The Importance of a Financial Institution Controlling Its Own Digital Destiny

Way to Go

Editor's note: Financial institutions must implement a digital platform that provides a frictionless UX in order to boost competition and control of its digital destiny.

Every company wants to be in control of their business. For many of these businesses, that means controlling technology, not being at the mercy of a vendor. Nowhere is this truer than with banks and credit unions. Financial institutions wanting to control their own digital destinies face many significant challenges, such as the inflexibility of their legacy backend systems, aging vendor solutions that cannot meet their time to market demands and internal processes better suited for the horse and buggy days rather than the information age.

Overcoming these obstacles requires finding a partner with a flexible, adaptive platform that allows the institution to improve time to market and quickly configure key aspects of the solution without the vendor’s help. For a majority of these banks and credit unions, this can be a tough proposition unless they can find a partner who moves quickly, while also allowing the institution to control the pace at which they move. This is a rare combination to find amid the many promises and claims vendors make when trying to attract business.

One institution that has been able to thread this needle is TCF Bank. By successfully doing so, the bank was able to offer its customers the iPhone X’s facial recognition feature for their mobile banking application on the first day Apple rolled out its latest iPhone. With a system that allows for continuous innovation, the Minneapolis-based FI didn’t have to wait around for somebody else to prioritize, plan and then incorporate the new mobile biometric security component.

However, for every victory like the adoption of a new banking innovation, there are multiple horror stories. For example, one institution had to wait three months just to make a simple 10-word change to its terms and conditions. And another bank spent $150,000 to wait months for their vendor to make relatively minor changes to the branding elements of their online and mobile platforms. 

The Need for Speed

“The customer is always right” is not a new saying, but its application to today’s trillion-dollar banking industry can be scary for the financial institution that is not calling its own shots. Consumers bring with them expectations about the optimal user experience based on the latest technology unicorns such as Uber, Airbnb, not from the bank or credit union down the street. Combine these high expectations with the fact that consumers have never had more financial services options, and it is easy to understand financial institutions’ struggles of attracting and retaining customers and members.

The largest financial institutions in our country are not sitting on their hands as regards controlling their own digital destinies. Last year, the biggest three banks accounted for 45 percent of all new account openings but together represented only 24 percent of all the branches in the United States. Statistics of this type suggest that regional and community institutions are no longer able to win the race by claiming to have better customer service, but rather must provide the latest features and functions customers and members demand. There are digital platforms that offer attributes community and regional financial institutions need to control their own digital destiny, specifically enhanced time to market and powerful configurability options that don’t require assistance from the platform partner. 

Banks and credit unions can’t be at the mercy of their tech vendors. Institutions that take a passive role in this regard will see significant attrition. Too many are already seeing this and that should be no surprise since a 2018 D3 Banking survey conducted by Harris Poll indicated that 32 percent of digital banking users are ready to leave their bank or credit union for a better digital experience.