A Digital Mindset Must Be Driven From the Top


strategy-12-7-17.pngRecently, I read a study from the research and advisory firm Gartner, in which chief information officers in the financial services industry predict that 45 percent of gross enterprise revenue will come from digital business products and services by 2020. That’s only two years from now and frankly, I think the industry is farther off than that. To meet that prediction, financial institutions will need to embrace a digital-first mentality, and I’m not seeing enough of that shift in thinking. Don’t get me wrong, a shift is occurring—but not quickly enough. Competition from and partnerships with fintech firms are adding pressure to traditional banks, but digital transformation has a long way to go.

CIOs will need to help their organizations change the basis of competition, create new markets and cross-industry boundaries by creating an industry vision for digital business in banking,” according to Gartner. Is the CIO in your organization driving digital transformation, and creating new markets and opportunities?

Before that can even start, a digital-first strategy must be embraced by the institution. Banking remains channel-centric, meaning that bankers tend to think in terms of channels, mediums and devices, so I’m afraid the industry has yet to adopt a digital-first methodology. The term ‘mobile first’ is used frequently, but the term is overused and shortsighted. Digital first, on the other hand, recognizes that the digital landscape will constantly evolve to meet the market’s needs, and to keep in pace with emerging technology and market expectations.

Then there is the issue of culture. Digital transformation is not something that can be steered and driven within an organizational silo. It’s holistic in strategy and execution. Digital transformation must begin with an organizational philosophy that is embraced from the board down, and there should be an enterprise-wide agreement that such a transformation won’t happen overnight, but rather will evolve through a deliberate strategy. The good news is that most of us in the industry understand the underlying rationale to digitalization, and the benefits it brings to customer experience and the ability to drive bottom line revenue. Executive teams now fully comprehend the need to reduce friction in the overall banking experience, regardless of the pursued market segment.

In the ‘80s we all heard the call to emerge as “high tech, high touch” providers of financial services. Finally, this evolution has begun. We acquire, service, engage and retain customers through digitalization now, more than ever before. However, this progress toward a digital-first strategy is due to broad, inescapable cultural shifts and strong leadership, not a lone CIO with a vision.

A financial enterprise runs in a very dynamic environment. A digital-first approach can yield a framework for how financial institutions should evaluate strategy, and change the operational approach and culture of the bank. This framework includes organizing teams, creating customer-centric internal processes and building an experience with flexible, innovative technology. Simply understanding the value of digital transformation is not enough. We all need to see and feel the rubber hit the road. This can start with a very conscious shift in allocation of dollars to digital, and understanding that digital will make “traditional banking” better.

Digital should evolve as a philosophy, and its principles and insights should weave through all aspects of a financial institution. It should be the cord that ties together every retail or business banking experience, be it marketing or delivery. It is the DNA of the new banking experience. Digital is no longer just a channel or a series of tactics, and can have a profound impact on all stakeholders at a financial institution, beginning with its customers.

Banks Will Play a Critical Role in Digital Identity Adoption


digital-identity-6-26-17.pngWhat could be more important than your identity?

The recognition and authentication of an individual’s identity, together with associated rights, is becoming a priority for governments around the world.

From a world development perspective, identification—whether through civil registries or other national identification systems—means inclusion and access to essential services, such as health care, education, electoral rights, financial services, social safety net programs, as well as effective and efficient administration of public services, transparent policy decisions and improved governance.

It’s equally important for the business world. Banks and businesses across verticals are facing harsh competition from technology companies that build seamless online experiences around one’s digital identity. Ever-increasing volumes of digital transactions and the complexity of the payments ecosystem, including watches that allow consumers to pay for purchase, force financial institutions to understand the role of a digital identity in security and growth opportunities. Five key trends, according to the World Economic Forum, are increasing the need for efficient and effective identity systems:

  • Increasing transaction volumes: The number of identity-dependent transactions is growing through increased use of the digital channel and increasing connectivity between entities.
  • Increasing transaction complexity: Transactions increasingly involve very disparate entities without previously established relationships (e.g., customers and businesses transacting cross?border).
  • Rising customer expectations: Customers expect seamless, omnichannel service delivery and will migrate to services that offer the best customer experience.
  • More stringent regulatory requirements: Regulators are demanding increased transparency around transactions, meaning that financial institutions require greater granularity and accuracy in the identity information that they capture and are increasingly being held liable for inaccurate or missing identity information.
  • Increasing speed of financial and reputational damage: Bad actors in financial systems are increasingly sophisticated in the technology and tools that they use to conduct illicit activity.

