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Work Environments, Customer Engagement, Bank, Retail Environments, Digital & Technology, Customer Experience, Credit Union, Brand Strategy

Bank & Credit Union Digital Transformation Roadmap

Marc Healy, executive director of retail and marketing
8 min read
Bank & Credit Union Digital Transformation ITM
Reading Time: 8 minutes

Digital Transformation in Banking: How Branches Can Make an Impact

Innovations in digital banking have given consumers easier, faster, and more efficient access to their finances than ever before. There’s no turning back now — so how can traditional branches ensure a seamless customer experience between digital and face-to-face banking?

Fortunately, customer service is at the heart of most quality financial services interactions, so institutions with a strong customer experience program have a solid foundation on which to build their digital future. Read on to see how digital transformation can help banks and credit unions better engage with their customers and members, improve their operating efficiency, and maintain their edge in a competitive market.

What is Digital Transformation?

There is no single definition for “digital transformation” in banking; it is a multi-pronged process of upgrading technology, implementing new digital tools, adopting new platforms, and integrating all data and system functionality to better serve users and employees. A digital transformation can include:

Digital transformation in banking both comes from and results in organizational, operational, and cultural changes within a financial institution (FI). The important thing for institutions to remember is that digital transformation does not require an overhaul of all existing processes and infrastructure; rather, a transition can unfold over a period of years through small, incremental changes aimed at improving the customer/member experience.

Digital Transformation Trends in Banking

As you read this, it’s likely that the height of the COVID-19 pandemic is still a fresh memory. As with nearly every other industry, retail banking experienced some major operational shifts as a direct result of this world event, and not all of them negative.

The initial sharp decline in branch visitors in 2020 spurred many FIs who were behind the curve to invest more in digital transformation — namely, building or updating their mobile banking platforms, pivoting to virtual and remote teller services, and, in some cases, reinvigorating their drive-thru system. However, due to a host of factors likely also accelerated by the pandemic (staff shortages, loss of revenue, etc.), many smaller institutions are slow to take the digital plunge.

According to Cornerstone Advisors, as of late 2020, 27% of 260 community-based financial institution executives polled said they would launch a digital transformation initiative in 2021; 13% said they planned to develop one in 2021, and 12% said they didn’t have a strategy and don’t plan to develop one. By comparison, 69% of 265 board of directors members across multiple industries say the pandemic has accelerated their company’s digital initiatives.

Many financial institutions have embraced large-scale outbound marketing campaigns to attract new customers/members and launched new services that cater to a digitally mobile world. Efforts like this have kept some institutions competitive with the recent influx of third-party banking apps, and will likely be a major driving factor moving forward.

Even prior to the COVID-19 catalyst, today’s banking consumer expects frictionless, 24/7 access to their accounts, fast service, quick turnaround, and personalized, effective issue resolution. Digitization and automation of services can go a long way in delivering on these expectations, but in order to make the customer experience truly enjoyable, consumer-facing banking technology needs to be accompanied by impeccable customer service.

In deploying any kind of digital transformation, financial institutions need to provide comprehensive employee training that covers both practical skills instruction and best customer service practices.

Tools & Technologies for Digital Banking Transformation

A comprehensive list of banking technologies deserves its own article, but here are the top tools financial institutions are leveraging in their current digital transformations.

 

Tool or Technology Purpose & Benefit
Artificial intelligence  “Learns” about customers through their digital interactions, then utilizes predictive analytics to offer relevant products and services or identify potential fraudulent activity.
Big Data  Large data sets that can be stored in a central location and analyzed for patterns. Enables institutions to develop targeted marketing campaigns, enhance security, and optimize product offerings to reach the right people at the right time.
Biometrics  Used as a security measure to verify a customer or member’s identity in the case of a missing ATM card, ID, etc. Identifies a user based on their physical markers, such as facial recognition or fingerprint scanners.
Digital signage  Static or dynamic displays that can communicate messages in a fraction of the time it takes an employee to “pitch” to a customer. Serves to educate, entertain, guide, and sell to branch visitors.
Integrated content programs  Streamline messaging across branch networks and on either side of the service counter.
Self-serve tools In-branch self-serve technology like ITMs empower customers and members to help themselves while maintaining access to a knowledgeable specialist.

