The Malaysian Reserve

The nuts and bolts to creating a digital bank

The key is in beating industry disrupters at their own game by becoming one of them, rethinking your entire digital strategy, says a report

By HABHAJAN SINGH

Managing the pressure points where the marketing and information technology (IT) teams converge is critical to building a bank that provides a seamless digital experience to customers.

But it is easier said than done. The path is laden with challenges like life cycles and meeting regulatory requirements.

Regardless of the difficulty, this area needs addressing if a financial institution wants to turn from a mere brick-and-mortar financial institution to one that is “digital first” in its approach.

“Becoming a truly digital bank isn’t just about IT or systems. It’s about the customer.

“Without a customer experience focus, plus commitment at the executive level and a robust digital execution strategy, the journey will be difficult and may fail,” according to a recently released report on digital banking.

The 52-page “Omni-channel banking: The digital transformation roadmap” report was based on a survey of more than 100 C-level bankers from across the globe.

The report was jointly released by Backbase Inc, a New York-based developer of portal software solutions for financial and large enterprises, and global not-for-proft organisation European Financial Management and Marketing Association (EFMA).

Rethinking Digital Strategy

At the heart of the report is how traditional financial institutions can win back market share.

“The key is in beating industry disrupters at their own game by becoming one of them, rethinking your entire digital strategy,” according to the report.

To put a new digital strategy centre stage, the report called for active involvement of the board and highlighted the need for a digital transformation strategy cascading from the top down to circumnavigate silos.

“Your customers’ needs should be the focus of your digital transformation — they should be at the core of your business — and any outdated, siloed thinking fuelled by legacy systems and processes should be eradicated.

“Traditional banks still have a siloed mentality, but customers don’t. You should be able to deliver a seamless experience that’s instant, trans- parent, personal, relevant and ubiquitous. ‘Going digital’ is a fundamental change in how banks and credit unions learn about, interact with and serve consumers,” it said.

Here, the report emphasised the need for banks to undergo a drastic paradigm shift.

“Successful digital transformation begins with an understanding of digital consumer behaviour,

preferences and choices across channels and devices, complemented with an agile strategy and lean IT stack that enables customer-centric innovation.

“You must think from the perspective of a new customer experience platform vision that will lay on top of existing systems, enabling you to break from the past and truly innovate,” according to the report.

On the local front, a study by EY on the global banking outlook found that Malaysian banks had begun steadily embracing digitalisation and are expected to focus more on investment in technology for the next three years to ensure further growth.

The study, shared with the Malaysian media in February 2018, revealed that 66% of its research respondents target to reach digital maturity by 2020.

EY Advisory Services Sdn Bhd partner and Malaysia financial services banking and capital markets advisory leader Shankar Kanabiran had then told the media that local banks are focused on investing in technology in the coming three years in line with their growth strategies, as well as to generate cost savings and operating efficiencies.

A Better Bank

The Backbase-EFMA report noted that customers are more demanding and more informed, expecting convenience and simplicity when it comes to financial services, particularly online and via mobile devices.

“People love digital services such as Netfix, Amazon and Uber because they’re easy to use and deliver great customer experiences.

“They deliver 10 times more convenience and better customer experiences than the status quo, and are therefore winning the market.

“It’s only a matter of time before the 10-times-better bank is founded, a thought that’s on the radar of every banker,” it said.

To achieve those ends, those surveyed in the survey rated the creation of a seamless omni-channel experience as “important” to “extremely important”.

It also noted the importance of the mobile’s impact on online sales and share of wallet.

“Customer behaviour is affecting the channel mix and revenue generation.

“The survey results reveal that mobile channels record the highest increase in revenue generation,” it said.