Why Banks Should Scrap Their Digital Strategy

The last thing banks need when they pursue a digital transformation is a digital strategy.

Not too many banks get this right. Rather than create a digital strategy, companies instead need one cohesive enterprise strategy for how to be the best in serving their clients’ needs.

Setting up distinct channel strategies, or a digital strategy that runs outside of your bank strategy, only generates a bunch of disparate go-to-market ideas. That siloed approach puts your bank on a road to failure by generating and instigating conflicts, as teams vie for differentiated levels of support and resources to strengthen now-competing channels.

Instead of standing on its own, digital should shape and drive your single banking strategy. You are striving for integrated omnichannel delivery, which will translate into the best experience no matter how customers engage with you. Even if you want customers to handle the overwhelming percentage of their banking online, many will continue to walk into branches, particularly for complex transactions like mortgage applications, and call you with questions.

Granted, safer-at-home guidance in response to the coronavirus pushed digital adoption forward, more by necessity than desire. In July, nearly five months after the pandemic started, 91% of consumers conducted banking online, mostly to deposit checks or review account balances. Even more striking: 40% of consumers reported using their bank’s mobile app more often. But bankers shouldn’t take these adjustments for granted or consider them permanent.

Customers don’t care that different teams manage your digital, branch and telephone channels. They want to trust you to meet them wherever they are, and not have to explain who they are and what they want every time they interact with your bank. Digital allows you to walk that fine line with insights to follow their electronic footprints to specific products that match their financial needs.

Digital Is a Tool, Not a Product
This is so important that I need to repeat it: Digital is a tool, not a product.

I already know some folks are saying, “But, yes, it is. We produced a mobile app.” That’s not the same. You created that app for its own purpose. It also needs to be connected to something else — your banking systems — and deliver a real solution.

Granted, your bank needs digital visionaries who can envision powerful, engaging capabilities and stay ahead of customers. But these leaders must start with your banking strategy and weave their innovative ideas into that bedrock. Your team should be constantly stepping up its capabilities and services, and positioning them in a near-linear fashion alongside the customer journey so that customers can get what they want, when they need it.

And while you should never have a distinct digital strategy, you do need a dedicated team to monitor and track performance in this channel and identify new customer needs and opportunities. This is the essence of digital transformation, as you continue iterating your offerings and migrating more customers and transactions into your digital channel.

Changing the Internal Mindset
Digital transformation is about changing who you are as a bank and bringing that to your customers. The starting point is always your enterprise strategy, which anchors your value propositions on how you serve customers and your role in the community.

Every bank associate will have a role in achieving the future vision defined in that strategy. Be clear on how digital connects to your bank strategy and communicate expectations so that everyone from the call center team to the C-suite understands where they fit in. Even as your bank inches forward, it remains on a treadmill: continuing to advance to stronger performance that outpaces the competition but never crossing the finish line.

As you develop your bank’s enterprise strategy, establish and monitor metrics upfront to gauge success and maturity, including in the digital channel. Some metrics to consider include improved efficiency, the amount of customers adopting digital behaviors and successfully escalating the right transactions in your digital channel.

Be sure to measure progress in three dimensions: Are you getting more efficient as customers migrate to higher digital usage? Are you freeing up funds to invest in other initiatives? And are you maintaining the customer experience that defines your bank?

Because if you lose that in the long run, you’re going to lose your customers.

Inspired by The Joshua Tree

Thirty-four years ago, an Irish band came up with an album that sounded revolutionary for its time. U2’s “The Joshua Tree” went on to sell more than 25 million copies, firmly positioning it as one of the world’s best-selling albums. Hits like “I Still Haven’t Found What I’m Looking For” remain in heavy rotation on the radio, television and movies.

Talk about staying relevant. As it turns out, U2 has some wisdom for us all.

Relevance is one of those concepts that drives so many business decisions. For Bank Director, the term carries special importance, as we postpone our annual Acquire or Be Acquired Conference to January 30 through Feb. 1, 2022. In past years, this special event drew more than 1,300 bankers, bank directors and advisors to discuss concepts of relevance and competition in Phoenix.

While we wait for our return to the Arizona desert, we got to work on a new digital offering to fill the sizable peer-insight chasm that now exists.

