With banking customers expecting higher quality and faster interactions, customer experience has become the battleground where banks compete to retain existing customers and attract new ones. Many banks are embracing digital transformation (DT) as a strategy on which to build new and advanced customer experiences and better, more compelling products. And, it’s important that investments in this transformation are allocated to the right areas. Many banks forget that digital transformation is a journey, not an overnight process, leading to a 2013 McKinsey study finding that 70% of transformations fail.
However, simply framing DT as a strategy for advancement doesn’t help banks understand what they need to do to achieve it. So, what does DT really mean?
We want to help answer this question, but not with a definition. That will only perpetuate DT as a fuzzy concept. We want to help bank leaders make DT tangible, so we think it’s better to explore what comprises the DT picture—the pieces of the puzzle if you will. And there are many pieces—spanning key areas such as people, processes, and technology. Our goal is to focus on the final piece mentioned, technology, and explore what we believe to be three critical components that bank strategists and technologists need to leverage to be successful at digital transformation: real-time data, cloud, and mobility.
Real-time data: how accurate insight is created
This first component of a successful digital transformation is a solid grasp on real-time data. While many banking strategists are familiar with the concept of big data and leveraging historical insights, real-time data provides a way to leverage insight across channels and adjust internal behavior as consumer behavior changes. Rather than worrying about the relevance of insight from big data (due to the gap in time between data collection and data use) real-time data provides immediate, actionable insight into consumer behavior, potential vulnerabilities, and overall business health.
Real-time data is the foundation on which digital transformation rests. Its development has led to significant opportunities for banks to succeed in digital transformation, including:
- Improving customer experience. According to a recent article from Mckinsey, “successful digital banks deliver a truly seamless multichannel experience by gathering real-time data and using analytics to understand the customer and build the proper (and always consistent) journey view.”
- Driving more revenue from marketing initiatives. According to a separate Mckinsey article, “such data-activated marketing on a person’s real-time needs, interests and behaviors represents an important part of the new horizon of growth. It can boost total sales by 15 to 20 percent…”
- Effectively managing risk exposure. Instead of build and updating risk models based on historical information, banks can adapt with changes in customer behavior as they happen, allowing for financial crimes to be mitigated in real time.
The ability to wield and control real-time data is truly the platform that makes DT possible. Without it, banks looking to digitally transform will lack proper insight and data analysis—making the required DT steps, such as powering advanced machine learning techniques, significantly more difficult.
Cloud: how technology services are delivered
Going hand in hand with real-time data is the cloud— it’s the medium by which real-time data capabilities are delivered. During digital transformation, adopting cloud infrastructure gives banks an early competitive advantage. While other banks may continue to rely on on-premise systems, cloud systems, and their ability to be lightweight and flexible, allow banks to more dynamically transform and keep up with customer expectations. In a recent report, the British Banking Association (BBA) found that, “public cloud deployments can enable banks to direct internal resources, previously focused on the administration of IT infrastructure, towards innovating and delivering new products and services to market more quickly.”
Cloud infrastructure also allows banks to shed legacy systems, which, as bank leaders are painfully aware, are weighing down activities across the organization. From marketing to accounting, these systems are hindering DT progress. A recent article from The Financial Brandmentioned that, when surveyed, 39% of banking executives cited their complex legacy IT environment as being the largest barrier to digital transformation. Clearly it’s important to ensure that legacy systems aren’t standing in the way of DT.
These “leading” leaders have taken note of the need for DT in banking, with the cloud being a large part of addressing that need. And their main reason for this is greater agility, as evidenced in a Deloitte study. Nearly a third of respondents indicated agility drove their decision to move to the cloud.
Not surprising, as DT is all about agility. Cloud infrastructure supports that by removing lagging legacy systems that require significant IT support and maintenance for little gain. With cloud, there’s no need to worry about any of that. Banks can do more and do it faster.
With many of the clear benefits becoming increasingly visible, the race to move from legacy systems is speeding up. Consider an IDC-EMC analysis that indicates that less than 20% of data was stored on or processed by the cloud in 2013. The estimation for 2020? It doubles to 40%. It’s important that strategic bankers understand the potential of the cloud and support its adoption throughout the transformation.
Mobility: how bank services are consumed
The last critical technology component for a successful digital transformation is mobility. Like real-time data and the cloud, it’s an important part of DT. However, mobility’s perspective is focused on the frontend, not on the backend, making mobility customer-facing.
Customers have always used, engaged with, and otherwise consumed bank services. However, their consumption behaviors and methods have shifted. As we discuss in another piece on DT , customers have evolved from a digital-centric to a digital-only mindset. In essence, this means they are no longer satisfied with being forced to walk into a branch or pick up the phone to achieve their banking goals. They must be able to use their smartphone to make banking magic happen.
This shift compels banks to evolve as well—to adopt a mobile-first mentality. DT in this context is building knowledge and capabilities around the digital consumer. For example, banks need to determine how best to sell to this new breed of customer through mobile and other digital channels, not in-bank advisors or specialists. And there’s no way around this reality, asresearch by CACI indicates that mobile transactions will rise 121% by 2022. With this shift in consumer preferences, moving quickly to adopt a mobile-first mentality is becoming increasingly important.
With the advent of digital transformation, banks are being required to leverage real-time data, cloud and mobility. This dramatic shift in infrastructure has opened banks up to new threats (e.g. new channels with unknown behavior). However, with the adoption of the proper technological infrastructure, banks now have the option of leveraging their investments and implementing platforms to accurately spot, and stop, criminal behavior in all of their channels, new or old.
That’s where a platform like Feedzai comes in.
Feedzai is uniquely placed to facilitate all banks and financial institutions to enable Digital Transformation with advanced machine learning. Built from the ground up to effectively manage financial crime, Feedzai’s machine learning powered platform can generate real-time context in high-speed data streams. It can work with any deployment choice, whether it be on-premise or cloud, and can work effortlessly at massive scale. With Feedzai, organizations can easily understand its own operating characteristics and understand normal customer behavioral patterns across all channels, easily allowing anomalous behavior to be spotted and stopped. These benefits allow banks to continue their battle of customer adoption without having to worry about damaging criminals slipping by unnoticed.
To read more about the digital transformation process and how Feedzai supports it, follow the link to download our latest Ebook: De-risking Digital Transformation: A Guide for Banks that Want to Evolve While Staying Safe.