Can “wrap and digitize” take you into digital age?
No simple feat, creating a digital bank around a traditional core may be path for most
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- Written by Steve Cocheo
Imagine the smart device as one of several funnels that the bank pours its key elements into and you begin to get where PwC's suggested strategy begins.
What will happen within 90 days of a new customer being onboarded at your bank?
If the answer is “nothing, unless they ask for something,” that’s wrong, say PwC consultants George Hodges and Justin O’Connor. If the response is that they receive an email blast pushing the “product of the month” to everyone, that’s also wrong.
During a recent webinar, the pair said recommending the customer’s “next best action” now that your institution is serving them is the kind of follow-up that today’s consumer expects. Hodges is director and banking and payments lead at PwC FinTech and O’Connor is director and digital banking lead at PwC Advisory.
It’s a throwback to an experience that many retail customers have never had, or only remember, in banking—the teller who knew them well and who could recommend products and solutions. But the expectation has been replaced with something else, a digital experience that the PWC webinar presented as an aspiration and, ultimately, a blueprint.
Model in your pocket
Increasingly, the pattern for consumer experience for all needs is being driven by companies that are literally right at hand. The apps on the typical American’s smart phone drive a lot of interaction by recommending purchases and other actions.
O’Connor’s wife is expecting, he told listeners, and, “Amazon is pushing baby products towards us and the baby hasn’t even been born yet.” How many banks do anything like that in their own sphere?
Some apps help the customer set and maintain goals, and advise on how progress is coming, whether the issue is weight loss, exercise, or savings.
Hodges, the elder of the two consultants, noted that even older Americans like himself increasingly rely on apps to run their lives. For him Google Maps has become a default search engine for everyday needs, not only for directions but also for finding restaurants and more. When he goes shopping at a physical store, he reflexively checks pricing against Amazon and—relying on Amazon Prime free two-day shipping—he will sometimes order at the lower price while standing next to the physical item. Price overrules proximity.
Bank branches, in many markets, are still ubiquitous. Yet, for banking, Hodges said, the parallel to his shopping experience is that “everyone is using branches less,” and they want a good alternative digital experience.
“Our expectations of our banks are being set by digital brands,” said Hodges. “What is my bank doing to help me along my journey?”
Perhaps banks enjoy the advantage that their services, essentially being abstract, don’t require free shipping to be attractive.
What do consumers want?
“There’s an unmet need out there for help with finances,” says Hodges.
The consultants said that there are six key expectations from customers today of banks, all of them achievable digitally:
1. Immediately recognize the customer.
2. Meet their immediate need for engaging with the bank.
3. Offer access to their relationship with the bank and transactions across the bank’s products.
4. Offer real-time advice in the context of their current interaction with the bank.
5. Present the same advice and experience in every channel.
6. Give them a sense of how they compare to people like them.
The consultants cited numerous nonbank examples of services that provide elements of these expectations. For example, Mint, owned by Intuit, aggregates customer financial information across institutions and across accounts—from spending to saving to investing—to provide an overall view of finances that drives product recommendations for that user. The site can even report on the user’s credit score.
By contrast, many banks offer customers a frustrating experience full of friction. The typical interactive voice response system leaves Hodges cold, he said, because often the technology appears to be designed to keep him from ever reaching a human operator. And often, once real people are reached, the customer winds up being bounced from one siloed operation within the company to another, because systems don’t talk to each other.
Think of how many times the typical system requires a customer to state their identification information to both a computer and ultimately to humans.
For many consumers, their main interaction with their banks, at present, consists of card transactions and payments on those card accounts. So improvement in such operations is critical.
Nonbanks frequently do a better job of handling customer issues, Hodges said, even if this is delivered digitally instead of by human interaction. He said he’d had to actually try to reach someone at Amazon only once. He couldn’t even recall how he had done it. However, he said, he found it so easy to solve issues and check information on Amazon itself that voice access wasn’t an issue.
“Wrap and digitize” strategy
The consultants portrayed two options for banks, beyond the status quo. One is becoming a “digital native” bank, typically by building a digital bank affiliate to serve a specific market or set of needs, with its own core system. The consultants dub that the “carve and deploy” strategy.
The other option, which the pair concentrated on, they call “wrap and digitize.” That is, extending the existing bank’s digital capabilities in order to recast it to enable access for customers across what have typically been silos, both in function and data connectability.
The “wrap and digitize” path assumes that the bank will keep the same core system, but that the bank’s architecture will be revamped to permit customer engagement; sales and marketing; and onboarding, origination, and servicing in a customer-centric fashion.
This is achieved, in the environment of “wrap and digitize,” by using APIs (application program interfaces) to pierce the core and give customers what they need from the bank no matter which channel they happen to be accessing it from. Much of this would be accomplished using third parties’ expertise and would rely on use of “master customer data management” to be the key linking all of the customer’s relationships with the bank.
Building the “wrapper”
That, put in simple terms above, is just the first stage. The second phase consists of creating a digital customer experience, from the public side, and achieving advanced data analytics, on the back side.
In the schematic that the consultants presented, there are four main aspects to this stage, which Hodges called “the real nuts and bolts” of the wrap and digitize strategy:
1. Omni-channel banking platform—Online and mobile banking capabilities would be used to provide customers with a single sign-on user experience for all accounts. The same quality of experience would be provided in all channels, including the branch.
2. Omni-channel onboarding—The bank would use a platform based in the cloud, to enable onboarding from any channel that the customer chooses. Wherever they sign on with the bank, monitoring their activity closely, with the efforts in point 3, below, would permit the bank to provide the suggestion of “what’s next” that Hodges identified at the outset of this article.
3. Integrated customer engagement and measurement hub—Here the bank would track and measure all customer engagement in both digital and physical channels. Streamlining of sales and service would rely on connections made across the bank’s silos.
4. Advanced data analytics—Data analytics would be built in across all bank channels to report meaningful usage information about customer behavior to drive targeted marketing. Instead of a “product of the month” pushed to everyone, customers hear about offerings that fit their needs and circumstances.
Finally, in the third stage of the metamorphosis, two additional capabilities are developed:
1. Business Process Optimization/Business Process Management: This requires a focus on the customer, built in the previous two stages. If that has succeeded, then the bank can hone its activities to meet performance goals.
2. Intelligent automation: Here, the bank deploys Robotic Process Automation software. RPA uses artificial intelligence and machine learning to automate the handling of business and computing processes traditionally handle by human workers.
In a sense, this brings things full circle, in an automated way. That teller who knew you, your family, and your needs becomes a virtual employee. Except this is one who always knows your name—ideally—and who never forgets all that the bank knows, and can learn, about you.
Advice to banks: Be the best you
“No two banks will go about this process the same way,” Hodges said after he and O’Connor presented this approach. For many banks, he added, a key early decision will be what management thinks their own bank’s digital bank face should look like and what it should provide.
“I will tell a smaller institution that you can’t be all things to all people,” Hodges explained.
“They will have to pick their battles,” added O’Connor.
Hodges emphasized that banks will have to work with third parties to make the wrap and digitize strategy work—the technological know how and capabilities outstrip most institutions’ resources.
“I don’t think it makes a lot of sense to build things yourself,” said O’Connor, “unless it involves something very targeted to your own bank’s business.”
And, to lean on an old cliché, banks’ challenge here is a digital journey, not a digital destination.
“None of us can predict the ultimate set of functionalities,” said Hodges.