The result: Inspired By Acquire or Be Acquired.

This new, on-demand offering goes live on February 4. Available exclusively on BankDirector.com, it consists of timely short-form videos, CEO interviews, live “ask me anything”-type sessions and proprietary research. Topics range from raising capital to deal-making, pricing to culture and yes, technology’s continued impact on our industry.

Everything within this board-level intelligence package provides insight from exceptionally experienced investment bankers, attorneys, consultants, accountants, fintech executives and bank CEOs. So, with a nod towards Paul David Hewson (aka Bono) and his bandmates in U2, here’s a loose interpretation of how three of their songs from “The Joshua Tree” are relevant to bank leadership teams, together with our Spotify #AOBA21 playlist for your enjoyment.

With or Without You

(The question all dealmakers ask themselves.) 

Many aspects of an M&A deal are quantifiable: think dilution, valuation and cost savings. But perhaps the most important aspect — whether the deal ultimately makes strategic sense — is not. As regional banks continue to pair off with their peers, I talked with a successful dealmaker, D. Bryan Jordan, the CEO of First Horizon National Corp., about mergers of equals.

 

Where the Streets Have No Name

(Banks can help clients when they need it most.)

A flood of new small businesses emerged in 2020. In the third quarter 2020 alone, more than 1.5 million new business applications were filed in the United States, according to the U.S. Census Bureau, nearly double the figure for the same period the year before. Small businesses need help from banks as they wander the streets of their new ventures. So, I asked Dorothy Savarese, the Chair and CEO of Cape Cod 5, how her community bank positions itself to help these new business customers. One part of her answer really resonated with me, as you’ll see in this short video clip.

 

Running to Stand Still

(Slow to embrace new opportunities? Don’t let this become your song.)

With the rising demand for more compelling delivery solutions, banks continue to find themselves in competition with technology companies. Here, open banking provides real opportunities for incumbents to partner with newer players. Ideally, such relationships provide customers greater ownership over their financial information, a point reinforced by Michael Coghlan, the CEO of BrightFi.

These short videos provide a snapshot of the conversations and presentations that will be available February 4. To find out more about Inspired By Acquire or Be Acquired, I invite you to take a longer look at what’s on our two-week playlist.

Increasing Customer Engagement to Exceed Expectations

The new normal produced by the pandemic has underpinned the need for change and connection.

One impacted area are the adjustments organizations are making as they rediscover the benefits of connecting with consumers, rather than simply selling them a product. These businesses are on the right track, as one thing is becoming abundantly clear in the wake of Covid-19: This is not the time to solely sell and advertise.

While advertising and selling inevitably play a big role in business operations, companies are often too focused on these two aspects and it doesn’t always pay off. Now is the time to connect, reach and engage with consumers on a deeper level. The coronavirus pandemic and economic fallout has impacted nearly all areas of consumers’ lives, and their interactions and needs from their banks and financial institutions need to change as a result.

Focusing on advertising and selling may work for some organizations, but with growing consumer expectations, this just won’t do for banks. Customers choose banks partially because of their emphasis on customer service and will be annoyed if the institution tries to advertise or sell them a product that doesn’t match their financial needs.

Connection goes beyond having the best catchphrase or the sunniest stock photo. True engagement is driven by identifying customer needs and communicating relevant solutions, peaking their interest and building connections that will last.

Right now, traditional, product-focused promotional efforts and marketing don’t work because people’s daily lives have drastically changed. Their financial situations may have been altered. A more personal approach develops connections and loyalty that will last for years.

It is more important than ever that banks use customer and business intelligence effectively to promote relevant products and services. Some institutions may need to return to their roots and their initial goal: to serve their communities and the people that live in them. This approach may sound simplistic, but it can prove challenging to achieve.

And banks, like their customers, don’t want to merely survive this health crisis, they want to thrive in these unprecedented times. It takes a shift in strategy to do so. “In a matter of weeks, digital and mobile banking technologies went from being a ‘nice to have’ to a ‘must have.’” The pandemic was even the catalyst for tech adoption at some financial institutions. With the help of data-driven communication systems, one-on-one communication is both realistic and accessible. The massive drive for digital solutions allows banks to reassess digital access to products and services. This immediate boost in digital engagement offers a huge opportunity for institutions that are implementing digital marketing plans, perhaps for the first time.

