well served — regardless of whether they are inside a branch or transacting through a mobile app.

Technologies like artificial intelligence can learn each customer’s unique habits and anticipate specific needs they might have. In payments, this might look like learning bill pay habits and helping customers manage those funds wisely. AI can even make recommendations on how users can ensure they have enough funds to cover the month’s bills or save anything they have left over.

AI is also able to look at customer data and anticipate any services they might need next, like mortgages, car loans or saving accounts. It brings the personal banker experience to customers in the digital world.

3. Weave the Branch Into the Digital
The ability to interweave the personalized, in-branch experience into the digital world is crucial. There are positives and negatives in both the branch and digital channels. The challenge for banks is to take the best of both worlds and provide customers with an experience that shines.

Customers want to know that someone is looking out for them, whether they can see that person or not. A digital assistant keeps customers engaged with the bank and provides the peace of mind that, whether they are in the branch or 100 miles away, there is always someone looking out for their financial well-being.

4. Embrace the “Now” Normal
To state that the Covid-19 pandemic changed the world would be a big understatement. It has disrupted what we thought was “business as usual,” and irrevocably changed the future.

The “new normal” changes day by day, so much that we choose to more accurately refer to it as the “now normal.” The increased dependency on digital has made it critical to have the right infrastructure in place . You truly never know what is coming down the line.

Customers enjoy the ease of digital and, more than likely, will not go “back to normal” when it comes to banking and payments. Now, more than ever, is the time to examine the digital experiences that your bank offers to further ensure its prepared for this endless paradigm shift that is the “now normal.”