Meanwhile, solutions like PayPal, Venmo, Stripe, Square Cash, and other leading examples set the bar for financial institutions of any size so high, that consumers’ expectations alone can bury a traditional institution that is not able to catch up. One of the reasons those solutions have been able to gain ground is the ease of signup and use. They are tied to strong digital identity verification and authentication rails, enabling them to offer smooth and secure mobile payments and online shopping experiences.

Banks, nonetheless, play a role as major gatekeepers for third-party solutions as identity is currently a critical pain point for innovation in the financial services industry. The lack of digital identity limits the development and delivery of efficient and secure, digital-based fintech offerings.

Many fintech startups are trying to deliver pure digital offerings, but the process of identifying users consistently forces them to use traditional rails established by institutional sector. These fintech innovators now see the development of a new generation of digital identity systems as being crucial to continuing innovation. Banks, being the primary verifiers of one’s identity in the financial sector, hold the keys to development of innovative, digital-based solutions. Digital identity would allow financial institutions to perform critical activities with increased accuracy over that afforded by physical identity, and to streamline and partially or fully automate many processes, according to the World Economic Forum.

The WEF suggests that physical identity systems currently put users at risk due to overexposure of information and the high risk of information loss or theft; they also put society at risk due to the potential for identity theft, allowing illicit actors to access public and private services, using easy-to-steal numbers such as credit cards and social security numbers. Digital identity would streamline the completion of these public and private transactions.

Having established massive repositories of records and deep understanding of their customers, banks have a unique opportunity to transition from reliable physical information to reliable digital identity systems. Identity enables many societal transactions, making strong identity systems critical to the function of society as a whole, according to the World Economic Forum.

Identity is also central to the broader financial services industry, enabling delivery of basic financial products and services. Reliance on physical identity protocols introduces inefficiency and error to these processes. Digital identity has great potential to improve core financial services processes and open up new opportunities.

How to Make Your Bank Customer-Centric


5-7-13_Celent.pngWinning retail banks will provide a different and better offer of value. They will:

  • Be customer-centric (finally) by delivering more than simply plumbing
  • Have a strong digital offering (mobile, tablet and online)
  • Turn zero-sum games into win-win situations

Here’s the cold, hard truth: Retail banking today is a means to an end for customers. Banking lets people accomplish other, more enjoyable things. Banking is not fun; it’s not a destination; and it’s not something that people would choose to do given any reasonable alternative. With the products and services that banks offer today, most often the highest praise that can be given is, “That wasn’t terrible.”

So what can banks do to change the game so that they have a realistic chance of having their customers actively praise them? Three actions, driven by technology and spurred by non-bank competition, can help banks transform customers’ feelings about them.  

First, banks should (finally) become truly customer-centric. The industry has been talking about this for a dozen years, but this time—really—it’s getting serious. Here’s why: Technology has advanced enough to make a host of truly useful solutions feasible, and consumers are demanding to be served differently now.

Exposed to great online experiences from Amazon to Zappos, customers wonder, not unreasonably, why banks can’t do the same?  And when the banks fail to deliver, frustrated financial services consumers begin to look around for someone who can do a better job delivering on their raised expectations.  

Second, banks must have a strong digital offering. This encompasses not just online, but also mobile and tablet devices. Bank of America predicts that in less than two years it will have more customer access accounts via mobile devices than through the online channel. And more than half of millennials now choose their bank based on its mobile experience.  

Third, banks should create win-win situations with the customers. The retail banking business model has been constructed as a zero sum game: Banks win when customers lose, and vice versa. There’s a finite pie that banks and customers have to share, and one group’s piece grows as the other’s shrinks. That’s not the basis for a fruitful relationship.  

Bankers should search for ways to create positive-sum games by aligning the interests of the bank with those of its customers. When the customer does well, the bank benefits. For example, banks can increase assets by helping customers understand (and act on) the need to save for retirement.  

Win-wins can also take the form of partnerships with third parties by delivering value to customers that they wouldn’t be able to get on their own. With some merchant offers, for example, banks can provide value to small business (i.e. new customers) and retail customers (in the form of discounts).

A bank’s internal organization is typically the biggest barrier to delivering a truly customer-centric experience. Banks have gotten away with a lot for a long time because alternatives were few and customers were conditioned not to expect too much. But that paradigm has been irreversibly altered; banks can’t let antiquated organizational silos stand in the way of delivering new value to newly empowered customers.  

Changing will be hard, but guess what? Customers don’t care. They don’t care about legacy systems, or regulatory burdens or organizational structure. They want what they want, and will be delighted when you surprise them with something that they didn’t even know they needed.  

Maxims for a customer-centric bank in the mobile age:

  1. Put the customer first and be in his or her corner
  2. State your offer of value clearly
  3. Save your customers time
  4. Save your customers money
  5. Let them know when they’ve done well