Practically applied, banks need to turn to smart technology to create a clear path to build better customer relationships and return to the longstanding values of one-on-one communication. While this may seem straightforward, using forward-thinking, innovative technology as the way to “get back to their roots” is an approach not previously imagined by many bank executives.

Utilizing a data-driven digital infrastructure allows banks to reach customers personally, uniquely and instantly. Banks need to embrace comprehensive digital outreach to touch people where they are with the services they need most. Customers still need access to financial services, even if they are avoiding branch locations and ATM lines. The solution is simple: Be the bank that communicates what options are easily accessible and available to them. Be the branch that shows that they care. With the help of an intelligent digital experience platform and the right technology, banks can automate the relevant communications, so the right messages reach the right person at the right financial time for them.

The pandemic sparked a much-needed shift: from being overly focused on advertising, selling and pushing products and services to establishing and building better customer relationships, increasing customer engagement as well as gaining consumers’ trust and loyalty for years to come. Returning to your bank’s original mission of serving the community will give you the ability to target consumers at the exact right time in their financial journey – reaching each customer’s specific needs and allowing banks to engage with their customers.

Exploring Banking’s What Ifs

What if the ball didn’t sneak through Bill Buckner’s legs in 1986?

What if you answered the call to deliver two pizzas for 10,000 bitcoins in 2010?

What if Hillary Clinton lost the popular vote but won the electoral college in 2016?

Thought exercises like these can take you down the rabbit holes that many opt to avoid. But how about asking “what if” type questions as a way to embrace change or welcome a challenge?

Mentally strong leaders do this every day.

In past years, such forward-facing deliberations took place throughout Bank Director’s annual Acquire or Be Acquired conference. This year, hosting an incredibly influential audience in Phoenix simply wasn’t in the cards.

So, we posed our own “what ifs” in order to keep sharing timely and relevant ideas.

To start, we acknowledged our collective virtual conference fatigue. We debated how to communicate key concepts, to key decision makers, at a key moment in time. Ultimately, we borrowed from the best, following Steve Jobs’ design principle by working backward from our user’s experience.

This mindset resulted in the development of a new BankDirector.com platform, which we designed to best respect our community’s time and interests.

Now, as we prepare to roll out this novel, board-level business intelligence package called Inspired By Acquire or Be Acquired, here’s an early look at what to expect.

This new offering consists of short-form videos, original content and peer-inspired research — all to provide insight from exceptionally experienced investment bankers, attorneys, consultants, accountants, fintech executives and bank CEOs. Within this new intelligence package, we spotlight leadership issues that are strategic in nature, involve real risk and bring a potential expense that attracts the board’s attention. For instance, we asked:

WHAT IF… WE MODERNIZE OUR ENTERPRISE

The largest U.S. banks continue to pour billions of dollars into technology. In addition, newer, digital-only banks boast low fees, sleek and easy-to-use digital interfaces and attractive loan and deposit rates. So I talked with Greg Carmichael, the chairman and CEO of Cincinnati-based Fifth Third Bancorp, about staying relevant and competitive in a rapidly evolving business environment. With our industry undergoing significant technological transformation, I found his views on legacy system modernization particularly compelling.

 

WHAT IF… WE TRANSFORM OUR DELIVERY EXPECTATIONS

Bank M&A was understandably slow in 2020. Many, however, anticipate merger activity to return in a meaningful way this year. For those considering acquisitions to advance their digital strategies, listen to Rodger Levenson, the chairman and CEO of Wilmington, Delaware-based WSFS Financial Corp. We talked about prioritizing digital and technology investments, the role of fintech partnerships and how branches buoy their delivery strategy. What WSFS does is in the name of delivering products and services to customers in creative ways.

 

WHAT IF… WE DELIGHT IN OTHER’S SUCCESSES

The former chairman and CEO of U.S. Bancorp now leads the Make-A-Wish Foundation of America. From our home offices, I spent time with Richard Davis to explore leading with purpose. As we talked about culture and values, Richard provided valuable insight into sharing your intelligence to build others up. He also explained how to position your successor for immediate and sustained success.

