3 Considerations for Your Next Strategic Planning Session

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Modernizing a bank’s technology has the potential to improve efficiency, reduce errors and free up resources for further investment. Still, with all those benefits, many banks are still woefully behind where they need to be to compete in today’s digital environment.

According to Cornerstone Advisors’ What’s Going On In Banking 2022 research, just 11% of banks will have launched a digital transformation strategy by the end of 2022. So what’s the holdup? For one thing, transformation is hamstrung by the industry structure that has evolved with banking vendors. Stories of missed deadlines, releases with dingbat issues, integrations that stop working and too few knowledgeable professionals to assist in system implementation and support are commonplace.

A large part of a bank’s future depends on how it hires and develops technical talent, manages fintech partnerships and scrutinizes and optimizes its technology contracts. Here are three key truths for bank officers and directors to consider in advance of their next strategic planning session:

1. There is no university diploma that can be obtained for many areas of the bank.
Our research finds that 63% of financial institution executives cited the ability to attract qualified talent as a top concern this year — up dramatically from just 19% in 2021. But even in the face of an industry shift to digital-first delivery and a need to better automate processes and leverage strong data intelligence, most banks have neither invested enough, nor sufficiently developed, their IT team for the next decade.

Every financial institution has a unique combination of line of business processes, regulatory challenges, and vendors and systems; the  expertise to manage these areas can only be developed internally. Identifying existing skill sets across the organization will be critical, as will providing education and training to employees to help the organization grow.

A good place for directors and executives to start is by developing a clear and comprehensive list of the jobs, skills and knowledge the bank needs to develop across four key areas of the bank: payments, commercial credit, digital marketing and data analytics.

2. Financial institutions and fintechs are on different sides of table.
Over the past decade, there have been profound changes in the relationship between financial technology and financial institutions. “Banking as usual” no longer exists; as much as banks and fintechs want to work at the same table together, they have very different needs, different areas of dissatisfaction with the relationship and are sitting on different sides of that table.

A fintech can create viable software or a platform for the bank to build upon, but the bank needs to have the internal talent to leverage it (see No. 1). A culture of disciplined execution and accountability that ensures the fintech solution will be deployed in a high performance, referenceable way will go a long away in strengthening the partnership.

3. Training and system utilization reviews need to find their way into vendor contracts.
When it comes to software solutions, banks are looking at multimillion-dollar contracts and allocating tens of thousands of dollars in training on top of that. This is not the time to be penny-wise and pound-foolish.

Every organization needs to build a tightly integrated “change team” that can extend, integrate, lightly customize and monitor a growing stack of new, primarily cloud-based, platform solutions. For CFOs and the finance department, this means a punctuated investment in the raw talent to make the bank more self-sufficient from a tech perspective (see No. 1 and 2 above).

One way to launch this effort is with an inventory for executive management that details how many users have gone through which modules of training. This tool can be vitally important, involves only minor add-on costs and can and should be embedded in every vendor contract.

Many financial institutions subject themselves to unfavorable technology contract terms by entering negotiations with too little knowledge of market pricing, letting contracts auto-renew and failing to prioritize contracts that need the most attention. If managed properly, vendor contracts represent a huge opportunity for savings.

FinXTech’s Need to Know: Construction Lending

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Demand for housing hit a high unlike any other during the pandemic. While demand grew, the number of acquisition, development and construction (ADC) loans in bank portfolios grew parallel alongside it. Construction and development loans at community banks increased 21.2% between the first quarter of 2021 and the first quarter of 2022, according to the Federal Deposit Insurance Corp.’s Quarterly Banking Profile.

As a subset of the commercial real estate (CRE) lending space, banks are accustomed to the timely process that construction lending requires. But are banks prepared for the influx of risk that can accompany this growth?

Mitigating construction risk is a bit like attempting to predict the future: Banks not only have to evaluate creditworthiness, but they also have to predict what the project will be worth upon completion. With another interest rate hike expected later this month, being able to accurately price projects is becoming more complicated — and more vital.

Here are three ways financial technology companies can help banks in their attempt to fund more ADC projects.

