Financial institutions that fail to modernize and embrace digital transformation in banking risk financial ruin as their peers modernize and become more efficient, and customers seek banks that provide more services and meet their needs. The banking industry, like traditional retail outlets, can’t afford to ignore customer service demands for 24/7 convenience. As the population ages, traditional banking must embrace using digital transformation to satisfy the desires and continually growing financial clout of Millennials and Generation Z.
Digital transformation in banking provides more than opportunities for improved customer service and marketing. Embracing technology also offers opportunities for banks to save money and continually improve customer experience.
Making Banks More Efficient
The most apparent way digital transformation in banking will save financial institutions money is by decreasing the need for physical bank branches and the staffing to operate them. Once banks boasted about their number of branches and ATMs because the number of physical locations they offered provided consumers with more convenience.
Now, as consumers rely on digital services such as direct deposit, auto bill pay, and even applying for credit cards or loans online, the need to visit a bank location physically has decreased. As finances have moved online, traditional banks face challenges from FinTechs, which threaten to disrupt financial services and steal younger customers away.
Younger customers especially prefer the convenience of being able to access their accounts at any time from the convenience of their smartphones. Many banks now receive more deposits via mobile phone apps than they do at their physical branches.
Digital transformation also allows banks to become more efficient by using low-code development platforms such as Sysbupro to streamline banking processes and easily create new products. For example, Reconwizz is a bank reconciliation application that can be used by any size financial institution to link unlimited sources of data in one application and create automatic rules to simplify the bank’s reconciliation process.
Choosing a Digital Strategy
As financial institutions embrace digital transformation in banking, they typically choose to focus on one of five strategies.
By working to serve as a trusted advisor, banks or credit unions can gain a more significant share of their customers’ wealth by providing more products and services that go beyond financial transaction and investment services.
Banks can use digital transformation to create new products and get them to market first to best capitalize on their customers’ wants and needs.
Embracing digital transformation allows banks to take advantage of economies of scale by building on low-cost, standardized offerings that build customer loyalty.
Banks also can build economies of scale by providing specific services such as investment advice.
By providing comprehensive product offerings, banks can better tailor their services to meet client needs and improve their efficiency.
Digital Transformation Value to Banks
Banks now process more data than ever, and adding more digital services means automatically collecting even more. Financial institutions that embrace using that data can learn the best ways to optimize their products, automate their services, and create new opportunities to serve their customers better.
Banks that will prosper through digital transformation will take that data to not only create products their customers want but understand the best times and methods to market those products to their customers. Banks also can use data to keep customers rather than lose them to churn by identifying when those customers are likely to leave.
Digital Transformation Value to Customers
The value of digital transformation in banking to customers is obvious. They no longer need to go to a bank branch and wait to meet with a person. Instead, they can fill out forms online and find out within minutes if they qualify for a loan. That convenience improves both customer satisfaction and retention.
A 2018 Deloitte Center For Financial Services survey of more than 17,000 banking customers from 17 countries shows customers will continually demand more digital services. According to the study, 84 percent of customers use online banking, while 72 percent use mobile apps to access their bank accounts. Improving digital offerings can increase customer satisfaction and engagement.
The bigger concern for most customers is the worry that their financial institution is doing everything possible to provide adequate security to protect their financial information. Digital transformation also offers banks more opportunities to encrypt their information to keep customers’ data secure. Older, more traditional customers especially have hesitated to embrace digital banking over security concerns.
But improving security, perhaps by using biometric authentication such as voice identifying technology or fingerprint analysis, will help ease customer worries. Banks also need to do more to stress their security measures in marketing, perhaps by better segmenting to their marketing to address customers’ generational concerns.
The Accelerating Need for Digital Transformation in Banking
Reconfiguring services to serve their customers better will only strengthen the bond those customers feel and will make them more loyal and profitable customers. Banks must embrace digital transformation to optimize efficiency and reduce costs.
But using technology and data also will help financial institutions reduce churn, improve customer service, and, in turn, customer loyalty. By emphasizing data security measures, banks can help alleviate customers’ concerns that their bank will protect their information.
Financial institutions that fail to rise to the challenge of improving their digital offerings risk fading away like traditional retail outlets such as department stores. Customers will continue their demand for easier, quicker access to financial services. And only banks that meet that need will survive and thrive.