Pandemic Proof Digital Transformations for the Financial and Banking Sector

by
Phil Leary
and
Rush Weston

The need for a digital transformation in financial services has never been more urgent. The global impact of the COVID-19 pandemic has accelerated the need for technology system maturity, process redefinition, rethinking of first-line and second-line responsibilities, and cyrgenan awareness of how customer behaviors are driving urgency for technology solutions.  

One sector that is rapidly evolving is digital banking. Since the onset of the pandemic, we’ve seen an increase in contactless payments driven by concerns about how the virus can spread via surfaces. Contactless payments, already the norm in Asia and Europe, have now become ubiquitous in the US, growing by 150% from March 2019 to April 2020.

The continued move to contactless, online-only, and automated behaviors (even the basic behaviors such as scheduled transfers and auto bill-pay) make life easier and safer for banking customers. However, there are challenges to both customer care and operational efficiency for financial institutions. A customer who no longer receives in-person, relationship-based, and/or white glove care from their institution is more willing to seek another institution that offers a perceived-as-better transactional value – a better interest rate, a lower account fee, a more usable mobile application. Behind the scenes, first-line defense behaviors such as a teller or relationship manager detecting elder fraud or suspicious transaction activity are no longer in play at the same time that bad actors see more opportunity for cybercriminal activity.

The FBI has reported receiving as many as 4,000 complaints a day during COVID-19. Banks are being forced to change processes around everything from customer risk to anti-money laundering and address needs for technology support systems, data quality, lineage, and retention. The longer bankers and banking employees stay remote, the more they will need automation for security and efficiency purposes.  

The Challenges

Financial services are not traditionally early-adopters of technology solutions, and regulatory relief has not kept pace with the impacts of COVID. The current challenges are the same ones that have held back banking’s digital transformation for the past several years. A few of them include:

1. Customer Onboarding

Fast-paced technology-based onboarding doesn’t replace the need and regulatory requirements to do customer due diligence. A delicate balance must be struck between speed and diligence. Banks struggle with this, especially when it comes to private wealth, mortgage, and commercial customers.  

Particularly with online-only (and potentially transactional, value-seeking) customers, a simple, rapid, and obstacle-free onboarding process is critical to new customer acquisition and important to customer retention as they are onboarded to new service offerings.  

2. The 360-degree View of the Customer

The leading core banking systems such as FIS and FIServ are families of products cobbled together over time and are not seamlessly integrated applications. This leads to customers having disparate experiences across different service lines. Often banks may not even know that some of their customers are multi-dimensional customers using personal, commercial, and mortgage products.

Consumers are more and more intolerant of this disconnect.  While a complete view of the customer has always been beneficial to financial institutions (for compliance, for upselling, for measuring profitability or wallet-share), consumers are now demanding seamless integration of the tools they use to manage their accounts within a financial institution, and often seeking benefits associated with their loyalty or breadth of service consumption.

3. Wire/ACH/Money Transfers  

People want to move money quickly and seamlessly. At the same time, banks do not want to create space for bad actors who might attempt fraud or money laundering. There are many fintech organizations eager to develop new technologies to help fight financial crimes. Yet, government support for the technology to combat these crimes is just now picking up in some places like Arizona and within the Department of Treasury’s Financial Crimes Enforcement Network.  

4. Reliable Data Supporting Customer Trust And Loyalty

Mistakes happen, and even banks can get the data wrong on transactions. When they do happen, there may be overnight or lagging corrections, such as with teller/ATM deposits. If the banks get your data wrong, you will trust them less and maybe even look to move your money to another institution.  

Adapting To The Post-Pandemic Era

Minimizing data mistakes, preventing cybercrimes, maintaining a full view of the customer, and onboarding new customers quickly are challenges banks must meet in a post-COVID world. At Allata, our team of experts has identified a few key Financial Services Trends for 2021 that will help banks achieve a successful digital transformation:

1. Robotic Process Automation

This is already being used for many back-office processes to increase speed, improve accuracy, and for security purposes. Front-line operations can be fully replaced with automation or better online tooling, including current tools supported with attended bots. Back-end processes that require human adjudication or decision-making can also benefit from bots, especially once risk officers, credit officers, internal auditors, and government regulators become comfortable with enhanced tooling and automation.  

2. User Experience  

User Experience makes all the difference. It is what defines a successful digital financial service from the failures. When UX improvements fail, it’s often due to an experience gap—the negative difference between customer expectations and their experience with a product or service. Even one bad experience can decrease customer loyalty, cause negative reviews, or be the reason a customer drops the brand.

Financial services need to adopt a customer-based mindset when developing new products or suffer the consequences. Customers want to use products from organizations striving to make the world a better place. In one report, 86% of respondents noted that the societal role of companies is changing. In the new normal, customers need and expect more. A UX mindset will help companies achieve more.  

3. Digital Onboarding

Community financial institutions need to stay competitive against challenger banks and relevant in an era where people can order anything and everything in a few clicks. Their digital onboarding experience must be on par with the online experiences customers have in other areas of their lives. Research shows that 90% of new account applications are abandoned before their completion, with 38% saying they dropped out because of frustrations with paper applications or the volume of information required during the onboarding process.  

The digital transformation in the financial and banking sector has been brewing for quite some time. To meet the challenges of the post-pandemic era, companies must embrace automation and put the customer experience at the center of their products. In short, it must be as easy for your customers to open a bank account online as it was for them to start using a ride-sharing app.  

Allata offers a comprehensive suite of services for financial institutions, providing your organization with a path towards better business through better technology. Contact us today to learn more.

Phil Leary

Phil Leary is Office Managing Vice President for our Boise office. He has over 20 years of technology and strategy consulting experience spanning the healthcare, financial services, manufacturing, and retail industries. He has led global services organizations, founded three service firms, and has delivered complex projects in custom software development, enterprise resource planning, integration, and compliance technologies. Phil has held consulting and education management roles at Pariveda Solutions, Perficient, Software AG, and webMethods. He grew up in consulting at Deloitte and Price Waterhouse, and prior to consulting worked in technology in the healthcare and transportation industries. During his time away from the office, Phil enjoys working out and outdoor adventures with his wife, two sons, and three dogs.

Rush Weston

Rush Weston is Office Managing Vice President for our Phoenix office. He has spent over 20 years as a CIO, during which time he implemented several large scale systems. He has a track record of delivering complex projects on time and on budget. Rush quickly understands a business and the core processes and technologies that support the business. When he is not solving problems for a client, Rush and his wife enjoy outdoor activities, such as hiking, fishing and sailing. Rush is also a beekeeper and rescues bee hives.

Continue reading

Collaborating for Success: Experience Design and Agile

Unlocking Innovation at Your Company with Design Thinking

Ready to connect?