Going digital—really digital

Recent research tends to support the notion that merely having an online or mobile channel isn’t enough—a truly digital bank needs to embrace digital throughout its organization.

More than an embrace, it almost seems necessary to do a cannonball right into the pool.

It all comes down to customers. What is it that they want?

Ask them, they’ll tell you

ABA just issued its latest annual survey, conducted by Ipsos, about customers’ preferred channels. Internet banking topped the list, rising to 32% from 31% last year. Online banking first topped the list in 2009, with 25%, and has risen each year since.

Mobile banking rose to 12%, rising from 10% last year, and is likely to continue growing.

“As consumers spend more time on their mobile devices, it’s likely that more people will adopt mobile banking as their top choice going forward,” says Nessa Feddis, ABA senior vice-president.

Branch banking, however, dropped to 17% as the most preferred channel, down from 21% last year.

That’s just one survey. In April, Gallup polled 6,000 banking customers about their preferred channels. It asked, in short, which they would give up—their digital banking connections, or the branch channel? Digital won out, if slightly—47% would give up digital, 53% would give up branch.

Looking more closely, the poll found that in the previous three months, 78% of people withdrew cash from an ATM; 71% made a bill payment through online banking; 21% deposited a check through a mobile app using remote deposit capture—and 65% deposited a check in person at a branch.

So banks, what does this mean for customer-attentive banks?

“In this multichannel world, you need to be perfect in every single interaction with customers, every single time,” says Beth Youra, senior consultant at Gallup. “You need to let customers interact with you through the channels they want, digital or personal. But you must also go out of your way to ensure a satisfying customer experience in each of those channels.”

Acute case of digitalitis

Such a mandate has engendered what Celent calls “the acutely digital bank,” in a recent report.

“A critical element to digital effectiveness is an intentional organizational shift to make the business more digitally savvy. Most banks have started to transform their organizations to cope with digital challenges, but the market is moving slowly. Financial institutions need to adapt,” the report’s abstract says.

In an accompanying blog, Stephen Greer, the Gallup report’s author, says: “The cultural and business model changes required for some institutions are daunting, and inertia always has a seat at the table. Without orienting the business towards digital, banks risk losing out to more agile and digitally adept competitors, both from within the industry and from nonbank challengers.”

The idea of assigning degrees of digital savvy to individual banks has taken hold. Everest Group just issued a report in which it applies a proprietary rating matrix called APEX (for ability, performance, and experience) to assess the extent to which the investments in digital functionality yield business results.

It applied the assessment to the top 14 U.S. banks and the top nine U.K. banks. For U.S. banks, Bank of America, Citibank, and Wells Fargo took the lead.

Everest’s Sarah Burnett, vice-president, says much the same as Celent’s Greer: “Increasing competition in retail banking means that established banks have to become more agile and innovative. They have to start thinking and acting like startups to come up with new solutions to appeal to digital natives.”

Adds Burnett: “Laggards will simply be left behind.”

8-step program for those catching up

Earlier this year, Steven Delacastro, who heads the Global Digital Banking practice at Cognizant, wrote about how banks need to design customer focus—including their channel preferences—into their business models.

“Organizational change starts at the top and support for digital, customer-centric banking has to be pervasive, reinforced, and measured,” he says in BAI Banking Strategies.

He offers these suggestions:

1. Define what digital means to your bank. Gather input from stakeholders across the full sweep of the organization. Remain open to bold new ideas.

2. Focus on operating models and governance. The operating model defines accountability and responsibility for all activities, from business processes and data-quality management to application development.

3. Rethink your reporting structure. Create a cross-enterprise structure to develop and execute companywide strategies and plans, such as improving the customer experience.

Some banks establish this as a “Digital Center of Excellence.”

4. Make it clear: Everyone owns digital. The reality is that the digital function is vast and eludes ownership by a single executive. What matters more than its location in a formal organization chart is the identification of the key players and the relationships among them.

5. Break down organizational barriers. Cross-functional groups are a start. Assembling teams from human resources, finance, marketing, and branches can unite disparate and often geographically dispersed functions.

6. Take a new approach to talent. Banks face an uphill battle to attract top talent in social, mobile, analytics, and cloud technologies; develop a strategy to counter the job market’s perception of banking.

7. Develop incentive structures that work. Replace such metrics as average call handling time with benchmarks such as net promoter scores, which reward proactive approaches and value customers’ best interests.

8. Cultivate a digital culture. An intense customer focus coupled with the ability to innovate and act quickly is difficult for competitors to emulate.

Step out onto the board, and dive in!

Of course, doing all this is not easy. It can be done, though, and some banks have done it. As Gallup’s Youra concludes:

“Banks must focus on the holistic customer experience. Yes, it is way more complicated than in the days when people only had to interact with a branch and everyone knew their name. This approach is more complicated than creating a service program for only one branch, adding new features to online banking, simply launching a mobile app to say you have one, or putting out a new rewards program for a credit card. But to create fully engaged customers, and reap the financial benefits that come with them, banks have no choice but to embrace this complexity and keep moving forward into the new frontier.”

Last one into the water is a laggard.

Sources used for this article include:

ABA Survey: More Consumers Turning To Mobile Banking

Organizational Change For Digital Banking

The Acutely Digital Bank: Mechanisms For A New Reality

The Acutely Digital Bank

Everest Group Identifies Digital Banking Leaders With New APEX Matrix

Most Bank Customers Would Trade Personal Banking For Digital Banking