These are just three examples — and digital excerpts — from a number of the conversations filmed over the past few weeks. The full length, fifteen to twenty minute, video conversations anchor the Inspired By Acquire or Be Acquired.

Starting February 4, insight like this lives exclusively on BankDirector.com through February 19.  Accordingly, I invite you to learn more about Inspired By Acquire or Be Acquired by clicking here or downloading the online content package.

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.

FinXTech Special Report: Mobile Banking

Mobile-Report.pngIn September 2017, Amazon.com’s patent for “1-Click” checkout lapsed. It was a foundational moment in e-commerce. Waves of digital retailers streamlined their purchasing processes. The moment reframed customer expectations. And meeting those expectations became a matter of survival.

Simplifying the checkout process, Amazon chairman and CEO Jeff Bezos believed, would reduce cart abandonment and increase conversion rates — the percentage of shoppers who complete the purchasing process. Cart abandonment is a huge problem in retail, where an estimated 69.5% of digital carts go unclaimed.

Online merchants of books and sweaters aren’t the only businesses that need to care about this; banks do too.

Customer expectations are fluid, flowing from one industry to the next. Amazon and other tech giants set the standard for the digital experience; banks and other companies must now follow it. Customers expect to acquire their new credit card as easily as they can download the latest Taylor Swift album.

Banks may not obsess about cart abandonment and conversion rates to the extent that other e-commerce companies do, but the same concepts apply to making loans and attracting deposits over digital channels. That’s why the principles of modern design are so important. Taking cues from companies like Amazon isn’t just a best practice; increasingly, it’s a matter of success and failure.

Nowhere is design more important than on mobile devices, which have emerged as the primary channel banks use to serve customers and is the purpose of this FinXTech Intelligence Report, Mobile Banking: How Leading Banks Make Modern Apps That Drive Sales.

The report unpacks mobile bank design: why an attractively designed experience will be critical to growing engagement, and the processes that have guided regional and community banks in creating their respective apps. It includes:

  • The rise of mobile banking
  • An overview of key features and functions
  • How modern design affects usability
  • Q&A with USAA’s chief design officer
  • A digital checklist to evaluate a bank’s offerings and approach

To learn more, download our FinXTech Intelligence Report, Mobile Banking: How Leading Banks Make Modern Apps That Drive Sales.

To access our earlier report on APIs, click here.

Four Traits That Will Define Successful Lenders in the Future

Covid-19 and the Paycheck Protection Program have fundamentally changed the banking industry.

In just a few months, lenders were forced to learn how to process a year’s worth of loans in six weeks. Numerated worked with lenders to process nearly a quarter of a million PPP loans on our platform. We had a front-row seat to how the pandemic transformed lending and drove a technological reckoning (which we shared with Bank Director).

We’ve identified a number of strategies, perspectives and traits that contributed to lenders’ success during the crisis. Working with banks to shift their focus to a post-PPP world, we’re seeing how incorporating these key learnings from the program will separate the winners from the losers going forward.

As banks and credit unions pivot to the new normal, the most successful lenders will be those who accomplish these four things:

Successful lenders will lean in on digital. It goes without saying that in the middle of a pandemic, every bank needed to figure out how to serve customers with closed branches. Digital capabilities were put to the test — everyone quickly figured out where their digital footprint fell short. A lot of sensitive documents were emailed, workflow was lost and most processes wouldn’t have passed audits in normal times. Digitally-mature lenders and those who successfully adopted technology for PPP had efficient, secure processes that didn’t burn out their customers or employees. Technology will be key to keeping customers satisfied and employees happy during inevitable future crises or unexpected shifts in the industry.

Successful lenders will prioritize speed to market. When Congress first announced the PPP, lenders had to make a quick decision: lean in and figure out how to help their businesses or sit it out. One of the biggest differences in PPP performance we’ve identified was how quickly lenders got into the market.

Two client banks in California both did the same number of PPP loans — despite one being 10 times larger than the other. The smaller bank identified their needs, adopted our platform and rapidly rolled it out to their borrowers faster than their larger counterpart. This gave the smaller bank a foot up in the market. Some banks think committees and consensus mean they can’t move quickly. In 2021, successful banks will understand speed matters, crisis or not.

