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What is a Digital Transformation and Where Do Financial Institutions Get Started?

Everywhere you look, businesses are embarking on digital transformations. In fact, only 11% of executives surveyed in a recent McKinsey report believe their current business models will be viable through 2023. It’s the reason why 64% of respondents cited building new digital businesses as their top priority moving forward.

In the financial services world, even the biggest banking players—like Wells Fargo—are taking significant steps when it comes to investing in digital infrastructure strategies and cloud-based tools. But what does the phrase “digital transformation” really mean? And more importantly what does an effective digital transformation strategy actually look like that will ensure it’s not just a buzzword?

For starters, digital transformation refers to a foundational change in how an organization seeks to deliver value and services to its customers. It includes the adoption of new technologies, new talent, and new workflows to achieve a North Star vision for how customer value will be delivered going forward. In financial services, digital transformations in 2021 tend to revolve around a rethinking of what a bank branch should look like.

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As for steering your digital transformation efforts in the same direction as customer and member expectations—guessing isn’t an option. Financial institutions must carefully consider their existing customer journeys, tools, and business goals to put the right digital transformation plan in place. To help simplify what can sometimes feel like an overwhelming process, here are five key steps financial institutions can follow to guide their efforts.

Define Your North Star

As we discussed earlier, the North Star is the focal point of your overarching CX strategy. It should embody your brand promise and visualize the customer or member experience you seek to provide at every touchpoint throughout your organization. Use it to guide your initiatives and delineate between nice-to-have features and core business capabilities that are critical to your brand identity.

Pro Tip: A simple way to think about this North Star is by asking yourself what you want to be known for. As banking continues to pivot to a “digital branch” philosophy, consider if it makes sense for your organization to go all-in and try to compete with digital native FinTechs or embrace a digital transformation that combines digital tools with in-person branch service to create a hybrid service approach.

Map Your Current Journeys and Identify Opportunities for Improvement

At the core of your rationale for taking on a digital transformation project should be a desire to better serve your customers or members. But you can’t do that without first understanding your customers’ basic needs and unique expectations regarding their banking experiences. Start with preliminary researching exercises, such as journey mapping and strategic workshops to map out the paths your customers and members take to access and interact with your services. Also consult your customer data. This can often reveal where new growth potential exists. For example, do you have a healthy cohort of banking customers, but then they head elsewhere to receive mortgages and personal loans? Marketing automation strategies might be able to help bridge this gap and maximize the customer lifecycle.

Pro Tip: At this stage, begin to ask yourself: Which elements of a digital branch solution are most crucial to roll out first? This step can help your team uncover priorities and decide if users would benefit more from digital access to bank accounts or online lending tools—or something else entirely!

Develop a Transformation Strategy

With your future goals and current gaps in mind, it’s finally time to develop a digital transformation strategy. In this step, you’ll want to establish a timeline, actionable objectives, and metrics for measurement. Based on the gaps you identified in earlier steps, prioritize the capabilities that you will need first and cascade additional tools and features in over time. Technology decisions should enable a seamless, personalized end-to-end customer journey. How will overlapping tools work together to deliver the experience your customers and members seek? Consider how employees will need to adjust their workflows to accommodate these changes.

Pro Tip: If you haven’t already, this step can also be a great time to introduce a CX consultant into your digital transformation team. An experienced CX consultant can offer advice about which tools and strategies will deliver both short and long-term benefits. That way, your organization won’t find itself in the same position five years down the road when customer and member expectations evolve yet again.

Orchestrate the Improved Experiences

Orchestrating your organization’s digital transformation is all about understanding how people, processes and technologies work together. Think about how you wish to redefine “business as usual” within your branch. Build out your new channels to flow seamlessly from one another. The rise of the hybrid banking experience means customers and members will increasingly expect to move between in-person and digital branch experiences seamlessly. These handoffs between tools are just as important as the new tools and digital capabilities themselves.

Pro Tip: API-enabled, cloud-based technologies are invaluable. Not only will these features make it easier to set up interconnected solution pathways up front, but they’ll also create a flexible foundation for future digital branch enhancements over time.

Measure Your Success and Plan Adjustments

There are a number of ways to begin measuring the success of your digital transformation. At the top of your list should be collecting customer feedback. Voice of the Customer (VoC) surveys and polls can help verify your new strategy is on the right track—and where additional tweaks can help push it across the finish line. It’s important to remember: no digital transformation is every complete. Financial institutions need to think of it as an ongoing cycle for improvement. However, if you’re looking to justify investment to org leaders, the metrics that will prove your digital transformation is succeeding are those that get to the heart of customer loyalty and retention. This is where a digital transformation can have the biggest impact on the bottom line.

Pro Tip: Benchmark the value of customer retention and increased customer loyalty. Can improving these metrics lead to additional service and product add-ons? What is the full lifetime value of a customer now, and what could it be with customer and member experiences that position your organization as a partner in their financial future? These are just a couple examples of data points you can use to tell a more holistic ROI story.

As financial services organizations continue to face rising external pressure from FinTech competition, doubling down on the customer experiences that will differentiate your brand and reinforce customer and member loyalty is a crucial objective heading into 2022. If you’re ready to build a banking experience equipped to handle next year and beyond, we’re ready to help.

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