What Can Financial Institutions Learn From Retailers?

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An IBM report analyzing 2014 holiday spending shows the distinction and complementary nature of digital devices. Smartphones drove 31 percent of total online traffic, nearly two and a half times that of tablets. While smartphones drove the traffic, more purchases were completed on tablets. Tablet accounted for 13 percent of online sales, whereas smartphones only accounted for 9 percent of total online sales.

This consumer behavior is called multi-screening.  There are two main types of multi-screening behavior: sequential screening, where we move between devices, and simultaneous screening, where multiple devices are used at the same time.  Because the use of multiple screens makes us feel more efficient, it is a behavior that is likely to increase as the universe of digital devices grows.

As e-commerce has grown to be more than a half a trillion-dollar market, successful retailers have worked hard to understand the purchase cycle consumers follow from research to purchase, including becoming familiar with what devices consumers use throughout the process. 

Financial institutions now find themselves faced with the same challenges as retailers: the customers and members they serve expect to use all of their digital devices to address their financial needs.  And, just as they do when they shop, consumers are moving between devices to bank.  Determining how to provide a fluid, consistent user experience from laptop to tablet to smartphone may be the single most important goal for financial institutions if they want to compete successfully for the long term.  

In the eight years since the iPhone was introduced, digital devices have proliferated at a historic rate.  Tablets were adopted more quickly than smartphones, and wearables are now being used not only to help consumers with their fitness regimes, but also to purchase goods at the point-of-sale.  Smart televisions that are directly connected to the Internet are common in many households, and car manufacturers are offering Internet enabled vehicles.

To date, financial institutions have responded to the growing number of devices that their customers wish to use by constructing solution silos for each device.  Not many banks or credit unions believe this approach is sustainable in the long term due to the high level of complexity and the associated costs in their IT infrastructure.  However, consolidating the digital silos they have today in such a way that will accommodate all possible digital access points remains a significant challenge. 

The existing legacy systems in place at most banks and credit unions are not flexible enough to adapt to a future where the Internet of Things (IoT) may bring us. Optimizing and personalizing the growing number of digital channels requires new systems with new architectures. Single code base solutions that can utilize APIs provide a foundation for consolidating existing digital channels.  In addition, highly configurable solutions with customizable templates are a necessity.  Financial institutions cannot continue to be held captive by inflexible products that require three months to change logos, colors or disclosure statements. 

Leveraging a single code base with APIs positions institutions for present and future digital access points.  With these attributes, banks and credit unions can deliver a consistent user experience to any digital device and ensure that customers are not confused by changing interface as they move between devices.  A little confusion will cause customers to abandon the process; too much will drive them to find another bank or credit union.

Young companies starting from scratch have the advantage of building for this digital infrastructure. However, these start-ups and early stage providers need to prove scalability, reliability and sustainability to get past the risk adverse CIOs who often are the gatekeepers for institutions considering new products. 

Some banks and possibly even a few credit unions may consider the risk of newcomers to the digital space too significant to overcome.  This is understandable, but those institutions that wish to be competitive in the ever-evolving digital arena will realize that the real risk is in doing business as usual.