Successful lenders will achieve efficiency ratios not previously thought possible. The workflow on Small Business Administration loans is complicated; despite the SBA’s best efforts, this was true for PPP as well. The best lenders leveraged technology to get PPP loans done the same day as applications. They pre-filled applications, automated decisions, automatically generated and digitally executed loan documents, and used APIs to board to the SBA. Loans that would have taken a banker five to six hours were done in less than an hour.

At the height of PPP, we saw lenders processing nearly two loans a second — the equivalent of $250 million of PPP loans per hour. Banks will need to find radical efficiencies like these to grow earnings in a challenging 2021 budget season. The most successful lenders are already using PPP learnings to reengineer their normal loan operations.

Using data is key. In 2021 and beyond, it will no longer be enough for lenders to digitize their processes. Going beyond these commonplace efficiency gains will require using reliable, actionable data that can automate and eliminate work. Unfortunately, as anyone who’s worked with financial technology knows, bank data is a mess.

During PPP, we worked with the SBA to create a connection to their systems that let us detect errors in our banks’ data. There were many, many errors; enabling our banks to fix these data issues saved countless hours of rework. Successful lenders are finding ways to clean their data so that software can automate more of their normal lending processes. These conversations are integral to their 2021 plans.

As the pandemic still grips the nation and without further government assistance in the immediate future, banks find themselves in uncharted waters as they set their budgets for the new year.

One of Numerated’s investors is Patriot Financial Partners’ Kirk Wycoff — one of the most successful community bank investors in the United States. In a recent Numerated webinar, he shared his perspective that this year’s budget conversations will be more focused on technology than ever before. “We need to get that message across to senior leadership teams that for investment in technology, there needs to be a realization that the building’s on fire.”

The ability to put out that fire effectively will determine much of lenders’ success in 2021 and beyond.

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.”

2020 Technology Survey Results: Accelerating the Drive to Digital

The Covid-19 pandemic has bankers reexamining the value of their branches.

While branch networks remain vital, their preeminence as a delivery channel has been diminished through the coronavirus crisis.

Bank Director’s 2020 Technology Survey, sponsored by CDW, finds that bank executives and directors indicating that the digital channel is most important to their bank’s growth (50%) outnumber those who place equal value on both the digital and branch channels (46%).

In last year’s survey, those numbers were essentially flipped, with 51% indicating that the two channels were equally important, and 38% prioritizing mobile and online channels.

This accelerates the evolution that the industry has undergone for years. Nearly all respondents — 97% — say their bank has seen increased adoption and use of digital channels due to Covid-19.

The survey was distributed in June and July, after a period of time when many banks upgraded their technology to better serve customers digitally, facilitate remote work by their employees and respond to the high demand for Paycheck Protection Program (PPP) loans. Sixty-five percent say their bank implemented or upgraded technology due to the coronavirus crisis. Of these respondents, 70% say their bank adopted technology to issue PPP loans.

These executives and directors also report installing or upgrading customer-facing virtual meeting technology and/or interactive teller machines (39%), or enabling customers to apply for loans (35%) and/or open deposit accounts digitally (32%).  

Yet, just 37% sought new technology providers as a result of the pandemic.

The survey also reveals that fewer banks rely on their core provider to drive their technology strategy forward. Forty-one percent indicate that their bank relies on its core to introduce innovative solutions, down from 60% in last year’s survey. Sixty percent look to non-core providers for new solutions.

Key Findings

Focus on Experience
Eighty-one percent of respondents say improving the customer experience drives their bank’s technology strategy; 79% seek efficiencies.

Driving the Strategy Forward
For 64% of respondents, modernizing digital applications represents an important piece of their bank’s overall technology strategy. While banks look to third-party providers for the solutions they need, they’re also participating in industry groups (37%), designating a high-level executive to focus on innovation (37%) and engaging directors through a board-level technology committee (35%). A few are taking internal innovation even further by hiring developers (12%) and/or data scientists (9%), or building an innovation lab or team (15%).

Room for Improvement
Just 13% of respondents say their small business lending process is fully digital, and 55% say commercial customers can’t apply for a loan digitally. Retail lending shows more progress; three-quarters say their process is at least partially digital.

