• Bernd Richter, Partner at Capco


• 01.09.2015 01:00 am
Banking , innovations

We keep hearing that banks must do more to bridge the ‘digital gap’. But, in order to create and deliver the next generation of digital customer service experiences, they require a more predictably productive development environment.

Banks are both aware of and rising to the challenge of providing a new generation of digital service experience for their customers. Some of the industry leaders are exemplary, with apps and other service touch-points that rival any competitor, including non-traditional market entrants. It is not true that banks are inherently unwilling or unable to embrace the digital age and leverage the opportunities it presents.

What many of them do face however, in contrast to other service providers, is a built-in organizational disadvantage. Typically their structures, as well as their technology, were never designed to cope with the speed of evolution that characterizes so many consumer-led offers today.

Time to market from initial concept is shrinking rapidly in almost every sector, even heavy industry. An automobile can be rolling off the production line in a fraction of the time from initial design that it took just a few years ago. Consumer Packaged Goods can be fine-tuned to align more closely with market preference, almost in real time and in close sync with customer research and social media sentiment.

In manufacturing, huge changes have been required in terms of technology, organization and culture to make near-real-time responsiveness a reality. Banks too are responding, but they do face challenges specific to the financial industry. There are three major issues to consider.

The first is culture. Although change is now gaining momentum, banks continued long after other industries to think in terms of ‘customers’ – loyal, slow to change financial service provider, likely to remain around for life – rather than ‘consumers’ – actively targeted by competitors, highly aware of product and service differentiators, willing to change brand and experiment regularly. The digital revolution is primarily a consumer revolution. This means proliferation of increasingly personalized products and services ‘at digital speed’. All of this is in stark contrast to the much slower pace of traditional bank service evolution.

The second is technology. Established financial services institutions did not deliberately plan to have complexity at the heart of their technology. But a long history of mergers, acquisitions, internally developed solutions instead of proprietary approaches and operational silos have left a difficult legacy. Disparate technology creates disproportionate difficulties, when it comes to adopting new and consumer-focused platforms.

The third challenge is the unique climate of regulation that banks have to operate in. Financial services have to conform not just to the preferences of a target market demographic or an appetite for digital service delivery. They also have to negotiate a tangled web of legislation and guidelines.

It’s clear these factors are not in every case fatal to the creation of a banking experience for digital natives. (Otherwise, we wouldn’t see the current proliferation of apps, new platforms, and mobile banking channels.) But, in combination, they do threaten to slow development down, to raise the costs of innovation, and to leave the field open to non-traditional financial service providers. These non-traditionals enjoy the advantage not only of being highly consumer-focused, but also of being built along ‘straight lines’ of organization and technology. Their more agile configuration makes it much easier to develop and implement new product and service offers, delivered through innovative channels.

The current situation creates an opportunity – indeed an obligation – that the fintech sector cannot ignore. We must be a lot more creative than just stating the obvious, through constant reminders of the need for banks to catch up with challengers’ digital experience development. Technology and business advisors need to show how this can be achieved, and in practical terms. And they need to do it in the context of working with the challenges and constraints listed above, rather than choosing to ignore them. 

Going forward, a truly creative environment for digital experience development will achieve at least three things.

1. It will break down organizational silos, by creating a space where key stakeholders including marketers, technologists, innovators and deliverers can work together, to understand both the needs and demands of the consumer and the interrelationships and dependencies inside the financial institution.
2. It will fast track development, by testing new ideas and possibilities quickly and making sure that only the strongest digital experience concepts make it all the way to market but in reduced timescales.
3. It will help ensure that every digital initiative contributes to the overall relevance of the bank’s product and service proposition to its customers.

As banking and technology specialists, we can and must rise to the challenge of creating this environment. We need to become the catalyst for releasing and applying ‘digital inspiration’. We need to become central in defining, developing and driving opportunities in the digital space.