Software can automate the drawing process. Construction lending features the unique ability for builders to “draw” cash from their loan throughout the project. Spacing out the draw schedule protects banks from losing large amounts of money on projects that go cold, and also allows proper due diligence and inspection to be on rotation.

CoFi — formerly eDraw — specifically focuses on this process. Bank associates access all budgets, invoices, approvals and construction draw records in one web-based system. The bank’s borrowers and builders also can access the software through customer-facing accounts. A builder requests funds by uploading invoices, and CoFi then notifies the bank that their approval is required for the funds to be disbursed.

Once the bank approves the disbursement, the borrower is notified. Banks can also dispatch inspectors to the property using CoFi. After confirming that construction progress is in line with the draw requests, the inspector can upload their report directly into CoFi. With all of the proper approvals in place, the bank can release funds for the payment request. All actions and approvals are tracked in a detailed, electronic audit trail.

CoFi also has a construction loan marketplace banks can plug into.

Multiple parties and industries can collaborate in real time through web-based solutions Nashville-based Built Technologies operates as a construction administration portal, coordinating interactions and transactions between the bank, the borrower, the contractor, third-party inspectors and even title companies in one location. 

Legacy core banking technology wasn’t designed to completely support construction loans, which moved the tracking of these types of loans into spreadsheets. Built’s portal eliminates the need for these one-way spreadsheets. The moment a construction loan is closed, instead of a banker creating a spreadsheet with a specific draw budget, they can design one digitally in Built and reconcile it throughout the duration of the project.

Builders can even request draws from their loan through their phones, using Built’s mobile interface. 

Fintechs can better monitor portfolios, identify errors and alert banks of risk areas, compared to manual review only. ADC loans are fraught with intricate details, including valuations that fluctuate with the market — details that can’t always be caught with human eyes.

Rabbet uses machine learning and optical character recognition (OCR) when reviewing documents or information that is inputted to its platform, the Contextualized Construction Draw format (CCDF). It also continually monitors and flags high-risk situations or details for borrowers, including overdrawn budgets, liens or approvals. Any involved party — developer, builder or bank — can input budget line items into the platform. Rabbet then links relevant supporting documents or important metrics to that item, which is information that is typically difficult for lenders to track and verify.

Storing loan calculations and documents in one place can translate to faster confirmations for borrowers and easier reconciliation, reporting and auditing for the bank.

In July 2022, Built announced the release of its own contractor and project monitoring solution, Project Pro. The technology helps banks keep track of funds, identify risk areas such as missing liens or late payments, and stay on top of compliance requirements.

Banks with a heavy percentage of construction loans on their balance sheet need to keep notice of all elements attached to them, especially in a rapidly changing economic environment. Technology can alleviate some of that burden.

CoFi, Built Technologies and Rabbet are all vetted companies for FinXTech Connect, a curated directory of technology companies who strategically partner with financial institutions of all sizes. For more information about how to gain access to the directory, please email [email protected].

Insights Report: Technology Tools Enhance Financial Wellness

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https://www.bankdirector.com/wp-content/uploads/Insights-FIS-Digital.pdfIn a March 2022 survey, Morning Consult found that just 23% of U.S. adults could handle a major, unexpected expense. At a time when Americans are worried about rising prices for everything from cars to gas to groceries in today’s inflationary environment, lower-income individuals who earn less than $50,000 annually feel this financial anxiety most deeply. Yet, even people in higher income brackets are worried: Only 47% of those earning $100,000 or more believe they could handle such an expense, according to the market research firm.

Financial wellness is often conflated with financial inclusion. These informative tools can play an important role in helping lower-income customers, but everyone needs a trusted advisor to meet their financial goals, whether that’s saving for retirement, eliminating debt or creating an emergency fund.

Americans may be struggling but they trust their banks, according to Morning Consult, which recommends financial institutions acknowledge financial stress, demonstrate empathy and provide “actionable guidance” for their customers.

The rapid digital acceleration occurring in financial services today has changed how banks maintain and build customer relationships, as well as deliver advice. “Banking relationships have become digital relationships,” says Maria Schuld, division executive, Americas Banking Solutions at FIS.

