The Digital Banking Imperative or How Your FI Can Avoid the Zombie Apocalypse

Zombies-693209-edited.jpegEditor's Note: 28 Days Later, Dawn of the Dead, Zombie Land, the list of zombie movies could go on and on. As it relates to many financial institution's digital banking offerings, the list of "walking dead" could go on and on as well. In this 270° Blog, we discuss zombies, digital banking, and a recent Forrester report that ties it all together!

Have you ever wondered why zombies have become the "go to" ghoul that those who entertain us turn to when they want to create fear in the audiences? Sure, there is their straight diet of brains and they are very difficult to kill, being undead already, plus they seem to come in almost infinite numbers. These characteristics increase the "creepy factor," however, to me - as someone who is intrigued by the way markets evolve - the thing that makes zombies most frightening is they are the classic example of a commodity, i.e., anyone can be one and they are all the same.

To be fair, it is important to note that there is staying power in being a commodity (see reference to killing the undead and infinite numbers above) but this type of success for commodity providers is generally achieved not with creativity and innovation but rather brute force and control - sort of like zombies, right? Believe it or not, the concept of zombies as commodities has relevance to the digital banking replacement market currently in its earliest stages in the United States.

Despite continued warnings from the leading firms that serve banks and credit unions such as Forrester, there are financial institutions in the United States that still seem to be zombified ( a state of becoming a zombie as defined in a song of the same name written and performed by the band Southern Culture on The Skids) when it comes to responding to the age of the digital customer. These organizations risk becoming what one banking executive describes as "dumb money pipes." Though this does not sound as ominous as "undead," the result is the same.

Previously in the 270° View, the case was made for why the current discussion around personalization should be about first anticipating a customer's or member's needs and then presenting an offer to him or her that is tailored for that need. This is possible, though not with the current solutions many banks and credit unions rely on to provide digital banking services. In fact, most existing digital banking services provided by FIs in our country today subject the consumer to an inconsistent and generic user experience that is so poor that it attributes to customer and member attrition. 

In the report by Forrester entitled The Digital Banking Imperative: The Digital Banking Strategy Playbook analyst Peter Wannemacher and Jacob Morgan describe three areas of focus for bank and credit unions wishing to avoid becoming the "undead:"

  1. Banks will either reinvent themselves or be forgotten - Banks are relevant to customers today, but digital disruption, disintermediation, and changing regulations threaten to reduce some banks to low-margin utilities, without relevance in people's everyday lives. 
  2. Successful Banks will Enable Customers' Financial Well-Being - While banks today vary in the quality of their digital offerings, their product sets, services, and business models are mainly all the same. This will start to change, and banking itself will begin to fracture as individual banks find new revenue streams, explore new business models, and establish new brand positioning. But all successful banks will have a common attribute at their core: enabling financial well-being for customers.
  3. Ecosystems Will Be Mission-Critical - Gone are the days when banks could essentially go it alone in serving their customers' needs. Digital banking strategies should focus on building financial ecosystems to provide more relevant and expansive services.

Ever watch the movie 28 Day Later? In case you have not, I will say only this about it: there are zombies and there is a timing issue. In the financial services industry that financial institutions anchor, there is a timing issue around digital transformation. There will be a tipping point somewhere along the timeline that will leave many banks and credit unions walking the earth (at least the area known as North America) as the undead - dumb pipes with an unsustainable position as a commodity.

This is where the zombie metaphor breaks down because ultimately these undead institutions will not multiply but rather will die or be eating (brains and all) by those banks and credit unions that took the steps required to remain digitally relevant to their customers and members. The Forrester report mentioned earlier gives options for avoiding the zombie apocalypse in the digital area. It's worth a read.