Editor's Note: If financial institutions want to stay relevant, they need to have a digital road map in place and they need to be executing on it. In our January webinar featuring Jost Hoppermann, he discusses a newer concept, "The Digital Core" and how it will be crucial for banks and credit unions to adopt if they want to stay pertinent.
Not so long ago, consumers were stuck with whatever financial services were offered to them. This is no longer the case. Such digital powerhouses as Amazon, Google, and Netflix have conditioned consumers to expect a personalized, contextual digital experience whenever and wherever they login. Such companies as UPS and Domino's Pizza have followed their lead, inviting customers to place and pay for orders digitally, while providing complete transparency on order status via smart devices.
Banks and credit unions that think these trends do not impact them will go by the way of dinosaur sooner or later. Most know this but only a few have made the moves necessary to protect and grow their customer and member bases. In 2017, more financial institutions will see that they must do likewise sooner rather than later. Over the next 12 months, the number of banks and credit unions replacing their aging online and mobile point solutions will not only continue but gain momentum.
The key to a successful project of this nature is a strategy that supports the vision a financial institution has for its digital channels. This is vital since the daily number of consumers using digital banking grows while those who visit the branch dwindles. Digital is the branch now. For this reason, a bank or credit union must have a clear roadmap for where they want to go and what they want to provide to the increasing number of customers and members using a variety of digital devices to bank.
There is an important new concept that is being discussed in digital banking which should be fully vetted as an option for any financial institution building its vision, strategy, and roadmap for its digital future. Instead of replacing antiquated online and mobile banking systems with other disparate solutions of the same kind, financial institutions should consider what Jost Hoppermann of Forrester calls "The Digital Core". In this report, " An Introduction to Digital Core Banking", Jost describes the digital core as being an end-to-end, single digital banking platform system with a comprehensive set of services and the ability to accumulate, store, and analyze data concerning consumers' financial needs, wants and goals.
The digital core approach integrates seamlessly since all applications associated with serving consumers through digital channels are contained within a single digital layer instead of being scattered across several disparate channels implemented at different times. This approach allows financial institutions to increase operation efficiency and more easily introduce new innovations. IT and operations staff will especially benefit from such a core, as it reduces complexities of traditional systems, allowing employees to more easily access member data and have a comprehensive view of the member relationship. For end users, this digital core would result in a more consistent, intuitive digital experience from any device they choose.
This shift will also allow banks and credit unions to more nimbly adjust to business and market changes while reducing overall risk and improving their ability to better leverage data about the end user's digital activities. While the industry has been talking about the importance of data for years, financial institutions have often had difficulty converting the customer and member data available to them into actionable information. The digital core will allow institutions to expand their personalization of offers and even begin to anticipate the need user's needs.
Financial institutions that want to maintain their competitive edge will take the necessary precautions required to ensure that modernization of their digital channels is a priority. They can accomplish this goal by carefully considering their digital strategy and vetting and selecting solutions that best support this journey. Forgoing antiquated technolgy and sytsems in favor of a new, streamlined digital core will provide additional benefits in operational efficiency as well as the user experience. Such an evolution will require an upfront investment of time and resources, along with the inevitable learning curve associated with any change of this magnitude. On the plus side, making this commitment will secure a significant competitive advantage for banks and credit unions as them embrace the digital future.