Financial education isn’t new to the industry, and personal financial management tools have been around for years. But technologies like artificial intelligence can help institutions deliver more meaningful insights to their customers. What’s more, younger consumers have a greater need for financial advice; a recent online WalletHub survey of 350 respondents found that young people are three times more likely to seek a complete view of their financial health, compared to consumers aged 60 or more. Being Gen Z’s first bank could lead to larger relationships as their lives change. “Once you establish that relationship early on,” says Schuld, “you have a very strong chance of being able to retain that relationship as their financial needs grow.”

To download the report, sponsored by FIS, click here.

Identifying Customer Needs, Sans Small Talk

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For such a seemingly trivial aspect of social gathering, small talk has provided significant economic value to banks over the years.

Transactions allowed bank staff to interact with customers and to learn about their lives, anticipate their needs, provide information or a listening ear, or to offer a well-timed referral to a personal banker or loan officer. Even when those conversations didn’t result in new business, they still cultivated a relationship and trust.

Consumers Stop Conversing
The pandemic hastened what was already a longtime trend: Consumers want a bank with a branch nearby, but most prefer not to visit that nearby branch unless they must.

In 2020, the cohort of customers who still preferred the branch received a new incentive to begin using their bank’s mobile app — safety. Branch sign-up lists and capacity caps only made using a branch that much more inconvenient. Although some customers have returned to visiting the branches, the pendulum shifted for many who are now acclimatized to digital banking.

Customers now also clearly prefer to do digital research on banking products, according to 600 banking customers polled by Total Expert.
They say they’re nearly twice as likely to search for a lender online versus contacting a lender directly. They are four times more likely to search online rather than ask a real estate agent for a referral for a mortgage lender. And they go to their financial institution’s website first when they have a new financial need.

Web activity, however, is not a two-way conversation. Unlike a teller who can ask follow-up questions, interpret customer responses and make referrals to a personal banker or mortgage loan officer, knowing what customers need depends on their activity: applying, initiating a chat, filling out a form or contacting a banker. Customers are increasingly “going dark” on small talk; where they do show interest, the bank must wait for them. Bank leaders should be wondering how to revive two-way, active conversations.

But where to start? Consumers can sense sales quotas in a branch. And they can’t be forced to fill out a form on a website any more than they can be forced to volunteer their financial needs. Banks must look to another way of conversing: data.

Data as Conversation Starter
Customers volunteer opportunities to serve them every day through their data. As account holders and borrowers, they provide significant information to their bank in exchange for financial services.

Understanding and using this data, though, has long seemed too intricate for local, community-focused banks. Advances in technology have changed that; using data to inform and to initiate customer engagement is far more attainable than ever before. Banks are moving back into active engagement because data allows them to intuit needs not vocalized by customers.

For example, every bank has an address for their retail depositors’ home. But when does that matter? It’s central to selling a home; when a customer’s home goes up for sale, the address is listed on a Multiple Listing Service (MLS), and it sends a signal to their bank. Customers selling a home often buy a new one, or they need to safely invest the proceeds of the sale. The MLS listing is the customer vocalizing a set of possible needs. Once a bank catches that signal, technology can allow staff to advise, interpret, engage or refer, depending on the bank’s strategy.

Even outside of mortgages, knowing a customer is selling a home can be both a revenue and relationship opportunity. The National Association of Home Builders found that customers are more than 2.5 times more likely to make large purchases within a year of buying a new home — items like appliances, furniture and home improvements — compared to consumers who did not. Would these customers appreciate savings through credit card rewards? Do they want to use their equity to buy appliances? Were they waiting until their new mortgage closed to purchase a commuter car? Even simple, widely available data points can become the basis for highly engaging and productive interactions between a bank and its customers.

Eighty-four percent of Americans report stress about their finances, according to a recent ValuePenguin survey; bank customers want help reaching their financial goals. Banks may not be able to stop the decline in small talk, but they can revive and even surpass it with new tools made for banking. There are so many more opportunities for banks to use their data to anticipate needs and to engage customers about their desired outcomes. The upside is lifelong loyalty within each customer relationship.

Leveraging Embedded Fintech for Small Businesses

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Small businesses are increasingly looking for more sophisticated financial solutions, like digital payments. Yet, many community banks haven’t adapted their products and services to meet these demands. Banks that don’t address their small business clients’ pain points ultimately risk losing those customers to other financial providers. Derik Sutton, vice president at Autobooks, describes how community banks can bridge that gap with embedded fintech.  

