Digital transformation as an opportunity for the banking industry

As shown in part 1 and part 2 of my blog series, the digital transformation of banks is an opportunity to build customer trust. This can be achieved through certain building blocks and a customer-centric design and development process. Because as it turns out, not every customer is a completely digital customer. Thus, digitalization is not simply intended to replace existing services, but to complement the customer experience in the best possible way.

Contrary to many a trend report, not every customer is a digital-only customer. This can easily be substantiated with a simple calculation:

According to the Federal Statistical Office, 89.6% of the Swiss population will be using the Internet in 2017. Of these, according to the World Internet Project Switzerland 1 (WIP-CH, 2017), 67% used the Internet to make payments or use other, simple digital services offered by banks. A good 2.5 million Swiss do not even use online banking for payments. There is therefore still considerable growth potential for banks in the digital transformation.

The question now inevitably arises as to why such a large number of people refuse such a practical service as online banking. Users cite security concerns as one of the main reasons.

Although technology is moving faster than ever and banks are investing a lot of time and money in digitalization, the use of online banking has only increased slightly, by 3% over the last 6 years. This suggests that people do not necessarily change at the same pace as technology. Don Norman, a veteran of user experience, summarizes this phenomenon as follows:

"Technology may change rapidly, but people change slowly. The principals (of design) come from understanding of people. They remain true forever."

So just because technology enables change (or digital transformation) does not mean that this change will be successful. Be it business success or a successful customer relationship. Rather, it is necessary that we digitize the right things in the right way.

Should banks wait with the digitalisation of their services because people change less quickly than technology? Not at all: Rather, they should take up the cudgels for digitizing the right services in the right quantities.

In 2017, Namics conducted a representative study entitled "Customer Experience in Private Pensions" to examine the needs of customers in Switzerland and Germany. Whether they have an affinity for online services or not, all of the respondents had one thing in common: they regarded the consultation as the most important touchpoint within the customer journey. At the same time, 76.9% of those surveyed say that personal trust in the advisor is one of the most important factors for a purchase decision. However, the quality of the advice and the personal relationship with the advisor is not only decisive for private pension provision, but also for a mortgage decision. The investment business is also still a business that requires intensive advice.

Within private pension provision, 89.6% say that it is important for them to be able to trust their advisor. And yet 52.2% of those surveyed do not see the bank or insurance representative as an advisor, but rather take him or her on as a salesperson. Within the most important touch point of the entire customer journey, banks are thus losing a lot of potential to build a relationship of trust.

Now it seems to be fundamentally wrong (contrary to many a trend) to replace the advisor with digital services, such as online mortgages. It is much more important to use digital means to facilitate the interaction between customer and advisor. This can be done by making it easier for the customer to access his advisor or by supporting and supplementing the advice itself with digital media.

As the above example shows, the digital transformation of banks should be based on actual customer needs in order to strengthen and expand the relationship of trust. Not only individual services, products or touchpoints should be considered, but the entire customer interaction should be understood as an overall customer experience. If banks focus on the customer experience, this not only has a positive effect on the relationship of trust between bank and customer, but also makes a direct contribution to the commercial success of the company.

Process models such as user-centered design can be used to design optimal customer experiences. Business models, services, products and interfaces are developed with a clear customer focus.

By incorporating the above-mentioned building blocks for digital trust, not only can useful and satisfying digital services be developed, but the relationship of trust with customers can also be actively expanded.

Only by focusing on the customer, his characteristics, needs, goals and fears can a positive digital customer experience and trust relationship be created. It is not the mapping of business needs on the digital channels or pure product sales that makes a bank successful in the long term. It is rather satisfied and loyal customers who trust their bank, buy more and recommend it to others.

In order to achieve this, banks not only have to digitize offers, but also adapt their internal structures and culture to digitization. The digital transformation is a matter for the boss, because it affects the future of every bank and should be centrally organized.

In order to be able to respond to customer expectations, banks must also adapt their processes so that they can respond faster and more individually to customer needs and inquiries. Because, as already mentioned, a relationship of trust is established not only through a single channel, but through the overall experience.

In summary, it can be said that the digital transformation will not shake banking to its very foundations. It is and will remain an (advisory) business based on trust. The way in which this trust is expressed, promoted and cultivated has changed. Banks must respond fully to this.

Sources

1. World Internet Project - Switzerland 2017
2. IFZ Retail Banking Study 2018, HSLU