Interview: Digital transformation in banks should be about the customer
BANKS are making headlines every day with exciting digital transformation projects. From artificial intelligence (AI) and machine learning (ML) to wearables and blockchain, there’s nothing that banks haven’t conquered.
According to estimates, banks have collectively spent over US$1 trillion on such digitization initiatives over the past year. However, if customers are asked about overall satisfaction with their banks, the needle hasn’t moved much.
Banking industry expert Neal Cross recently spoke to Tech Wire Asia ahead of his speaking engagement at TechSauce last week and shed some light on what’s going wrong.
Cross believes that ego and ambition are two of the banking industry’s biggest obstacles when it comes to impactful digital transformation.
“Ego in terms of that banks know best, that they have been building new products and services for decades and they know exactly what the customer wants.”
As the rate of disruption has changed, Cross believes that banks definitely need to collaborate to solve customer problems — “whether it’s getting ideas from internal staff or working with start-ups or students to co-create, or even working directly with clients to understand how they want their financial problems solved.”
“I feel most companies have forgotten their focus, which is not to push their products on their customers but to solve their customers’ problems and to earn the right to sell them a product or service,” explained Cross.
“Second ambition, banks can no longer just think like a bank, they need to start thinking like a tech company or a start-up or a blend between the two.”
“In the current environment new competitors are appearing daily from taxi companies, e-commerce through to even airlines, now is the time to do something big and to do it fast.”
Digital transformation advice for bankers from Cross
Honestly speaking, given the concentration of legacy systems in traditional banks, transforming digitally involves a lot of time, effort, resources — and most of all — planning at the most strategic level.
The strategic plan can only be successful if the executive-tiers of a banking organization is in touch with what customers really need.
According to Cross, in order to make real progress, banks must focus on “fixing the more prevalent customer complaints and to reduce the amount of time and effort that a customer spends engaging with the bank.”
This might sound like a no-brainer since bankers have been chasing this goal for more than a decade now. The whole point of creating a strong network of ATMs was to reduce the number of customers walking into branches to make transactions — because each visit is an expensive ordeal for the bank.
Since millennials prefer banking digitally, the age of banking transformations is a great opportunity to enhance service delivery through online and digital channels.
However, Cross points out that “many banks focus too much on the new sexy digital experience while not addressing the key customer issues that in many cases have been around for decades.”
In order to truly delight customers, bankers must focus on ensuring all transactional and operational requirements can be fulfilled online.
“Secondly, they need to find ways to make banking quicker and cheaper by the use of technologies like RPA, and through wholesale digitization efforts that focus on cost reduction.”
ICICI Bank in India, for example, has deployed about 750 RPA bots that handle close to 2 million transactions per day. While no cost or time savings have been reported as yet, it’s interesting to see that human error has gone down significantly.
“These robots are being used across different operations and LoBs including retail, wholesale banking, forex, treasury, agro and international operations. And most of the robots deployed have been developed in house,” ICICI Bank India’s Senior GM and Head of Operations Anita Pai told the media.
“Finally, bankers should start to focus on projects that reach into ecosystems to create scale and value outside of their organization, this can be done via the very simple use of APIs and value exchanging partnerships,” explained Cross.
The value of building and working with ecosystems holds enormous value for banks as there’s a lot to gain in terms of ideas, technology, and even additional revenues.
“Ecosystems are not just for tech companies. They also offer banks a unique and scalable solution to the competitive challenge. Banks have great advantages, including rich data and customers’ trust, to expand beyond their traditional limits into adjacent businesses,” A recent McKinsey study pointed out.
Both Cross and McKinsey are of the opinion that most banks aren’t too good at leveraging ecosystems — but they must get good at it if they want to really throttle their digital transformation engine for maximum performance.