Four Strategies for Starting a Digital Banking Revolution

The world of banking is in a state of flux. The quiet halls and stately buildings that defined the customer experience for decades – if not centuries – are being supplanted by apps and online tools that allow quick and easy access to finance.

The trend toward online banking is here to stay, with the market for financial technology (fintech) businesses expected to climb by an impressive 20% per year between now and 2028.

In the face of this booming competition, the traditional banks and credit unions that have formed the backbone of the finance sector must rapidly modernize their offerings or risk being displaced by fast-thinking, fast-acting fintech startups.

However, transitioning a venture as complex and heavily regulated as a bank to a digital enterprise is much more involved than designing
a slick website and installing a few e-commerce plug-ins. A successful modernization project has a lot of moving parts and challenges that
must be overcome.

Challenging doesn’t mean impossible. Every institution’s pathway to digital transformation will be different, but there are several common steps that a bank should consider when putting together a platform of modern digital offerings.

The following steps can help to smooth out the bumps in one of the most important projects the organization will ever embark upon.

Identify the low-hanging fruit

Much like Rome, no bank was built in a day.

As much as we’d like it to, a digital banking platform (“platform” in the sense of apps and back-end services working in concert to create digital experiences) doesn’t have to offer every single service from the get-go. Rather, financial institutions should look to launch with a range of offerings that are easily attainable and highly popular.

Account opening and loan origination are perfect examples of these kinds of services. Both are relatively simple areas to automate, and both are highly popular with customers. It’s possible to develop these kinds of services in-house or purchase them as an off-the-shelf service or module from an established developer — or even a fintech.

Notching early wins, especially ones popular with a wide range of customers, does wonders for getting a foot in the door. Beyond this, it also instills internal confidence,
builds momentum for even wider change, and yields
credibility with senior
leadership.

Build (and maintain) your team

Any major modernization initiative requires extensive skills to enact. These skills must be supported with significant buy-in across the organization.

Of course, unless a bank already manages a lot of development work, there’s a good chance that the key people needed to build a digital platform will have to come from outside of the organization. They may even come from outside the banking industry entirely. A report from recruitment specialists Toptal noted that 15 years ago the finance industry was by far the most popular destination for top MBA graduates. Today, it is the tech sector.

Experienced and creative banking leaders have noted the importance of looking beyond well-worn recruiting paths to bring in new blood from fintechs. On the GOBankingRates blog, Jeanniey Walden, CMO of DailyPay, noted that this kind of young, ambitious digital talent may well require compensation and incentives beyond the traditional banking practices we’re used to, as well as a career path that diverges from the norm.

It’s important to remember that a new digital team’s members don’t stop being useful the moment they hit the “deploy” button. Consistent success depends on iteration, evolution, and maintaining in-house the skills needed to ensure that your new modern platform has staying power.

Explore fintech partnerships

It’s easy to frame the relationship between fintechs and more traditional banks as a winner-takes-all struggle. This does not have to be the case. There is every reason to believe that partnerships between traditional financial institutions and fintechs will become the norm.

Many fintechs offer specialized services and products that fall well out of the traditional remit of established banks – many of which can complement their offerings without the need for in-house development. And for their part, banks and credit unions can extend to scrappy start-ups the benefits that come from a trusted legacy and access to a banking charter. Writing for Forbes, Andrew Jamison, the CEO of payment startup Extend, noted that “from fintech’s perspective, banking infrastructure is difficult at best to tap into, as regulatory compliance concerns prevent open banking from truly commandeering the industry.”

Banks have plenty to offer to fintechs. But keep in mind that no relationship with a fintech or any other partner is possible unless your organization can integrate with them. It comes down to what those of us in the tech world call “extensibility.” You need to have a technology platform where you can easily embed the offerings of external partners into yours, and easily embed your own offerings into theirs.

With a focus on integration, and some careful negotiating and a willingness to embrace a potential rival, banks and fintech companies can develop profitable partnerships that enhance the offerings of both organizations.

Leverage physical branches

Among the things that banks and credit unions can offer that fintechs can’t, a network of physical branches is chief among them.

The usefulness of brick-and-mortar branches may seem like a strange thing to raise in a discussion about digitization, but if used carefully they can offer massive benefits. For example, they represent locations where customers can talk with nearby experts and learn about products. Many of these discussions will invariably bleed over into digital interactions, while customers who originated their accounts online may well head into a physical bank to discuss their options with an expert advisor.

In fact, banks are increasingly looking at branches as centers of innovation rather than just transaction centers. Yes, transactions will continue to be facilitated there, but they also should be places where customers go to speak with trusted advisors who can tell them about relevant new products and services.

The physical branch doesn’t have to just be a haven for the technology-phobic who purchase banking products from an actual person. Instead, it can be a hub of financial information and expertise — a place to build a community and provide education and guidance in a way that no app can quite manage – no matter how cleverly it’s programmed.

Modern thinking

The move to a modern banking environment isn’t easy. Establishing the team and the partnerships needed to see a digitization project from start to finish requires commitment, dedication, and investment.

However, the ultimate result is easily worth every hardship encountered along the way. Very few customers want to deal with the hassle and paperwork that comes from shifting to a new bank. But if they can’t access services how they want, traditional banks and credit unions can no longer just rely on customer loyalty to preserve their revenue.

Is your organization ready to do what it takes to keep them?  

Ron Cameron
Ron Cameron, KnowledgeLake
President and Co-Founder at KnowledgeLake

Since KnowledgeLake's inception in 1999, Ron Cameron, president and co-founder, has taken great pride in creating a positive company culture where employee and customer satisfaction are the highest priority. KnowledgeLake is a cloud-native solution for document processing that enables organizations to capture, process and manage their content in a single platform. The company combines intelligent document capture and robotic process automation (RPA) to increase productivity. Two million users worldwide employ KnowledgeLake to work faster and more efficiently.