Why banks must increase tech spend and invest in digital first

It’s clear FIs today are facing a stark new reality: technology is more vital to all aspects of the financial services than ever before. Why? For one thing it’s a competition game changer: Accenture reports that financial institutions (FIs) which are truly "all in" on technology or "digitally active" boost financial returns, with those banks pulling ahead of those struggling with digital transformation.

Also, According to 2020 FDIC data, $2 trillion (83%) of the $2.4 trillion in new deposits and over $250 billion in assets went to just 13 banks with most going to the top three—Chase, Bank of America, and Wells Fargo—which is a revenue coup that can be tied to significant investment in digital technologies that all three made.

And at no time in the history of banking has there ever been such a dependence on technology…and such great promise. Consider the following:

• In 2020, half of all millennials shopped online for a deposit account 
• Over 50 percent of consumers now interact with their bank through mobile apps or websites at least once a week—compared to just 32 percent two years ago 

But to reap the rewards, FIs must increase their investment in transformative technologies. 

Importance of making progress in digital transformation for 2021    

FIs are seeing continued disruption with accelerated spending as technology races forward at a rapid pace. So standing on the sideline isn't an option anymore—in fact it’s a mandate to remain competitive.

Simply put, financial institutions not on an accelerated path toward digital transformation in 2021 will be at a disadvantage to their competitors.                            

At no time in the history of banking and financial services has there ever been such a dependence on technology…and such great promise.. 

Why? Digital-first banking creates much-needed new opportunities for traditional FIs who are up against a whole new generation of fintech companies adept at swiftly closing widening gaps between yesterday and tomorrow’s consumer banking needs. And because the world has changed. Digital transformation in banking and financial services was starting to take hold before the pandemic, with some FIs struggling with an overall plan. 

Leadership within most FIs understood the need to move from siloed, process-driven interactions to seamlessly-integrated digital channels; this redesigning of branches for more personal advisory and more complex services is still happening for many banks, helping to reduce costs and improve the customer experience. 

But the COVID-19 crisis accelerated the need to meet consumer expectations for mobile and online banking that was safe and contact-free. While certain banking consumer segments were more likely to visit branches for financial services before the pandemic, even those who preferred a face-to-face interaction had to cope with the reality that they had to transact temporarily using their FI’s digital channels.

Simply put, banks that aren't on an accelerated path toward digital transformation in 2021 will be at a disadvantage to their competitors.  

Use new technologies that improve customer experiences across bank channels and touchpoints    

To thrive in this new reality, FIs must focus on the digital customer experience and their journey in a digital world; there doesn’t need to be a disconnect between exceptional customer service and banking digitally. In fact, the best technologies are not just a required cost of doing business, but rather enablers of a great customer experience. Digital-first banking is about bringing digital and physical experiences together to meet customers' immediate financial needs, and making it simple to follow the customer across channels—without breaking the back office.

Personalization is a great example of how technology can improve the customer experience. 

In banking, technology that empowers personalization and a superior customer experience can take the form of: 

• Interactions where customer data is used to streamline interactions, such as a faster new account opening process or easy and quick loan applications
• A digital banking platform that allows users to easily manage their finances with an intuitive, consistent experience—regardless of the device—via an open and flexible platform
• The use of data analytics to help you better understand your bank customer and offer individualized financial services and recommendations
• New ATM and self-directed technology that can upsell or cross-sell products based on a customer's finances, preferences and goals
• Channel services, including the branch, teller, imaging, and pre-stage

Build trust by investing in security for sustained progress toward digital banking transformation    

Greater digital and self-service engagement requires robust security and risk management to thwart fraud. This is an absolute imperative because consumers' faith in their FI has recently taken a steep dive. For instance, a recent Accenture survey found that:

• Only 29 percent of banking customers trust their FI enough to look after their long-term financial wellbeing
• That trust level is dramatically down from 49 percent just two years ago
• More specifically related to digital security, only 37 percent of consumers trust their bank "a lot" to safeguard their data
• That loss of faith in protecting their data is also down from 51 percent two years ago

Thirty-four percent of bankers in a survey perceive cybersecurity as a major threat. Retail banks are aware of this serious issue, and their expected technology spend for 2021 will be heavily skewed toward investing in privacy and security issues. Indeed, 51 percent of retail bankers expect to spend more on cybersecurity in 2021. 

Rebuilding that trust will take some time, and the necessary investments in financial fraud and security solutions will help protect against data privacy breaches and cyberattacks. But the importance of investing in security measures can't be understated—if consumers don't trust an FI, they won't likely use their services or they’ll limit their interactions. 

Also, with fintechs and other newcomers into payments, such as Apple and Google, consumers may feel more comfortable using the services of these tech-focused companies since they perceive them to be more security-enabled than traditional banks.

Drive down costs with digital transformation    

A significant benefit of banking digital transformation is the cost efficiencies that can occur, either through a direct change of process and automation or organically as the entire organization works more efficiently. Technology will drive costs down as redundancies and siloed systems are modernized and made more responsive and resilient.