  • How Small Business Needs are Changing
  • Confronting Competition 
  • First Steps to Embedded Fintech 

Autobooks’ cloud-based platform is built on Microsoft Azure.  

6 Tactics to Win Customer Engagement

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One topic that’s commonly discussed in financial institution boardrooms is how to serve customers and meet their expectations. This topic is especially pertinent now that consumer expectations are at an all-time high.

Bank consumers want delightful, simple customer experiences like the ones they get from companies like Uber Technologies and Airbnb, and they’re more than willing to walk away from experiences that disappoint. As a result, financial institutions are under immense pressure to engage and retain customers and their deposits. Bankers cannot afford to stand idly by and watch a generation of customers increasingly lean on fintechs for all their financial needs.

Fortunately, your financial institution can take action to win the battle for customer engagement — some are already doing so with initial successes. Incumbents like Bank of America Corp. use financial assistants powered by artificial intelligence to assist customers, and fintechs such as Digit offer an auto savings algorithm to help people meet their financial goals. These efforts and features bring the disparate components of a consumer’s financial life together through:

  • An intense focus on the user experience.
  • Highly personalized experiences.
  • “Do it for me” intelligent features.
  • The right communications at the right time.
  • Intuitively-built and highly engaging user interfaces.

How can your bank offer experiences like these? It comes down to equipping your financial institution with the right set of data and tools.

1. Data Acquisition: Data acquisition is the foundation of customer experience.
The best tools are based on accurate and comprehensive data. The key here is that your bank needs to acquire data sourced not only from your institution, but to also allow customers to aggregate their data into your experience. The result is that you and your customers can see a full financial picture.

2. Data Enrichment: Use data science to make sense of unstructured data.
Once your bank has this data, it’s critical that your institution deploys an enrichment strategy. Advanced data science tactics can make sense of unstructured and unrecognizable transaction data, without needing to add data scientists to bank staff. Transforming these small and seemingly unimportant bits of the user experience can have a huge overall effect.

3. Data Intelligence: Create personalized and timely user experiences from the data.
By consistently looking at transactional data, data intelligence tools can identify different patterns and deliver timely, unique observations and actionable insights to help consumers improve their financial wellbeing. These are the small, but highly personalized user experiences that fintechs have become known for.

4. Data Productization: Provide a user interface with advanced pre-built features.
One of the most difficult things for a bank to pull off is data productization. The right tooling and advanced, pre-built features allow banks to unite data and analysis and encapsulate it into intuitively designed digital experiences. This way, consumers can engage naturally with your bank and receive relevant, personalized products and services they need from you. Digital notifications can be part of your strategy, and many customers opt in to receive them; case in point is that 90% of the customers using a Goals-Based Savings application from Envestnet opt into notifications.

5. AI Automation: Utilize AI to enhance self-service capability.
Wouldn’t it be nice if you could ask someone to cancel a check at anytime? Or type in a question and get the answer on the spot? Tools like AI-powered virtual assistants with an automation layer make it simple for consumers to do all this and more, wherever they are. Financial institutions using the Virtual Financial Assistant from Envestnet have automated up to 87% of contact center requests with a finance domain-specific AI.

6. Trusted Partners: Leverage partner to compete.
Competing with fintechs often means, “If you can’t beat ‘em, join ‘em.” But leveraging trusted partners is a tried and true strategy. Your bank’s partner could be a traditional financial institution you’ve pooled assets with to create and embed financial technology deep into your experience. It could be a fintech focused on business-to-business capabilities. Or it could be a partner offering world-class data aggregation as well as analytics and innovative tools to enhance your customer experience.

Fintechs have done a phenomenal job at connecting the disjointed components of consumers’ financial lives through amazing customer experiences. Your financial institution can do the same. By using the right data and tools and partnering up, your bank can deliver the personalized experiences consumers expect, delight and empower them to take control of their finances and future.

Crafting a Modern Customer Service Strategy

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Customers increasingly demand immediacy and accountability in their service interactions, whether that means ordering a pair of shoes from Amazon.com or a pizza from Domino’s Pizza.

