From Legacy to Digital: How Financial Institutions Can Make the Transition

By Ed Lane, VP Sales EMEA at nCino, discusses how traditional financial institutions can learn from the success of digital leaders in the retail space to bring a more customer-centric approach to banking

The coronavirus pandemic continues to irrevocably alter the banking industry. Traditional ways of working have been turned on their head as social distancing guidelines and ongoing lockdowns have forced the banking industry to condense five years of digital transformation into eight months and become more digitally minded than ever before. While challenges remain, this digital trend is likely to be welcomed by British account holders as it is predicted that by 2025, 44% of UK citizens will have a digital-only bank account. As challenger banks proactively drive to digital at the prospect of greater client acquisition amidst the shifting landscape, their sheer existence is an impetus for innovation amongst traditional financial institutions that want to stay aligned with evolving client expectations.

For banks already on this path of digital transformation, or looking to begin their journey, inspiration can be found in a less than obvious source: global tech giant, Amazon. As a truly digital and customer focused business, Amazon has transformed the way people shop, read, watch TV and now even buy their groceries. So, what can the financial industry learn from this renowned innovator as it adapts to a more digitally minded mindset?

Lesson one: Put speed and efficiency at the heart of every process

Amazon has a maniacal focus on speed and efficiency – be its ‘buy now’ button or dash buttons – you can hit ‘buy now’ with one click without the need to enter any additional information and your order arrives at your home in 24 hours. This has shown real business success. In fact, 66% of UK Amazon Prime users say they regularly use the service because of its faster delivery offering. As customer expectations adjust to this as a standard, the ‘need for speed’ is now felt across all industries, including banking.

Understandably, the pandemic has forced consumers to adjust their expectations as they settle into the ‘new normal’. And while many have adapted to changes in speed of delivery for many everyday products, Covid has actually heighted the importance of speed in the financial industry. For example, the introduction of the Coronavirus Business Interruption Loan Scheme (CBILS) in March highlighted the ever-increasing importance for digital solutions and fast loan processing as small and medium-sized businesses endeavored to restart trade.

Whilst a fantastic initiative that provided a vital lifeline to many businesses, the scheme was plagued with criticism; many argued that the process of applying was slow and banks buckled under the strain of high demand at a time when they had to quickly adapt to a remote workforce. A perfect storm of conditions revealed the urgent need for financial institutions to place a priority on speed. Financial institutions built with a digital and agile mindset – and the right technology – saw success in delivering loans quickly, efficiently and compliantly. Cynergy Bank, for example, has noted that it was able to reduce the onboarding process from three days to 54 seconds for Identity and Verification by moving to a more agile, cloud-based platform, and the end-to-end customer application takes less than eight minutes for CBILS loans.

Lesson two: In the pursuit of digital, don’t forget your humanity

How do you create a bond and a feeling of engagement when you don’t have a welcoming and smiling staff member greeting a customer as they walk into a branch? Well, fortunately, the digital world doesn’t have to seem as cold as rows of zeros and ones might feel. Amazon has successfully utilised the data at its fingertips to provide a truly personalised experience.

Financial institutions, too, should look to ensure all channels, and more critically digital channels that lack that human touch, are personal to the individual. Small acts of personalisation like an app greeting you with your name or asking how your trip was based on spending data can all help build brand loyalty and create opportunities for engagement. This is increasingly important as financial institutions move more of their presence and focus to digital. Start-up Challenger B-North has recognised this need and is harnessing the functionalities of a cloud-based platform to develop an agile, digital and personalised customer experience. In an increasingly competitive SME market this will help differentiate them from its competitors and help service the borrowing needs of its client base of business owners and entrepreneurs.

In an interesting juxtaposition, as more financial institutions close branches, Amazon has expanded its bricks and mortar presence highlighting the value of in-person interactions. As an either-or approach clearly falls out of favour for retailing or banking, the financial industry needs to look at how it can ensure a hybrid approach – retaining the positives of both high touch and high tech.

From humble book seller to global retailer and media organisation, Amazon has consistently increased its offering to customers whether they want groceries delivered or to stream original content. Understanding a consumer need and then seamlessly delivering on that need has been its strength.

In the same way, traditional financial institutions need to look at the needs of their clients and respond accordingly with appropriate new services and channels. This can help grow their portfolio but more importantly, result in a more loyal client base. Santander UK realised the need for faster loan processing in order to be able to support the increased demands from their customers even before the pandemic hit. By digitising elements of its infrastructure, the bank was able to replace 13 legacy systems and over 60 end-user computing systems with a cloud-based ecosystem, completely overhauling its SME, corporate and commercial banking units to help it meet rapidly changing customer expectations.

As traditional financial institutions make the transition from their legacy technologies and behaviours, it’s vital that they bear in mind Amazon’s ways of working and applicable lessons to the banking industry. With a laser-focused obsession on the consumer, Amazon has built a business that keeps people returning in droves. The ultimate achievement for any financial institution would be to replicate this themselves.