Key Components of Digital Transformation Success

Before embarking on a full digital transformation, it’s critical to define your goals for doing so. The overarching goals of a digital transformation in banking may include:

  • Improve the customer/member experience
  • Understanding and anticipating customer/member needs
  • Reducing operating costs
  • Streamlining operations
  • Reducing process friction
  • Gaining agility
  • Increasing profitability
  • Retaining talent

To achieve these ends, banks and credit unions should consider building the following steps into their digital transformation journey:

Foster a culture of innovation

Chances are, your institution does not have the capability to design and develop a brand-new technology from scratch. Therefore, you’ll naturally be using tools that others in the industry are also using. That’s fine! Innovation isn’t as much about the novelty of the method as it is about the mindset that surrounds it. Everyone in the organization — from leadership, to board members, to front-of-house staff — needs to participate in fostering a culture of innovation and foresight. This attitude, more than the actual technology, is the true differentiator in a digital transformation. Keep in mind, too, that innovation is in the eye of the beholder (i.e., the customer or member). Deploy regular surveys to take the temperature on the user experience.

Reskill your workforce

Training is a part of every onboarding process, but it doesn’t have to end there. Providing ongoing training opportunities for bank and credit union employees keeps them up to date and agile, plus it conveys to potential new hires that your institution invests in its workforce. Employees with an innovative mindset can easily reskill or upskill into new or expanded roles during a digital transformation — there’s no need to rebuild your existing workforce from scratch. Consider reorganizing your teams to leverage skill sets that can work in tandem to deliver higher efficiency: pair marketing specialists with retail team members, tech support with customer experience officers, etc.

Center the user experience

Every change you make toward a digital transformation should fulfill a specific customer/member need. Don’t change for the sake of change — use data and analytics to respond to or predict the needs of your users. Today, age is no longer a signifier of digital proficiency or preference, so assuming your customers/members won’t be interested in a tech upgrade may hurt your ability to stay competitive. Seek to understand the customer journey, and prioritize digital improvements that enhance it or create new engagement opportunities. Use every available platform and opportunity to spread the word about changes — leave no physical or virtual stone unturned.

Optimize your physical space

“Digital transformation” does not mean doing away with the physical branch. Rather, reconfiguring or optimizing your branch around new technology can open up more opportunities for customer/member engagement, new customer/member acquisition, and better omnichannel banking and marketing. Don’t be afraid to think outside of the box by looking at how other retail organizations improve their brick-and-mortar experience — sometimes the simplest, most unexpected design touches can make a huge difference.

Benefits of Digital Transformation in Credit Unions & Banks

The benefits of embarking on a digital transformation are many and varied — some small and short-term, some organizational and long-lasting. Whether you see the returns tomorrow or five years from now, benefits of digital transformation in banking include:

Reduction in manual work: With fewer analog processes, customer- and member-facing employees save time, energy, and hassle on both sides of the counter. Reducing this kind of work doesn’t mean a reduction in employees; rather, it can lead to more effective allocation of talents to focus on higher-value work like customer engagement and marketing. By digitizing more transactional services, like check cashing and deposits, bank and credit union employees can focus more on holistic, personalized sales and consultative interactions with their customers and members.

More cohesive user experience: Digital upgrades provide the opportunity to streamline your branding and messaging across all platforms, so that your website, app, ITMs, ATMs, video walls, and digital signage all look like they’re telling the same story. Visual and experiential cohesion contributes to increased brand loyalty and recognition, which in turn benefits sales.

Centralized customer data: With all customer data stored in a core digital platform, there’s always a “paper trail,” as ironic as that may sound. Electronic customer/member data is easier to search, store, and categorize. When self-service tools like ITMs are integrated with an institution’s core processing network, each transaction becomes smoother and more efficient. A centralized digital platform also makes it easier for employees to access customer data, which cuts down on in-branch wait times and “lost” information.

