Something that continues to amaze me, is that most bank CEOs still define their bank purely as relationship driven and “having the best service”. The reality is that the perception and value proposition of your bank is not defined by you, but by your customers. Customers want it all. Relationship banking, the best service and online banking. More importantly, they already think of you as both a traditional bank and an internet bank, and judge you accordingly.
The astute community bank CEO has realized this for a while now, and is already hard at work in bridging the gap between traditional banking and digital banking. Digital banking being the broader umbrella term for internet banking, online banking, mobile banking, mobile wallet, online account opening, online marketing, etc. They understand that in order to survive in the future, they have to provide customers with a human service representative when the customer wants it, and with good technology and a friendly user interface when the customer elects for self-service. It is not the bank’s choice; it is the customer’s choice.
The notion that your customer likes your people is noble, and mostly true. At the same time, your customer has a life (their own) and limited time. They also know what is available out there from the top online players in terms of digital banking. I am sorry to break this news to you, but they want the best of both worlds from you, at your expense and with no more fees! They want to continue using your expensive face to face service, but only if you also provide a superior digital service.
You are in a bad spot. How do you afford the personal touch that has served you so well, and introduce top technology? How do you ensure strong customer adoption? When technology is so central to what you do, the scale of the change that is required may seem overwhelming. How do you decide how much to invest in maintaining what you have versus building new functionality? Especially when there is no clear ROI. But there is hope, and there are also solutions.
Firstly, the relative cost of digital banking is reducing, with many software providers now also catering to smaller banks, even those below $100MM in size. Secondly, as always, good old common sense should prevail, like maximizing the use of existing technology and prioritizing. Most banks already have good pieces of technology and online servicing capability. However, they are not using it to its full capacity or on a broad enough basis. Ask yourself, why are customers still calling your bank to ask for their account balance? Walk into the branch to do a transfer? Who drives adoption and how? Start with a systematic evaluation of existing capabilities and apply simple and easy-to-introduce technology interventions. Examples include wider deployment of API’s, e-forms and work-flow systems, which can be rolled out relatively quickly and independent from core system interventions or changes. Sometimes, it could be as simple as making small adjustments to the workflow and let the employees adjust, as opposed to building a system around the existing workflow.
No doubt, there is value in digital banking. Done right, digital transformation could pay for itself. Banks that pursue digital transformation can realize improvements in earnings, through both the impact of reduced cost (reduction in double entry of data, migration of front-end activity to digital self-service channels, etc.) and from a longer customer life cycle. This is especially true with deposit account origination. It is a well-known fact that the majority of customers will open their next deposit account online. Chances are that your existing customer may open their next CD or Money Market Account with a bank that offers online account opening. Can you afford not to offer automated deposit account opening online? To not offer mobile?
Thinking like a digital bank, but without compromising existing strengths and values is the way to go. You can do both, blending the existing well-proven business model with the changing customer expectations of digital delivery. It is the only way to retain your customer and prevent them from joining your more technologically advanced competitor, who also “have the best service and people”.