Webinar Wrap-up: 5 Steps to Digital Transformation in Banking

Digital transformation is sweeping through the financial industry. Facing exponential competition from internet giants, fintech, Facebook, and other players, banks now have a critical need to catch up if they want to remain competitive. How well are they doing today? And what steps can they do to speed and improve the transition?

Simplilearn recently spoke with Jennifer Borchardt, Vice President of Omnichannel User Experience for U.S. Bank Wealth Management, about how banks can accelerate digital transformation. This article provides a condensed version of this interview, which is available in its entirety as an on-demand webinar video below.

Q: What’s happening in the financial industry today that makes it even more critical than ever for banks to get on the ball with digital transformation?

A: Just like a lot of other organizations, banks need to meet customers where they are, and these customers have embraced digital and especially mobile. Everyone is going digital, and it is essential for banks primarily to serve the needs of their users and be able to provide the products and services that they expect.

Q: How is this transformation being fueled or necessitated by the generations of bank customers?

A: Today’s users, especially digital-native younger customers, have expectations about user experience – how they expect things should work. These expectations are being shaped by fintechs (such as Acorns, Robinhood, and Venmo) as well as companies outside of financial services. These companies include Apple, Facebook, Instagram, Google, and swipe apps.

Q: Whom should financial institutions turn to for examples of best practices in customer experience?

A: Tech companies. When banks are looking to excel competitively, they need to look not only with their direct at their direct competitors, but really every place where people are spending their time and forming their expectations about digital experiences. 

Fintechs are “better at engagement” because their design has centered on users from the start, using the latest data about cognitive psychology, usability, accessibility, and behavioral economics. By contrast, the experiences from larger institutions (not necessarily just banks) have evolved over time based on legacy experiences. However, many large companies, especially banks, are now investing heavily in user research, technologies, and new methodologies, including Agile for digital transformation and creating a more user-centric experience to increase engagement.

Q: With so many customers going digital with their banking, what advantages do banks have from their brick-and-mortar branch presence?

A: Regarding digital as the channel of choice, this is true for certain types of activities, like viewing balances, transferring money, and depositing checks. But for other types of transactions — opening and closing accounts or handling fraud events — phone or branches still tend to be the preferred channels. However, as technical capabilities and customers’ comfort with technology continues to improve, more of these more complex interactions will move to digital. Interestingly, regarding customer satisfaction, customers who have had negative experiences (such as fraud – a very stressful experience) that have been positively resolved report higher satisfaction than customers who have never had such experiences.

People trust technology companies for financial transactions because they have a lot of experience and deep relationships with these companies. However, it is important to keep in mind that these established technology companies who are new financial players are still the best-equipped to support certain types of personal transactions: sending money to friends and family, paying bills – frequent, lower-amount, lower-risk transactions. On the other hand, these technology companies are not (yet) equipped to handle more complex higher-stakes transactions such as home lending or business banking.

Digital-only transactions are expected to increase as technology and people’s comfort using it improves. However, even the most sophisticated technology can replace human interaction and relationships, which will always be of value to the business and higher net worth clients.

Q: Let's talk about where banks are today how prepared are they are or how far they’re lagging behind.

A: I think it is fair to say that they are behind — but behind relative to what? Many fintechs and other startups are already farther ahead because they got a head start. They were built digital first. So banks are making significant investments in changing their culture, changing the way that they invest in technology and their people. 

Now banks are catching up, and I would actually say that the disparity between large banks and fintechs is going to start to narrow. Fintechs kind of hit the ceiling of what they're capable of doing, and they can't grow any further. A lot of this has to do with regulations.

Q: What does this closing gap spell for the future of banks vs. technology companies?

A: Banks and fintechs are going to start partnering. This could be an acquisition, or this could be a partnership. Through these partnerships, both the large banks and the smaller fintechs will be able to do what they do best and be able to rely on the strengths of the others. That partnership is essential, particularly for the fintechs. Fintechs will have to be in compliance with these very complicated and arcane regulations. 

It’s a barrier to entry for some smaller companies. Like Uber and Lyft, they may start by flying under the radar. But as these companies are getting larger, expanding their reach, and getting the notice of local and federal governments, they're now starting to have to comply with regulations, just as their larger competitors do. That is evening the playing field.

Do you wish to leverage digital technologies to transform your business strategies and objectives? Then check out the Digital Transformation Course!

Q: You’ve said that a big part of digital transformation has to do with a cultural shift at the top. Let's talk about what it takes to make that cultural shift.

A: Digital transformation readiness goes beyond technology — which, of course, has its costs and challenges. But a more difficult barrier is culture. Digital transformation, mainly if it includes adopting an Agile development methodology, requires distributed decision-making to empowered lower-level team members. That’s a challenge, particularly in larger, more established organizations where most decision-making is centralized at the top. Also, it is critical to recruit, develop, and retain people who can make the right decisions and thrive in an Agile organization. Shifting hiring practices is neither fast nor straightforward!

What's interesting is that the cultural shift isn't just about a CEO saying, “We need to transform.” It requires a commitment that goes right down to the deepest levels, including funding and talent

acquisition and developing that talent, developing Agile workflows, and empowering teams to make decisions. Plus, it takes the willingness to take risks and the budget to back it up. Banks have historically been a little bit risk-averse, and some of this has to do with the culture, and some of this has to do with the regulations.

Q: What about the mobile aspects of banking? Is it enough to have a mobile-friendly website?

A: The percentage of mobile banking customers is expected to increase as bank technology, device capabilities, and user familiarity with technology also increases.

As satisfaction relates to mobile app usage, this could be due to a couple of factors. First, banks are making a lot of investment into mobile technology, and employing user-centered design approaches as they do this so that user satisfaction may be more “baked in.” 

Second, customers who download their bank’s mobile app may already have a higher level of trust and satisfaction with their bank. Customers must make an active choice to download a mobile banking app, whereas Google Pay is pre-loaded into most newer Android phones, and Apple Pay is already part of iOS on iPhones. This, too, is a challenge to banks and their mobile apps. 

Mobile banking is a significant way that people connect with their banks, but we do need to remember that this is not the only way. Recently, banks have invested very heavily in online and mobile banking. But now they need to take a step back and consider how the digital channel works across the entire ecosystem across the experience across all channels, and this includes ATMs, phones, and branches. As much as possible, this experience needs to be consistent and supportive across channels, and customers need to be able to use their channel of choice, when they want, for what they want.

Q: McKinsey says that one of the biggest transformation hurdles relates to organizations’ skills as much as investing in technology. How can banks improve these skills gaps?

A: I think I think one way that ace can improve these skill gaps is by training their team members to embrace technology. Team members should not only understand how the technology works but also help their customers understand how the technology works. 

It's also essential for banks to invest in training their teams about Agile methodology, learning about different types of technology applications. I also recommend teams learn about project management and getting a PMP certification or even becoming an Agile Scrum Master. Design thinking and excellent UX courses are not just for designers. Everyone has a stake and unique user experience. This includes vital managers and everyone who wants to improve their personal, professional development.

It’s equally important to gain training in people skills that involve human emotion and personal connection, including leadership, organization, and communication. This is something that technology can never really replace.