Environmentally sustainable: While a digital transformation is much more than digitizing paper processes, online-based customer activities cut down on supply costs, waste, payroll, and even emissions (ex. The gas it takes to drive to the branch).

Any combination of the above can position your institution as a nimble, attractive, agile, future-facing competitor in the financial services market.

Challenges of Digital Transformation in Banks & Credit Unions

Even though digital transformation is a necessary evolution for financial services, the process is not without its challenges. Fortunately, the right implementation partner can help.

Security risks

Even though a vast number of banking consumers are digital natives, there are still those who are wary of digital platforms. Account information theft is a real threat, and hackers get savvier with each new technology. Legislation and strict regulations around banking can also impede innovation. Institutions must understand and protect against threats to their new digital platforms, including developing an airtight plan for potential data breaches.

Initiative siloes

Think of digital transformation as the whole cake, not just the icing: a digital-first mindset should serve as a foundation for your institution’s services, not an add-on or afterthought. Some FIs make the mistake of taking on multiple, separate digital initiatives, perhaps as pilot experiments, while leaving other areas of the business untouched by new tech. This only serves to further segment your customer base and workforce, even though the goal is to foster integration and cohesion.

Leaving audience segments behind

While consumers by-and-large prioritize digital and mobile banking, some individuals or demographics may not be comfortable with new tech. In the push to digitize your services, make sure those customers and members are not forgotten. This is where education, marketing campaigns, and consultative customer service can be a major asset to your institution, by highlighting your consideration for all customers/members and making new tech less intimidating.

Product before process

Without a clear implementation and onboarding process, any new technology is just that — a shiny new product without a defined purpose. Your institution must have an in-depth understanding of the need and intended purpose of this new tool, supported by proof from real customer/member data. The entire purpose of new tech is to better serve your users; this customer-centric approach also requires constant improvement and updating of technologies.

Legacy mindset

It’s the roadblock that impedes any new initiative — “But it’s the way we’ve always done things!” Getting all stakeholders on board can pose a challenge to any major organizational changes, but having concrete goals to present can help all parties understand the need for digital transformation.

Not leveraging team members

A proposed increase in automation and digital tools may make bank and credit union employees concerned about their jobs. However, during the initial proposal and deployment phase, you can demonstrate how automation will enable employees to expand their skill set and focus more on high-value, personalized customer service. Include your employees in the transition by having them document existing processes, identify areas for standardization or improvement, and take ownership of new tools.

The proliferation of independent fintech also poses a challenge to traditional banks and credit unions, but these services often lack the customer service interactions that make traditional banking so valuable to its customers and members. At the end of the day, tech tools come and go, but an organization’s mission of delivering top tier customer experience sustains.

The Future of Digital Innovation in Banking

It’s nearly impossible to predict the specific banking technologies that will emerge in the coming years, but the high-level trends mentioned in this post will likely persist into the future. More financial institutions will learn to adopt an attitude of innovation, especially if they listen to what their customers, members, and employees want and center each new initiative around relevant needs.

At Element, we’re in constant contact with clients who prioritize longevity and recognize the need for innovation. Every new build, renovation, or digital integration we take on begins with an examination of what our client’s customers or members want; more than the latest tech tool, this is the driving force behind any branch transformation.

If you’d like to learn more about our services, or would like to discuss your own institution’s digital transformation, reach out to The Element Group today. We’re always open to helping banks and credit unions explore new solutions.

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Author
Marc Healy
executive director of retail and marketing

Often greeted by the team as “Mr. HEALY!,” with all suitable pomp, Marc is known to be a positive force of nature in the office. After graduating from Western Washington University with a degree in Business and a concentration in Finance, Marc proceeded to leap right into leadership positions. His career now spans over 35 years, with experience in marketing, sales, and finance.

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