Editor's Note: To stay ahead of the curve, banks and credit unions must deliver innovations to market quickly and continuously with of configurability and analytics that allows for personalization across a generation and even down to the individual. Learn more in this week's blog!
The Interstate Comes To Our Town
Recently, Apple celebrated the 10th birthday of the iPhone. It is an understatement to say that this device and others in its class have had a significant impact on the lives of many. It is more accurate to say that the smartphone changed the world, and many of the basic services people need and want.
It is difficult to think of another industry that the smartphone has altered more radically than banking. In some ways, online banking before the smartphone was like a sleepy little town off the main road that tried to attract visitors by offering new attractions that were not all that interesting to many people. Then, one day, all the people in the little sleepy town woke up to find a 16-lane interstate running past their doorsteps. Suddenly, the town had a new set of challenges as too many visitors needing and wanting things the town just did not have.
For every town near it, the interstate changed everything. Some of the largest "towns" along the interstate moved quickly to put in new attractions that met the expectations of travelers. More recently, even a few of the towns that were large, but not the largest, started to take steps to try to do the same. A decade after the interstate was put in it is clear a new mindset is needed for any town that wanted to maintain and grow its population.
Set and Forget? That Ship Has Sailed
This metaphor is pretty easy to translate into the reality being faced by financial institutions (FIs) in our industry. Technology, especially technology that relates to the digital interstate most consumers and businesses ride on every day, is now all about improving convenience and responsiveness. It is not enough to decide to add pizza to the town diner’s menu because all the interstate travelers in the last month have asked for it. To thrive, you have to be able to offer pizza to the very first people who ask for it.
Gone are the days of "set and forget" where FIs upgrade their online and mobile banking offerings every 4-5 years in response to the latest preferences consumers are voicing. Today, the only way to survive is to continuously and quickly respond to the early indicators of what the digital customer wants. No one is going to wait nine months or a year, much less 4-5 years.
As If It Weren't Hard Enough
Alas, that is only part of the puzzle. To win the race outright, a FI must do more than improve time to market for new innovations. FIs will need to offer variations of their digital services according to the demographics they serve. Sure, Gen Y and, more recently, Gen Z are big, lucrative targets, but Baby Boomers aren't dead yet and they are indicating preferences for innovations such as voice-activated banking interfaces. This means not only must the FIs digital platform deliver innovations to market quickly and continuously but it also must include a level of configurability and analytics that allows for personalization across a generation and even down to the individual.
Ernst & Young’s (EY) 2016 Global Consumer Banking Survey of 55,000 people across 32 countries, found that only 16 percent of customers are both financially savvy (i.e., understand products) and digitally discerning (can navigate the various digital channels) while 36 percent are neither. Do the math and you end up with nearly half of an FI's customers or members falling somewhere on a continuum between wanting to simply check a balance or pay a bill to those following the bank's or credit union's Twitter or Snapchat stream at the other extreme.
Anticipating and meeting the needs along this spectrum is, as the lawyers say, a non-trivial challenge. According to EY there are three such areas FIs must invest in, “to restore their central place in the lives of consumers:” the ever-changing nature of the user experience, the need to be current with the technology of the day – not because everyone will use the latest feature but because they may perceive a FI old or dated if it is not offered – and enhancing customer understanding.
Quick Wins with a Long View
Demonstrating material commitments to each of these areas sooner rather than later is not an option as institutions come under more pressure from other players in the marketplace. Yet, many FIs struggle with how they are going to transform what they have today into a digital banking environment that allows them to respond rapidly and often to the latest addition to the consumers list of expectations. The secret is focus and not trying to “boil the ocean.”
With the right technology stack, architecture and platform a FI can move from continually playing catch up to making the end users look forward to each new release of their digital banking application because it will feature the most recent “killer” feature. Continuous innovation is not about big, massive shifts in the UI/UX, but substantive incremental improvements that show the FI has a strategy responsive enough to compete with any FI of any asset size.
This does not need to be "rocket science," as the saying goes. An FI has to know what it is looking for and what is needed to allow them to achieve that goal. There is no reason for an FI of any size not to be pursuing this course. The technology is there, but not in the usually places FIs have looked for it in the past. Some already know this, others are learning and, sadly, some will learn it too late.