Financial institutions are not immune to this standard; as customer expectations evolve, so too must banks’ approach to customer service. To retain relevance and customer loyalty, bank executives must prioritize the digitalization and personalization of customer service. If institutions are not working towards this transformation, they’re already behind.

Leveraging capabilities like digital customer service can enhance the customer and employee experience while diminishing the risk of complacency — strengthening a bank’s overall competitive position.

Many banks still employ a phone-centric approach to customer support, which can be inefficient and cumbersome for all involved. Even though bank transactions are frequently initiated or occur on digital devices, customers are often required to dial into a contact center when they encounter issues or have questions. Recent research from Bankmycell found 81% of millennials experience anxiety when making a phone call. But this dislike for phone calls isn’t unique to younger generations; a study by Provision Living found that baby boomers made even fewer phone calls than millennials do on their smartphones.

The customer service bar is set by the likes of Apple, Netflix and Meta Platform’s Facebook: companies that facilitate seamless, uninterrupted interactions with as little friction as possible. It’s time for bankers to be able to meet customers in the digital domain and empower them with choice on how to communicate, whether it’s through chat, video or voice. Such an approach boosts the customer experience and fosters long-term loyalty.

Digital customer service can improve the employee experience as well. The customer service agent role has traditionally been one of low satisfaction and high churn, which is especially concerning as the country continues to experience the Great Resignation. Digital customer service allows frontline agents to join a digital interaction in progress on the customer’s own screen, eliminating the risk of miscommunication and expediting resolution time. Such technology even allows agents to guide customers in how to solve the issue themselves next time. As a result, agents shift from customer care representatives to become a teacher or coach, instilling confidence in users to solve future issues through digital self-service. Digitalized customer service and a seamless on-screen experience allows agents to complete tasks with greater speed and efficiency — while making the role itself more enjoyable and fulfilling.

Complacency is both a common barrier and a looming threat for bank executives; many keep legacy processes and strategies in place because of comfort and fear of change. But the failure to innovate can be a death knell for banks when it comes to keeping up with competitors. And technology continues to shorten the innovation cycle — making complacency that much more dangerous.

Financial institutions are at the vanguard of innovation in the consumer-driven market; experiences are the key differentiator. Customer service, and how customer-facing employees work, are experiencing dramatic digital transformation. As a result, financial institutions must examine, reconsider and frequently adapt to new technologies as they emerge.

The banks that recognize the urgency of modernizing customer service and act accordingly will benefit from a competitive advantage for years to come. Those that fail to act risk falling behind competitors and face significant customer attrition.

5 Ways Banks Can Keep Up With Consumer’s Digital Demands

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As technology progresses, more financial institutions will face scrutiny from consumers seeking features powered by advanced digital banking platforms.

Consumers are actively searching for banks that value them by giving them remote, customized experiences. Many banks have seen record growth in digital banking usage in recent years, according to a Deloitte Insights report. While this might create a challenge to many financial institutions, it can also be an opportunity to further build relationships with consumers. Below are five things banks should do to proactively respond to customers’ digital needs in their next stage of growth.

1. Analyze Consumer Data
Gaining real-time insights from consumer data is one way banks can start improving customer experiences. Analyzing data allows banks to see how, when and where consumers are spending their money. This data is a gold mine for creating custom approaches for individuals or recommending products that a consumer could benefit from. This electronic trail of customer information can ultimately lead to more personalized financial strategies, better security features and more accurate insights as to what digital banking features will be needed in the future.

2. Humanize The Digital Experience
Financial Institutions are being given a chance to humanize their digital banking platforms. Banks can build and strengthen relationships with their consumers by customizing their mobile experience — right down to the individual. Listening to feedback and valuing a customer’s experiences can create productive and useful relationships. It is important to take a customer-centric approach, whether in-person or through digital platforms. Financial institutions can use consumer purchase history to create custom reward offerings — like 10% off at their favorite coffee shop or rewards on every purchase — that lay the foundation for a bespoke, valuable experience.