Spending Continues to Rise
Banks budgeted a median of $900,000 for technology spending in fiscal year 2020, up from $750,000 last year. But financial institutions spent above and beyond that to respond to Covid-19, with 64% reporting increased spending due to the pandemic.

Impact on Technology Roadmaps
More than half say their bank adjusted its technology roadmap in response to the current crisis. Of these respondents, 74% want to enhance online and mobile banking capabilities. Two-thirds plan to upgrade — or have upgraded — existing technology, and 55% prioritize adding new digital lending capabilities.

Remote Work Permanent for Some
Forty-two percent say their institution plans to permanently shift more of its employees to remote work arrangements following the Covid-19 crisis; another 23% haven’t made a decision.

To view the full results of the survey, click here.

Designing a Pandemic-Proof Compensation Plan

The ability to pivot and adapt to a changing landscape is critical to the success of an organization.

The coronavirus pandemic has created a unique challenge for banks in particular. Government stimulus through the Paycheck Protection Program tasked banks with processing loans at an unheard-of rate, turning bankers working 20-hour days into economic first responders. Simultaneously, the altered landscape forced businesses to adopt a remote work environment, virtual meetings and increase flexibility — amplifying the need for safe and reliable technology platforms, enhanced data security measures and appropriate cyber insurance programs as standard operating procedure.

Prior to Covid-19, a major driver of change was the demographic shift in the workforce as baby boomers retire and Generation X and millennials take over management and leadership positions. Many businesses were focused on ways to attract and retain these workers by adapting their cultures and policies to offer them meaningful rewards. The pandemic will likely make this demographic shift more relevant, as the workforce continues adapting to the impending change. 

Gen X and millennial employees are more likely than previous generations to value flexibility in when and where they work. They may seek greater  alignment in their career and life, according to Gallup. The pandemic has forced businesses to either adapt — or risk the economic consequences of losing their top performers to competitors.

Many employees find they are more productive when working remotely compared to the traditional office setting, which could translate into increased employee engagement. In fact, the Gallup’s “State of the American Workplace” study finds that employees who spend 60% to  80% of their time working remotely reported the highest engagement. Engagement relates to the level of involvement and the relationship an employee has with their position and employer. Gallup finds that engaged employees are more productive because they have increased autonomy, job satisfaction and desire to make a difference. Simply put, increase engagement and performance will rise.

The demographic shift and a force-placed virtual office culture means that designing programs to attract and retain today’s workers require a well thought out combination of strategies. An inexpensive — though not necessarily simple — method of employee retention includes providing recognition when appropriate and deserved. Recognition is a critical aspect in employee engagement, regardless of demographic. Employees who feel recognized are more likely to be retained, satisfied and highly engaged. Without appropriate recognition, employee turnover could increase, which contributes to decreased morale and reduced productivity.

In addition to showing appreciation and recognizing employees who perform well, compensating them appropriately is fundamental to attracting and retaining the best. The flexibility of a non-qualified deferred compensation program allows employers to customize the design to respond to changing needs.

Though still relevant, the traditional Supplemental Executive Retirement Plan has been used to attract and retain leadership positions. It is an unsecured promise to pay a future benefit in retirement, with a vesting schedule structured to promote retention. Because Gen X and millennials may have 25 years or more until retirement, the value of a benefit starting at age 65 or later could miss the mark; they may find a more near-term, personally focused, approach to be more meaningful.

Taking into consideration what a younger employee in a leadership, management, or production position values is the guide to developing an effective plan. Does the employee have young children, student loan debt or other current expenses? Using personalized criteria, the employer can structure a deferred compensation program to customize payments timed to coincide with tuition or student loan debt repayment assistance. Importantly, the employer is in control of how these programs vest, can include forfeiture provision features and require the employee perform to earn the benefits.

These benefits are designed to be mutually beneficial. The rewards must be meaningful to the recipient while providing value to the sponsoring employer. The employer attracts and retains top talent while increasing productivity, and the employee is engaged and compensated appropriately. Banks can increase their potential success and avoid the financial consequences of turnover.

Ultimately, the pandemic could be the catalyst that brings the workplace of tomorrow to the present day. Nimbleness as we face the new reality of a virtual office, flexibility, and reliance on technology will holistically increase our ability to navigate uncertainty.