Businesses worldwide and across industries are facing a tremendous challenge to capture market share, retain existing customers and attract new prospects. In disruptive times like these, customer loyalty is particularly brittle, and ironically crucial to the survival of many organizations. Banks are no exception.

The 2019 Deloitte Banking and Capital Markets Outlook report noted that the global banking sector had recovered from the 2008 recession and was not just profitable but more resilient than ever before. But the unprecedented events of 2020 have upended the progress and created several significant challenges for banks to contend with.  Over the last few months, they have had to quickly adopt innovative technology solutions to ensure seamless operations and customer expectation management. As we move forward from this crisis, there must be deeper technology integration into banking solutions and services and the sector must usher in a new era of digitalization.

Banking on Business Continuity

Thanks to the pandemic, even the most technology averse customer is now forced to adopt digital banking channels. And banks must capitalize on this trend for future growth and business security. To be fair, these last few months have seen a number of innovative uses of technology to address some very unique challenges. For example, there has been a distinct uptick in the use of Near Field Communication technology (NFC) to enable contactless payments and money transfers. But there needs to be focused long term vision and roadmap to drive the sweeping changes that the sector needs to recover and survive in the coming years. 5G networks, wide range of smartphones, comprehensive data plans and efficient mobile apps can all be brought together in the form of video transaction models that offer remote banking services as well as a human connect to ensure customer loyalty. BMO Harris Bank in Chicago has integrated technology and personal connect particularly well with a Smart Branch where tellers interact with customers via video screens and help customers using their smart devices. Customers can also avail of on-demand videos to learn more about products and services.

Investing in Technology

Technology aided transformation is no longer good to have but a critical business imperative. But the fact is that it is a cost intensive affair. As the world recovers from the pandemic it is likely to be faced with a new economic crisis, and banks must maximize their technology investments. Small and medium banks particularly must identify strategies that will ensure the maximum ROI. With customer needs and engagement at the center of their transformation drive, banks must invest in smart digital strategies that will ensure seamless continuity, business resilience and exponential growth in an increasingly connected and disruptive market scenario. The emergence of fintechs and customer expectations of on-demand availability and service had pushed even the most traditional banks to digitize their cores. From customer acquisitions and improved revenue management to ecosystem management, billing and invoicing and hyper personalization, most banks have been exploring technology solutions to improve their business outcomes. Reports indicate that the top five American banks (JP Morgan, Bank of America, Citigroup, BNP Paribas and HSBC) had an annual IT budget of USD 42 billion in 2019, which is close to the of USD 50 billion combined annual IT budget of technology giants Amazon and Alphabet. For the most parts, banks have been focussing on cloud adoption, introducing mobile apps and upgrading key services.  They have also focussed on implementing a solid digital core as the transaction and accounting engine, while the modernized middle layer handled integration, orchestration, data analytics and ecosystem management. But with the COVID 19 pandemic, it has become increasingly clear that the pace of transformation has to be accelerated. Digital technologies must be applied across the organization to transform every aspect of banking and not just core banking functions.

Improving Customer Experience

Of course, emerging technologies like AI and ML hold tremendous potential for improving customer experience and offering hyper personalized solutions to drive customer loyalty.  From using NLP algorithms to push voice based services like <Bank of America’s voice assistant Erica, to turning smartphones into digital wallets with Barclay Banks Grab and Go feature on the Barclay card, the possibilities are limitless. Russia’s Sberbank, uses AI powered tool provides customized service to help customers improve their financial habits. And Oregon’s Umpqua Bank has developed a hybrid digital -human platform to address the declining use of its branch network. Every customer can use the app to choose their personal banker from an online list provided by the bank and can connect with them through the app that supports both text and voice options. Banks can also use technology to help customers schedule their visits online. In the current socially distanced reality this would be an excellent way to ensure the safety of tellers and customers alike by regulating the flow of visitors while also maintaining transaction volumes for the bank. In the future, banks could use the same technology to make their resourcing more efficient by matching customer needs with specific skill sets or job roles and making them available during the visit. It would be an intelligent hyper personalization strategy that could ensure customer delight and loyalty in the future.

New Vendor Engagement Models

It is time banks started considering new vendor engagement models, and entirely new partnerships to address revenue leakage and capital shortage. Outcome based pricing models will necessitate ROI driven digital transformation strategies and help banks prioritize their budgets. They can also use this time to drive incremental implementation strategies rather than large scale transformation drives to ensure better resource utilization and reduce TCO. Technology partners can use predictive technologies to improve maintenance models and reduce downtime. Banks must also consider partnering with fintechs to tap into newer technologies to drive customer experience and innovation. In short, digital transformation in banking industry should not be considered as mere upgrading of technology, it should be the starting point for reinterpreting customer needs and finding new opportunities to continuously engage with them. Also, any digital transformation strategy must be be aligned with the business mode of the individual banks. With customer data at the very foundation, a bank’s digital transformation drive must help deliver new insights and ensuring the delivery of better products and services to ensure business security in a post COVID world.

“The views or opinions expressed in this article are those of the author. They do not purport to reflect the opinions or views of SunTec’’.