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Banks need to get on board with digital transformation

Posted: 25 July 2017 | | No comments yet

Darren Collins, Global Director of Banking and Insurance at Kofax, explains why digital literacy will be so crucial to the future of banks as the open banking revolution beckons…

Better finance planning starts with better use of data

Did you know that by 2021, almost 3 billion people will be using a form of digital banking?

People are at the heart of all businesses. In order to run a successful business, no matter what that might be, you need to ensure that your customers are comfortable, happy and these days, digitally literate. Put yourselves in their shoes and experience the interaction from their perspective. Is it easy to be your customer? Is it simple to do business with your organisation digitally or are you forced to use slow and outdated, paper-based systems that are often the cause of deep seated frustrations?

Digital transformation is a term used so frequently these days that it’s almost lost all meaning, but when the background noise is tuned down, it is all about making it easier for prospects and patrons to engage and interact with you. If you look around, there are plenty of indicators that banks need to achieve this goal as quickly as possible.

Digital transformation has been driven by end-users

Digital innovators, such as Amazon and Uber, have not only changed how the general public buy goods and services, they’ve also altered how consumers expect to bank with organisations. Businesses from the most innovative banks, as well as trailblazers such as Apple, are disrupting certain banking products and services, further driving a transformation in how banking is done.

Customer expectations have shifted. They’ll no longer accept waiting in lines at bank branches or staying on a telephone line with a call centre staff member whilst being subjected to severely outdated hold music that would be better suited to a hotel elevator. Nowadays, customer expectations from banks include the range of capabilities that exist in mobile apps – customers want the immediacy of sending required documentation electronically or being able to swipe right on a phone to pay a bill. Alongside this, they desire the multichannel experience that seamlessly lets them switch between devices to bank on.

From front to back

So where do we begin digital transformation, especially in a bank? Putting this into context:

But it always comes back to the customer. The goal of meeting customer expectations with streamlined processes that keeps bankers, customers and processing personnel informed and all on the same page is crucial.

When many banks go digital, they often improve the front-end customer experience by adding mobile apps and point-of-sale systems. That being said, it’s not all about the shiny new customer facing tools, the failure to address the mid- and back-office systems and processes is often a rookie mistake. For example, digitalising the front-office will look to address customer engagement in branches, online and via mobile devices. But it is imperative to also focus on the mid- and back-office processes, such as loan approval, underwriting and loan closing.

End-to-end digital transformation doesn’t mean wholesale systems need to be replaced. Manual processing and interventions can be eliminated by integrating the right mix of digital automation technologies with existing systems. It’s all about making the connection between internal and external information sources, encompassing everything from identity validation to credit scoring systems.

The onboarding process is key

The first interaction between a customer and bank is the most crucial as it sets the tone and expectation for the entire relationship. It should be a painless, flexible and frictionless process, but this isn’t always the case, and can often result in lost revenue and/or opportunity.

What do customers expect? According to Ernst and Young, 86% of customers expect a smooth paperless account opening experience when starting with a new bank. This is no longer a nice to have, banks need ensure they are able to make the onboarding process as proficient as possible.

But in order for banks to optimise this process, they first need to overcome the many challenges associated with onboarding, which include:

  • Customers’ digital expectations exceed the banks capabilities
  • Disparate data sources
  • Disparate channels
  • Extensive and increasing regulations
  • Slow mid- and back-office processing
  • Digital non-traditional competitors
  • Paper data collection and review.

Failure to overcome these challenges has major implications across the banking ecosystem. The front-office is exposed to customer abandonment, alongside the potential loss of incremental sales, and the mid- and back-office is susceptible to inefficient manual processing, errors and higher operating expenses. Arguably the biggest barrier to an optimised onboarding process is that legacy systems lack the business agility to operate in today’s marketplace. When onboarding is done correctly, it is the pathway to true digital transformation for customers.

In a true digital onboarding scenario, customer actions need to be recognised from channel-to-channel. For example, if a customer begins to process via one channel but still has steps remaining, they need to be able to pick up from where they left off via their desired channel, rather than having to start the entire process from the beginning.

By connecting back-office systems and external sources, data can be integrated into the onboarding process, thus requiring less data entry. This system integration allows for business rules to be leveraged by the digital platform to automatically ensure all the required data and documents have been submitted, making the entire process more efficient.

Banks that digitise their processes from end-to-end can reduce client onboarding time by 80% and increase throughput capacity by 40%. Alongside this, banks can eliminate more than 60% of manual steps while reducing management overhead by 50%. We recently worked with a bank to overhaul its entire onboarding process and the results achieved following this digital transformation speak for themselves. Not only did this its strategy set this bank apart in its region from other competitors, but 50 percent more customers also completed a new account.

Digital transformation is not confined to one particular aspect or area of banking, it’s a concept that centres around putting the customer at the heart of business. Onboarding in banking is key, you never get a second chance to make a first impression, and this interaction has the power to dictate the tone of an entire relationship. Banks need to be digitally literate, not only does this enhance the customer experience, it also creates potential for adherence to compliance, greater probability, revenue and market share.

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