Editor's Note: Allow your bank or credit union to not only embrace digital disruption but to also cause some disruption of its own. In today's blog, we discuss how to achieve this.
“The more the merrier” doesn’t apply to the IT landscapes at financial institutions (FIs). Most of these landscapes include numerous disparate, standalone, legacy systems that are difficult to adapt to satisfy what the digital consumer of today expects. For these institutions, keeping pace with the speed of innovation being created by an increasing number of mobile-first consumers is nearly impossible. According to a PwC report entitled Top Financial Services Issues of 2017, many simply cannot adapt causing them to fall further and further behind in the race for attracting and retaining customers and members.
However, there are “fast followers” in the marketplace that are escaping from the downdraft of their aging software systems. These FIs are installing digital banking platforms with the technology stacks and architectures that can mitigate the limitations of older, disparate systems. By embracing this strategy, these institutions are not only transforming their organizations but also are reshaping the industry landscape by equipping themselves to compete with FIs of any asset size, including the biggest of the big who enjoy nearly limitless budgets and resources.
There are three common elements that support the digital banking strategies of these FIs:
- An extensible, digital banking platform that is scalable
- A technology partner that allows the FI to innovate at the speed it wants
- A versatile business model that allows the institution to invest quickly in new initiatives and continuously innovate
These institutions also are looking for some additional capabilities within these platforms that will enable them to more quickly deliver new features and functions to market.
- The platform must allow the institution to control its own destiny. This involves giving the FI the ability to choose a user interface out of the box or configure a distinct one of their own. It also involves allowing the FI to quickly make changes to its branding, entitlements, disclosure statements, content and more without needing the vendor’s assistance.
- The platform also should include enhanced analytics that allow the FI to analyze the rich store of data it holds about its customers and members, then utilize it to anticipate their needs. This analytics capability must offer end users the capability to easily assess a view of their financial situation without undue complexity.
- Lastly, the platform should be channel-agnostic, allowing it to push innovations across any digital channel, e.g., online, mobile, tablet, wearable, voice assistance, etc. When new access points or user interfaces are introduced, such as voice-activated, intelligent virtual assistants, internet-enabled cars, et al, these should be easily incorporated into the platform in a matter of days or weeks rather than months.
Pay Attention to The Man Behind The Curtain
Nearly every vendor offering any solution designed to serve as the foundation for a FI’s digital banking platform claims to have a platform that does most of what is described above. FIs will need to look behind the marketing to find the truth of the matter. First, consider the tech stack being utilized by the vendor. If it was developed with some age on it, e.g., using .Net, you may not be able to accomplish all that is needed – think speed and scale – to win against the competition. Look instead for more modern, ubiquitous languages such as Java and open-source tools.
Second, FIs will need to make sure they approach their digital situation from a strategic, rather than a tactical standpoint. There are more than a few solutions that do give FIs the option of decreasing cost and reducing complexity to some degree. While this should definitely be on the list of requirements used for the purpose of due diligence, these attributes alone will not win the day. Ultimately, being able to bring innovations to market faster – not necessarily as a first mover but certainly as a fast follower – is the goal that must dominate the FI’s list of mandatories.
Third, FIs will need to jettison some of the “old” ways of thinking about banking systems as a whole. Digital banking is not a “set and forget” area of the bank or credit union. Short of some apocalyptic moment in time, the technology that has become intertwined with our lives will only continue to evolve. Yet “set and forget” is a hard habit to break for many banks and credit unions as it is what has been the standard end game for years for many of their decisions on products and solutions. It is easy to forget that this type of shift in mindset is a requirement, not an option. Often when a new system is installed, it is such an improvement over the old that all seems well. But in the digital revolution, only a short amount of time needs to pass to wake up one morning to find your FI well behind in the race.
Digital disruption is about FIs using modern technology and architectures to give them the juice to compete with any FI, regardless of size. This capability is not optional if these FIs intend to protect, defend and extend their brand against the inevitable assault of the largest FIs. No one I have spoken with in the industry – banker, analyst, guru, or digerati – has suggested that these biggest of the big FIs are not going to do everything they can to continue to grow their digital user bases. Allow your bank or credit union to not only embrace digital disruption but to also cause some disruption of its own.