By Stephan Hartgers, VP Digital Strategy, Mobiquity
The digital opportunity of COVID-19
John F. Kennedy once said that the word ‘’crisis’’ in Chinese is composed of two characters: One representing danger, the other opportunity. He may not have been entirely correct on linguistics, but the analogy is true enough: A crisis represents a choice and an opportunity. The COVID-19 crisis caused banking and financial services companies to rethink the speed at which they were adopting technologies and accelerated the digital transformation of their operations.
In a COVID-19 world, traditional banks are realising that although their motor is still running, if they fail to embrace digital innovation, there is no guarantee that their established position in the market will remain in the future.
The pandemic has squeezed years of digital transformation into just a few months, especially in the innovation of payments, open banking and personalised online customer engagement. It has provided a golden opportunity for traditional banks to scale digital offerings and maintain their client base, whilst attracting new customers.
In an increasingly saturated market, traditional banks face competitors who are embracing digital innovation wholeheartedly, from emerging fintechs to challenger banks – and reaping the benefits. According to Innovate Finance, the UK fintech sector has raised $5.7bn in 2021, overtaking the total investment in 2020 by 34%, with 13 UK fintech companies closing deals worth over £100 million since January. In this context, it has never been more crucial for traditional banks to welcome this digital opportunity and leverage the value of digital innovation.
During COVID-19, many traditional banks have done just that – investing heavily in improving their omnichannel customer experience to retain and grow customers, with banks closed due to lockdown measures. In addition, many also invested in enhancing existing digital products and services, and technology was naturally a key facilitator in this. However, while some traditional banks have recognised the potential of digital banking solutions, many need to do more to arm themselves against the younger, digital natives in the market, with the likes of Starling, Monzo and Revolut becoming increasingly more influential.
Less is more in digital innovation
Executing digital transformation properly is no easy task. Implementing technology for technology’s sake is not only a futile strategy, but also a barrier to successfully driving business impact.
Banks and financial institutions need to focus on using the right solution; one that not only fits the problem, but also fits the market, customer demands and an overall business strategy, while remaining technically viable. To do this, it is important to know that digital transformation isn’t just about digitisation, it is a strategy of applying digitised solutions holistically across all areas of the business. It is about embracing digital solutions as a means to reconfigure how the business approaches operations and customer service, from C-suite to junior staff.
In short, less is more when it comes to implementing digital innovation successfully. Across the industry, not all companies have as much space, investment or time to experiment with the right solution. On the one hand, larger banks have significant funds to experiment with new kinds of digital technology, but may be complacent regarding its benefits. While on the other hand, smaller financial services companies may be ready to innovate with emerging technologies, but lack the direction or funding to innovate successfully.
The customer is king: Going beyond products and services
Whatever the business context, the value of implementing end-to-end solutions in banking and financial services is clear. From mobile banking apps to leveraging AI and Machine Learning, digital transformation has enabled banks to deliver innovative banking solutions for customers, exceeding corporate hype for emerging technologies and actually driving business value internally and externally.
With the advent of smartphones in 1992, users started to expect a certain level of customer experience. With the increase in portable devices, it stimulated the dawn of UX design, forcing businesses to invest in innovative ways to engage customers.
Digital transformation during COVID-19 has presented a similar watershed moment in the redesign of customer banking experience. For banks to meet these new demands, digital innovation needs to be done right and at speed. Key methodologies that can aid in driving this innovation include Design Thinking, Lean, Startup and Agile.
Idea to impact: Evolving innovation management
To deliver innovation from idea to implementation, banks need to focus on a common vision for innovation and that the innovation team is positioned separate from the business operations. Maintaining this cohesive visualisation going into innovation cycles is essential to applying new methodologies and technologies and effective business outcomes. During this development, banks can research and define their innovation strategy, define where they want to innovate, and where they do not. This aids the company in consistently generating relevant “good” ideas whilst filtering out the “bad” ones, carrying out rapid client experiments, prototyping and building of minimum viable products (MVPs).
Since these groups have been working on innovation for a while now, it has begun to move beyond what started as a “trend” in business. In the beginning – only several years back – there wasn’t always a need to focus on large potential revenue streams. As competition has accelerated with COVID-19 and the thrust into greater digitalisation, these projects now need further reconsideration. They need better objectives, and more Innovation Factories that will not only create useful solutions quickly, but also deliver on generating business impact.
These innovation strategies, once matured, will not only provide faster, cheaper and better services, but also ways for banks to positively combine the human-digital banking experience that can fulfil the demands of the customer in a post-COVID-19 world.