Viewpoint
Every bank needs a
digital strategy
It is not a one-size-fits-all approach
Viewpoint
Table of contents
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Getting the first steps right
Understanding your demographics and target markets
Determining an approach to your digital strategy
Assessing the culture, appetite for change, and innovation
Building a viable digital strategy
Delivering today—with an as-a-service approach
About the author
Viewpoint
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Digital strategy. Those two words are at the top of your
bank’s business plan. But what do they really mean? Are
they window dressing—or part of a workable solution?
Can’t say. Don’t know yet? This viewpoint might help you
figure it out.
Getting the first steps right
Baby boomers are not big-time users
of mobile banking. In contrast, they are
heavy users of online banking:
• Checking balances (92%)
• Obtaining information (88%)
• Transferring funds (87%)
• Checking balances (86%)
The first steps in creating a digital strategy for your bank are not about choosing the
technology. Rather, the first steps in creating a digital banking strategy are to: 1) understand
your customer demographics and the bank’s target markets; and 2) assess the culture, appetite
for change, and innovation of the bank.
Creating a digital strategy similar to how every other bank is doing it will get you what everyone
else is building. It is no surprise the industry, in general, has a follow-the-leader mentality in
many aspects. But it might not meet your bank’s objectives, attract your customer segments,
and effectively target your markets.
Targeting effectively means less cost and more revenue. If you don’t put your customer
segments and your targets market first, you might spend a lot of time and money building
something that attracts customers but not your segment of customers—and it may cost
more than you needed to spend. Not that it’s bad to attract new customer segments. It is
just something you should think about as you design your strategy. Remember, attracting
customers just to attract them is not always paradise. It just might be Pandora’s Box.
All banks need a digital strategy—and it must be sponsored by the CEO. That said, it’s
important to know that not one size fits all. You need to determine your own approach—
appropriate within your culture and business. There are effective—and proven—ways of
doing it.
Understanding your demographics and target markets
It is not rocket science that customers are demanding seamless, intuitive, and easy access to all
the channels. As more channels are developed, more will be used. Customers want it when they
want it, and how they want it. This is, in part, because they generally get it from other industries
and companies, new and old. They don’t want to resubmit information, resend documents
you’ve asked for in the past, and key in information more than once. Heck, they don’t want to
key it at all.
Customers do not want to be inconvenienced; they don’t have time for it. They want to be able
to research, open, change, check, and request, on any channel, whenever they want. But this
statement has a slight nuance that may help you design your digital strategy more effectively,
based on the customer segment you bank today or the segments you want to grow.
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For example, a recent study by Nielsen, “Digital Enablement for Retail Banking,” found that
mass affluent baby boomers’s don’t really use mobile banking. The highest usage rate of 5% is,
in fact, to transfer funds. In contrast, these boomers are heavy users of online banking:
checking balances (92%), obtaining information (88%), transferring funds (87%), and checking
balances (86%).
So if this is your target market, shouldn’t your digital strategy be heavily weighted on the online
channel?
If your target is mass affluent millennials, the strategy may change quite a bit. Their usage of
online looks similar to the boomer’s mobile, abysmal (per the Nielson research), but maybe a
little higher. Usage of mobile is heavy for millennials, and to no surprise, they feel all channels
in banks take too long. They are more likely to use alternative payment methods. This goes for
Gen Z as well.
So if this is your customer base or target market, you most likely should be providing these
types of methods now. This is not to say your strategy should not include other channels and
investments. Your customer segments still have expectations for performance and future
enhancements. Someday, this group will be replaced with the generation behind them, and you
need to be prepared for the change.
It comes down to phasing in technologies rather than not introducing them. It’s all about when
and where to focus. Short term makes sense for the channels and preferences your customer
segments and target markets want now. Near term looks toward technology for future customer
segments or target markets, based on building a more effective digital strategy.
Determining an approach to your digital strategy
There are many things to consider. You need to:
The path you take to build a digital
strategy for your bank will depend
on many things, such as funding and
strategic direction. That said, your
culture’s willingness to change and
leadership buy-in will matter most.
•Identify who are your customer segments and target markets.
•Determine the banking and communications channels they use and prefer.
•Figure out how they want to interact with you. Learn which channels they prefer to use.
Remember, existing customer behavior may not represent what they want, but rather, how you
have made them interact with you.
•Put more effort into analyzing how your customer segments and target market behaviors are
evolving.
•Research how your customer segments and target markets buying behaviors have changed—
and which ones had successful adoption rates.
•Consider doing ethnography studies to better understand your customers’ worlds and
experiences.
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Assessing the culture, appetite for change, and innovation
Now to the hard part: the culture question—What’s the openness to change?
The path you take to build a digital strategy for your bank will depend on many things, such as
funding and strategic direction. That said, your culture’s willingness to change and leadership
buy-in will matter most. Many bank leaders have digital on the roadmap. Why? Because it is
the thing everyone else is doing, so they should as well. Right? That’s a reactive rather than a
reasoned approach.
Bank leaders who truly see the intrinsic value of a robust digital strategy will most likely allow
bumps along the way, knowing that pain comes with gain. They also will foster an atmosphere
that encourages change, allocating bank resources and mandating that the road to the end
state be short and swift. Bank leaders who take this digital challenge on the offensive—instead
of the defensive—will most likely realize greater returns.