3. Understand Digital Trends
According to Forbes, 95% of executives say they are looking for new ways to engage their customers. Financial institutions that remain complacent and tied to their legacy systems can expect to fall behind their competitors if they do not keep up with advancing digital trends. Consumers increasingly shop around and compare account offerings and benefits; they are choosing customizable, digital solutions. Banks that don’t, or refuse to, keep up with digital trends will lose these relationships. As technology expands, so do the needs of consumers —it is up to banks to keep up with those needs.

4. Utilize Advance Card Features
Technology’s rapid advancement means that the digital features that banks can take advantage of have also advanced. Consumers want features that correspond with their everyday financial management strategies and spending. Virtual cards with state-of-the-art security features are just one of the many digital solutions available to banks. Adjustable settings, like the ability to block and unblock merchants, create family hubs, set spending limits for individuals and family members, are just a few of the ways that banks can differentiate their card programs.

5. Keep Evolving
Many banks use legacy systems that are outdated, expensive and difficult to uproot. This technology strategy holds them back from being on a level playing field with their competitors. However, partnering with fintechs that can integrate with their current systems is one way that banks can keep up with digital trends — without the upfront cost of installing an entirely new system.

According to a FICO study, 70% of U.S. bank customers report that they would be “likely” or “very likely” to open an account at a competing provider if that provider offered services that addressed their unmet needs. Today, consumers do not just prefer digital banking: They expect it. Banks that cannot provide their consumers with customizable digital options are at a disadvantage.

Why Embedded Finance Is the Next Area of Digital Revolution

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The four decades after the internet made information readily accessible has led to inventions and innovations like smart devices, mobile apps and the ability to be constantly connected. Today, companies are focusing on harnessing technology to build smoother, richer and deeper customer experiences.

As the information age evolves to the experience age, the next digital revolution will be embedded finance. Embedded finance enables any brand, business or merchant to rapidly, and at a low cost, integrate innovative financial services into new propositions and customer experiences. Embedded finance is driven by consumers’ desire for more convenient and frictionless financial services. Several use cases that underline the demand for embedded financial experiences include:

  • Billing payments as part of the experience. Businesses are already using payment options, like buy now, pay later, to differentiate their offering, increase sales and empower buyers at checkout.
  • Growing popularity of Point-of-Sale financing. The volume of installment-based, flexible payment and instant credit options has increased significantly in the past five years, indicating a desire for instant access to short-term borrowing.
  • Mainstreaming of digital wallets. As more people use their mobile phones to purchase products and services, it makes sense that consumers want to access other financial services seamlessly within apps.

There is potential for embedded finance in almost every sector; in the U.S. alone, embedded finance is expected to see a tenfold revenue increase over the next five years. Financial institutions are in a position to provide branded or white-label products that non-banks can use to “embed” financial services for their customers. Banks must evolve rapidly to take advantage of this new market opportunity.

The front-runners will be institutions that can offer digital real-time payments or instant credit with minimal friction and optimum convenience to customers. But providing this requires new core technologies, cloud capabilities and flexible application programming interfaces, or APIs and other infrastructure to support new business models. Banks will also have to become much more collaborative, working closely with fintechs that may own or intermediate the customer relationship.

Embedded finance allows nonbank businesses to offer their customers additional financial services at the point of decision. Customers can seamlessly pay, redeem, finance or insure their purchase. This can look like buying, financing, and insuring a TV from a store’s shopping app, securing a mortgage through the estate agent’s website as part of a house purchase or obtaining health insurance from a fitness app. This does not mean that every retailer or e-commerce business will become a bank, but it does mean that many more will be equipped with the potential to offer more financial capabilities to customers as a way to compete, differentiate and engage more effectively.

In May 2021, Mambu surveyed 3,000 consumers and found the following:

  • 81% would be interested in purchasing health insurance via an app, and almost half of these would pay a small premium.
  • 60% would prefer to take out an education loan directly from their academic institution rather than a bank.
  • 86% would be interested in purchasing groceries from a cashier-less store.

How these capabilities are delivered and consumed is changing constantly. Consumers want to use intuitive and fast financial services via online and mobile banking channels. Digitalization and cloud services are reinventing back-office functions, automating and streamlining processes and decision-making. At the same time, legislation, open banking and APIs are driving new ecosystems. These changing markets and increased competition make it more difficult for banks to meet evolving customer demands, prevent churn and sustain growth.

