Lack of vision and resistance to change are leaving banks ill-equipped to succeed in an increasingly digital world.
By MaiteBarón, CEO, The Corporate Escape™
There’s a natural reluctance to look into the future for fear of what you might find. Perhaps that’s why many organisations – banks included – hang on to the past for far too long.
However, in a world where technology continuously and relentlessly shifts the economic sands, relying on what once worked is no longer an option, as old ‘certainties’ are swept away by new concepts.
This is nowhere more evident than when it comes to the impact of digital, or rather lack of it, on the world of banking. Just when it should be looking towards tomorrow, an institutionalised resistance to change prevents much of the sector from doing so.
So, while the wider world moves ever further towards buying travel, holidays, books, electronics and food online as the norm, banking keeps one foot (perhaps even two) firmly in the past. As a result, customers are unable to engage with their bank in the seamless digital process they have come to expect. Instead, while they may begin an application for a loan or mortgage online, all too often they are deposited back in the world of pen and paper, and handed forms that have to be laboriously filled in.
The internet didn’t exactly happen overnight, but for banks it’s almost as though it did. As a result, many could soon be found wanting, increasingly ill-equipped to deal with what is happening around them.Across Europe,for example, retail banks have digitised only 20% to 40% of their processes according to global consulting firm McKinsey, while most (90%) have invested less than 0.5% of their spend on digital.
That’s an ominous statistic, given that customer needs, particularly among younger people, are increasingly focused online. For example, surveys of American 18- to 29-year-olds reveal that most are choosing their bank based mainly on its online offerings. Branch proximity is more of a concern for older customers.
In Asia, where adoption rates for many devices, and especially mobile phones, outstrip those of the West, consumers are increasingly making their banking decisions online. When business is concluded in branch, it’s often after online research and only because country legislation requires the physical signing of documents to be overseen by bank staff.
In a region where culturally there’s a degree of unease about handing over money to others,the physical ‘bricks and mortar’ presence of a bank used to provide reassurance, so the move towards ‘virtual’ non-branch channels is particularly significant.
So you can be sure that at some point soon, someone with vision, having seen the benefits, will step up to the mark and create the truly ‘digital bank’, with all the potential cost savings that come with the automation of services, improved fulfilment processes and transference of front-end activities to digital channels.
The economics are such that those who achieve this successfully will have a major competitive edge over their slower to adapt, more traditional banking rivals.
So here are five ways to get ahead of the curve:
- Grow your understanding across the whole digital spectrum
It is easy to perceive digital as consisting solely of apps for mobiles or product comparison tools, and fail to see its potential as a means of bringing different elements of the business together, streamlining processes and removing bottlenecks by connecting front end and back room services.
- Increase trust both ways
Many banks would claim that security is holding them back from embracing digital more vigorously. Yet airlines – and it would be hard to deny that they face even greater security issues than the financial sector – have managed to successfully automate many of their processes. I believe it’s actually a question of trust, and it’s a deep-rooted one. No-one really trusts banks anymore, and they seem to mistrust themselves too. Resolve this issue and other solutions will flow from it.
- Improve your strategic thinking
With many of the elements already in place – imaging technology, work-flow software and voice response systems – what’s really lacking is the visionary thinking to bring those elements together, then make sure they’re used consistently and effectively.
- Shift your focus
Often digital initiatives are perceived as a high cost investment. Yet in actual fact, much technology is now low cost, so could easily be introduced at the margins. The use of tablet-based forms (rather than paper) and video-conferencing could significantly increase employee productivity while bringing more to the customer experience. Behind the scenes, a combination of digital and human review of application forms and other interactive materials could easily be implemented, with the human element there to increase trust, improve decision-making choices and address errors and anomalies.
So much more could be done without major investment, and focused on where it would deliver greatest returns.
- Think multi-channel
When digital is offered alongside traditional services, it seems customers prefer this more versatile banking environment. Further research by McKinsey shows that, while younger customers may prefer to do their banking online, overall two-thirds of customers interact with their banks through multiple channels, with digital reserved for simple transactions, and human interaction sought when solutions to problems are required.
It also appears that the more customers use a bank’s digital channels, the more they also use its branches and call centres. So those who use mobile and online banking at least once a week are over 60% more likely to use their retail branch than those who don’t bank online. That opens up new opportunities. But to leverage them requires vision and a willingness to think long-term and see a world in which people and digital work alongside each other, integrated within an organisation’s structure.
Managing that transition requires sensitivity, since the introduction of technology will be seen by employees as a threat. The emphasis must be on how it can replace low interest activities with more rewarding work.
But first, those at the top must rid themselves of restrictive mindsets and learn to understand digital ways of working, so that digital becomes a part of their strategic thinking, with a Head of Digital with P&L responsibility appointed to oversee implementation and lead the way forward.
As part of that process, the emotional intelligence of banking leaders needs to grow. Too often, the ability to relate to others and the external world is blocked by self-preservation and consequent inability to see beyond the here and now.
Only then will banks overcome the short-termism that blinds them to a future that’s already here and has the potential to be so much more rewarding for all.
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