Building a viable digital strategy
So how do you build it—so that it works?
Eliminate the paper
Depending on the culture and leadership direction, there are options a bank can take. One
option which is very limiting and not optimal, but for some banks it is the only step—or at least
the first one. Using this as a first step in a journey though is littered with challenges. Simply
removing paper does not enable you to automate antiquated operating models, which are full
of workarounds, rework, and exceptions.
•Simply digitize paper and keep current processes related to them:
––This will enable you to reduce cost in paper and courier expense.
––If done poorly, the digital images will not be stored in a way that can easily be retrieved. This
impacts service by having to ask the customer for the same documents again when another
product is needed.
––If done poorly, your bankers will not trust the digital system. Instead, they will store paper
copies in branch vaults. If you don’t believe this and you have “digitized” your branches, visit
a few of your vaults. You will find signature cards and loan documents, all sitting in piles.
Viewpoint
Creating a digital strategy for a bank
without some direction is like boiling the
ocean. The time wasted and the cost of
doing so will be heavily felt on the bank’s
income statement.
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Transform the process to digital while automating your operating models
On average, more than 50% of banks’ costs relate to staffing. Straight-through processing (STP)
is about paring back the human input required to process transactions. Using this approach,
you can:
•Analyze current business processes that create, require, and print paper.
•Evolve those processes and operating models into a streamlined digital framework—ensuring
all channels are completely integrated.
This is the optimal approach, because it will enable you to:
•Reduce cost in paper and courier expense and process improvement expense.
•Increase revenue by being able to book new accounts at a faster pace—with first-time
processing and by enabling you to enhance customer experience, gaining a deeper share of
wallet with current customers.
•Develop new revenue streams you couldn’t create in the past due to antiquated operating
models.
•Effectively plan and deploy self-service. Without adequate planning, however, moving to
self-serve can increase cost and risk.
Build your how-to-get-there roadmap
Everyone knows your digital strategy won’t be a big-bang approach or a one-and-done.
Instead, you need different roadmaps, with a continual refresh because technology and your
customer behaviors and requirements are constantly changing. To succeed, you need to
execute an achievable, short-term strategy—with an eye toward the future improvements—by:
•Creating an immediate roadmap that eliminates customer pain points today. It makes no
sense dreaming up whiz-bang ideas if customers are leaving because your online channel isn’t
providing value or the branch staff doesn’t know your products and services.
•Developing a get-there-now roadmap that enhances the channels your customer segments
and target markets desire most.
•And combining it with a get-there-next roadmap that focuses on digital enhancements
geared toward the generation or customer segment you will want to attract in the near term—
while keeping up with technological advances. Again, there really is no need for long-term
roadmaps in digital banking because of the rapid rate of change.
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Delivering today—with an as-a-service approach
No matter what, the days where you had five years to complete a project are long gone. The
idea of utopia changes yearly. So there’s no reason to invest five years building something that
will be outdated when it’s released in 12 months.
So the proverbial million-dollar question is: How can I deliver solutions at such a fast and nimble
pace?
Utopia not only changes in time—but in form. You can’t do it alone. You need partners to help
you become faster and more nimble. Gone are the days where you can do it all by using the
talent you have or hiring new blood.
Think of it on two levels: In our personal lives, we don’t do everything ourselves. Often, we hire
labor to do our commodity work, such as lawn crews and house-cleaning services. We also hire
licensed professionals to do more skilled jobs, including electricians and plumbers.
That’s how banks can deliver faster and be more nimble—and provide innovative solutions
for their customers. Banks need to do this with as-a-service solutions to augment, or replace
to some extent, their existing processes and structures—with either commodity work or more
complex tasks.
Managed services or hosted solutions enable a bank to focus on what it does best—serve the
customer. It frees them by bringing in outside experts to complement the business. Industry
consultant Gartner1 states as-a-service offerings “have increased traction because they are
easier and more efficient for organizations to consume the service with a much lower, upfront
setup cost.”
Creating a digital strategy for a bank without some direction is like boiling the ocean. The time
wasted and the cost of doing so will be heavily felt on the bank’s income statement. Now, is this
thoughtful and phased approach we have outlined the only way to go?
No, but it certainly can be an efficient and cost-effective one. Why? Because at its foundation,
it does one thing: Focuses on the real wants and needs of your customers—and not on some
whiz-bang gadget or pseudo-cool app your competitors are touting, at least, for the moment.
What’s more, it focuses on a more nimble approach. Taking an as-a-service approach provides
the best of both worlds for a bank.
Learn more at
hpe.com/services/applications
1
artner SWOT: HP, Application Services,
G
Worldwide, 26 Nov 2014, page 11
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About the author
Lori Murray
Lori Murray is the global offering director of Banking for HPE Business Process as a Service
(BPaaS). She is responsible for consulting with bank executives to understand their current
strategies and initiatives and identify HPE BPaaS solutions that will help achieve them.
She was in banking for 20+ years before joining HPE in 2010. As a senior executive,
Murray demonstrates leadership in all aspects of strategic planning, design and execution,
management, and network optimization. She has a proven history introducing innovative
solutions, leading concurrent, large-scale projects and teams, and delivering timely, resultsoriented solutions.
Murray has vast experience in reconstituting underperforming business units and providing
fiscal, strategic, and operational leadership in uniquely challenging situations.
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