We are living in the world of the continuous next. Customers expect financial service providers to anticipate and meet their requirements — sometimes even before they know what they want — and package those services in a highly contextual and personalized way. At the same time, new digital players are setting up camp in the bank space. Tech giants are inching ever closer to the banking market, putting bank relationships and revenue pools are at risk. On an absolute basis, this could cost the industry $3.7 trillion, according to our research.

Incumbent banks need to adopt a foundation oriented toward continuous innovation to keep pace with changing customer preferences. Embracing innovations such as embedded finance is one way that banks can unlock new opportunities and raise new revenue streams.

How Technology Blends Banking’s Future

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After rapidly adjusting operations at the start of the pandemic and accelerating their digital transformation roadmaps, banks are left wondering: What happens next? And what did the acceleration mean for banks’ digital strategy?

Banks need to shift their mindsets from emergency response toward using digital technologies to boost their relevance to their customer’s lives. Blended banking will become the norm. Although Covid-19 will be with us for the foreseeable future, people have returned to shops, restaurants and theatres. Similarly, customers are returning to bank branches, but in lower volumes and for different reasons. The proliferation of digital banking means customers no longer need to visit a branch for a transaction. But many retail and business customers will still visit a branch to receive advice or to buy a financial product. And although most banking journeys start online, many are still completed in branch.

Banks must recognize this and provide a consistent customer experience across channels, with human support for digital interaction and digital tools that augment human interaction. In practice, this means empowering customers with an engaging digital experience that can continue in branch. Many banks already acknowledge this evolution: They are repurposing branches as advice centers, with less emphasis on over-the-counter transactions. In addition, banks can harness modern tech devices, like tablets, to support the in-person experience. But to truly elevate the customer experience and increase engagement, banks must also harness the power of data.

Advanced Analytics
For many banks, data and analytics have great untapped potential to drive the next wave of innovation to increase customer engagement. With a wealth of customer data at their disposal, banks can gain a deep understanding of customers behavior, goals and financial aspirations, and deliver personalized experiences in a way that was never before possible.

In practice, big life events have financial consequences — buying a car, getting married or having children — but the reality is that small transactions and spending habits can also provide valuable clues to a customer’s behavior. Careful use of data and analytics allows banks to help customers align their financial services closely with real-life events. They can also use data to help their customers gain a deeper understanding of their own financial standing, providing recommendations to optimize the use of cash. For example, a customer with surplus funds may be advised to pay down a mortgage or increase pension contributions rather the leave money on deposit.

Banks can also do more for commercial customers to evolve beyond transactional banking to helping them run their business more effectively. Once again, data and integration are key. Providing commercial customers with up-to-the-minute aggregated cash positions and forecasts gives them a deeper understanding of their cash use, liabilities and commitments. As banking becomes more open and connected, commercial banks can become the heart of an ecosystem with many participants. Banks must embrace modern technologies, boost automation and integration and ultimately adopt a fintech approach to finance.

A Fintech-First Approach to Finance
The pandemic has accelerated banking’s shift to a technology business. Banks that ignore this will be left behind. To attract and retain consumers and business customers, banks need to eliminate guesswork by harnessing technology and data and offering customers what they want, when they need it.

Banks have much to learn from big technology: Amazon.com generates around 35% of sales from recommendations, while 75% of what’s streamed on Netflix is because of its suggestion algorithm. In the digital age, consumers welcome recommendations, nudges and insights — and are usually happy for trusted suppliers to use their data to personalize their digital experience. Banks must adopt a more entrepreneurial approach to customer engagement.

Retail banking: For a long time, bankers have designed banking experiences based on customer journeys. Now is the time to support customer life journeys by proactively supporting customers throughout their entire lifecycle — from large, life-changing decisions as well as everyday spending and budgeting.

Commercial banking: Banks must acknowledge that millennials are more digital savvy and entrepreneurial than any previous generation. Many current retail customers will start businesses and become the commercial customers of tomorrow. Many will need financial advice, and all will need banking.

With fintechs and challenger banks growing in scope and number, now is the time for incumbent banks to act. The digital age is here to stay.