By Jeffery Kendall, Senior Vice President & GM, Global Banking & Financial Solutions, Kony, Inc.
First, Amazon teamed up with Chase. Then, PayPal invested in physical branches. As the dust settles on these major announcements from digital natives, my advice to banking leaders is to hit the pause button and ask some important questions about where your digital banking strategy is taking you. Do you have the executive vision, investment appetite, and people to execute quickly enough on your digital roadmap?
As an industry, credit unions and banks are undergoing its biggest tectonic disruption in modern history. The decisions you make now will impact your organization for years, possibly decades. Now is the time to be clear-eyed in terms of what digital success looks and feels like to your customers – and to your profit margin.
In order to effectively compete in the digital society of today and tomorrow, credit unions and banks must evolve with their customers, and do it in a way that makes practical sense. Forget the broad and lofty goals of becoming the next tech darling; focus instead on some basic, often overlooked, pillars of digital success. Below are some observations I’ve made in working with banking leaders who are most successfully navigating their way through digital innovation.
Like all banking divisions, digital should drive revenue
Most credit unions have not addressed – let alone exploited – how digital can drive revenue. Financial institutions need to stay focused on the very basics of what drives their business: acquiring deposits and lending assets. At the end of the day, your digital strategy must support these essential functions in order to be successful.
Ask your team this simple question: Are we optimizing our online account application process to reduce abandonment? For many would-be customers, the user experience is so clunky and tiring, that they throw up their hands and take their deposits elsewhere.
Always remember that your customers’ efficiency and your profit margin are in perfect alignment. The easier it is for your customers to transact with you, the higher the revenue. By capturing the easily obtained assets of online account applications, you make strides forward in revenue as well as customer recruitment and retention.
When deployed effectively, digital banking should run silently and seamlessly alongside your various business divisions with the shared goal of growing assets. Whether through digital loan applications, new account applications, or other high-value transactions, time and attention spent in these areas are wise investments. Just as you measure these outcomes in your overall business, monitor and increase your digital revenue. The key to unlocking digital revenue is to deliver a frictionless user experience where customers can easily and efficiently transact with you on the channels they want.
As a leader, it’s important to recognize that you are no longer competing in the digital arena solely against other banks and financial institutions. You’re actually competing against the user experience delivered by digital giants such as Uber, Zappos, and Amazon. These companies have formed your customers’ expectations and now set the pace for innovation.
When your customers transact digitally with you, they anticipate the same efficient, secure, and intuitive experience they have when booking travel or shopping online (think Amazon’s one-click purchase). That’s why they refuse to complete online account applications that require too much time or effort. Their expectations have been set by other industries that have long embraced consumer-driven experiences.
These tech-driven industries have dominated e-commerce for the past two decades. Although banking arrived late to the digital party, it doesn’t mean you can’t take a page from their playbook by anticipating your customer needs while also maximizing your own profitability.
The high-impact areas in digital banking in which to focus your resources are to streamline revenue-generating processes such as account opening and lending while making sure not to overcomplicate the everyday “financial chores” which I’ll describe next.
Think beyond financial chores
Financial chores are the mini transactions people do every day such as check deposit, bill pay, and transfers. Think of these functions as “jacks or better” in the digital customer poker game. They’re very important and you have to get them perfect; but, it’s rare for them to move the needle in terms of a differentiated user experience.
One of the most common customer complaints is the inability to use remote check deposit on their mobile app. Not only does this negatively impact their experience and affinity to your brand, it also increases the cost of the transaction, from approximately 30 cents, if done via mobile deposit, to approximately $2, when done in-branch. This is yet another area in which your customers’ efficiency and your profit margin are in perfect alignment.