Many FIs have built up siloed infrastructure by design, aiming to optimize engagement in individual channels. While this was best practice a decade or so ago, the omnichannel journey rules the consumer experience. Not to mention a siloed, fragmented infrastructure is costly and full of manual, labor intensive and often redundant processes.

Digital transformation can help FIs reduce costs with:

• Automation: Automation can help skip unnecessary steps, free up your employees for more value-added tasks, and streamline operations. For instance, automation at the teller improves their ability to engage with customers, skipping unnecessary and manual steps. 
• Data analytics: Actionable insights derived from data analytics can empower informed decision-making that can help reduce costs. With data, decision makers can better understand where monies are being poorly used and where costs can be cut. 
• Workforce efficiency:  Digital transformation gives your employees many digital tools to work smarter, saving time and money. Digital tools improve collaboration that can boost the bottom line, improve the customer experience and make your team more productive. 

Transform to an every-channel approach to develop amazing customer experiences    

FIs need technology that improves their business intelligence across channels and touchpoints to ensure an exceptional customer experience with digital products and financial services in-lieu of face-to-face transactions. This can result in interactions that drive loyalty, repeat business and even referrals to new customers. 

More than just a simplified account opening or loan application process, providing a customer journey that features digital touchpoints that are personalized—with just enough human interactions and touch mixed in—can boost satisfaction levels. The aim is a cohesive experience for the customers. 

Today’s customers have their core needs met by branches, ATMs and online banking. But, while these three channels have traditionally done well for the customer, the growing use of mobile apps and online banking has shifted priorities. Also, the opportunity to use newer, intelligent technology, such as smart ATMs that integrate with mobile devices or offer video banking capabilities with call center or channel services, provides an opportunity to combine channels for a better customer experience. 

Data visibility is an important aspect of providing a superior experience for customers as they move from one channel to the next in any given process or interaction. Data insights give your people an accurate and real-time view of the customer, including their interactions. For instance, data visibility across channels offers a financial advisor the opportunity to gently intervene when they see a customer hasn't finished a loan application. Or perhaps the data suggests that the customer is better suited for a different type of loan. 

Ultimately, creating an excellent digital customer experience is about meeting their expectations in a world where technology is simply part of their lifestyle. As consumers grow more technologically sophisticated, the expectation will be for their bank to keep pace. So, whether they access their bank via a smartphone, tablet, website or visiting a branch in-person, a consistent experience is essential. 

In fact, research from Google has shown that 46 percent of consumers switch between devices as they manage their finances online. For instance, a customer might start researching loan rates on their smartphone yet switch to a laptop or a tablet to dig deeper on a bigger screen. 

When you consider that the average person owns three or four connected devices, there must be a seamless experience no matter how they interact. Plus, it’s estimated that by 2030, each person will own a whopping 15 of these devices. So, it's an upward trend that any FI should consider when prioritizing omnichannel capabilities as part of their digital transformation.

Where should FIs start on their digital transformation journey?    

If your FI is at square one or at an early stage of a digital transformation journey, there's an urgency to get the ball rolling quickly. Key areas to consider as you create your digital transformation roadmap are:

• Improve your mobile banking offerings: Focus on frequent tasks like account opening, transfers, bill and P2P payments and deposits. Today's consumers want more advanced functionality and your mobile apps and offerings must live up to the level of convenience and reliability people expect.  
• Become a true financial partner: Use digital tools to gain real-time insights to guide or educate customers, alert them to issues, automate savings, and introduce them to new products or services. Digitalization can achieve this through automated solutions and technology that empowers your people to provide higher service levels. 
• Personalize banking: Move away from marketing campaigns to the masses to marketing solutions tailored to your customers. Leverage data insights to guide customers in making the smartest financial decisions, or speeds them along a stalled transaction. Also, the branch teller is key from the physical location to integrating ITMs and using touchless ATMs. 
• Partner with digital expertise: The right solutions provider can help any bank overcome their digital challenges faster and more cost-effectively than going it on their own. It's vital to partner with a provider with a proven track record in the banking industry to ensure the unique needs of both FIs and their customers are effectively met. 

Of course, making that digital leap can seem overwhelming, and there are plenty of challenges on the horizon—outdated legacy systems, work culture resistance, and competing priorities to name a few. But rather than be stuck in neutral, finding a partner with deep technology expertise, digital tools and experience in the banking industry can help you fast-track your journey and keep pace with the growing competition.   

When researching and choosing a digital transformation partner, one key thing to consider is whether they possess mature digital platforms and proprietary accelerators, especially if your organization is behind the curve. Typically, these digital assets allow for a much speedier ramp-up of digitalization efforts. Instead of "build your own" efforts or bolt-on remedies, platforms and tools are usually designed to integrate seamlessly with existing systems and rapidly expand your digital capabilities. 

As FIs look ahead to 2021 and beyond, the evidence presented here makes it clear that a commitment to increased tech spending isn't a "nice to have," but a "must have" in today's digital world.