In this digital era, companies having a success rate of digital transformation grow faster than their competitors. For a successful digital transformation, there are many technologies – mobile, artificial intelligence, augmented reality, machine learning, digital twin, internet of things, and cloud among others – that can be used. Solutions are determined based on consumer behavior and the business process of an organization. These solutions are useful in optimizing operational efficiency and increasing work productivity. Technology goes hand-in-hand when it comes to digital transformation. But, many other considerations must come first in a digital transformation strategy. Mark Sievewright from Sievewright & Associates shared some context about the digital transformation at CULytics Virtual 2021 Summit.
Here are the main highlights:
Primary Trends Shaping the Future of Financial Services
Five forces that are reshaping the financial industry are:
- Accelerating Consolidation and the Drive for Scale: The financial services industry favours scale economics – and industry consolidation is accelerating.
- Unprecedented advances in technology and innovation: Technology advances and adoption rates are enabling fundamental shifts in how financial services operate.
- Change in consumer behaviors, attitude, and expectations: Consumer demands greater convenience simplicity, speed, empathy, and personalization.
- New waves of competition from large-scale incumbents and new entrants: Incumbents have adopted “High Tech, High Touch” strategies while new entrants are defining the delivery of “Digital First” service.
- Demographic change and the rise of digital natives: The US in the midst of unprecedented demographic shifts with significant implications for member or customer retention and acquisition.
The Future of Financial Services Industry Structure
It is important to understand the response to the above-mentioned forces in the context of industry structure. Apart from continuing industry consolidation and the increased importance of scale, FinTechs will become more prevalent. Consumers will be in a world where they will be competing for head-on fin-tech and big-tech companies. The Big Banks learned these lessons years ago and working on improving digital capabilities.
Transaction Trends: Valuable Insights
On seeing the work of big banks on improving digital capabilities, Chase reported why digital is so important. Chase observed a reduction of 49% from 2014 to 2019 in average everyday Chase Branch Transactions conducted inside its branch. And, Chase consumer Banking deposits per branch, from 2014 to 2019, improved to 62%.
American Consumer Satisfaction Index: 2013-2019
The financial industry that is led by the big four banks has put a massive emphasis on digital technologies. This helped a lot in gaining consumer trust, long term association, and a satisfied member base. In contrast to this, emerging digital-always competitors have gained millions of new consumers in the same time frame. This tells us that change is happening in the industry.
For financial firms to become future-ready they will need to reimagine how they bring together people, technology, data, and process to create value for their members or customers, and remain competitive.
Driving Digital Transformation
Driving Digital Transformation is critical to secure the future. It is required to adopt a new mindset founded on business intelligence and data analytics. Also, it is important to engage members to make deeper relationships, optimize operations through operational data to get more effective operations. As an organization, one can empower employees by valuing their feedback; this will help in improving overall work effectiveness. Transforming products at regular intervals to heed the needs of the consumers is a key to gain a large member base.
This transformation requires financial firms to embrace and adopt digital technologies. FIs need to become data driven organizations. Over the next 3 years, it is expected to see the mainstream adoption of Analytics, Artificial Intelligence, Biometrics, 5G, Video Banking, and Voice Banking.
Demographic Shifts and their impact on service
A preference has been noticed for online and mobile-first solutions. For many Millennials and Gen Z Consumers, we can expect:
- A clear preference for online mobile-first solutions versus branches
- Demands for more mobile, automated budgeting and saving tools
- Preference for mobile payments over card-based payments and cash
- Greater willingness to use point-of-sale lending based on convenience
- Willingness to use Robo-advisors and micro-investing providers
The future of the branch in a new era of competition and demographic shifts
For sustainability of the industry, more digital intensive business models will come into play. The more people will use digital modes for meeting their requirements, the smaller branch footprints (number and size) will occur. Similarly, the effect can be seen as:
- The pursuit of branch optimization strategies as branches will need to become dramatically more productive, or significantly less costly
- Transactions continue to migrate to digital (“Low-Touch”) channels
- Branches become “Service and Sales Hubs”
- The mix of skills of credit union branch employees will change
- Demographic shifts will require multiple tiers of branch design
Changing in cost system is a part of digital transformation. It is imperative to make strategic moves for a successful digital transformation. It is important to create a digital ecosystem and the focus should be on delivering exceptional member experiences. Timely review and improvements of offerings- products and services- is another way to achieve the set targets of digital transformation. Do not forget, that big things happen with good people. So, in addition to investing in technology, strategy, and execution, work on culture and talent management at the same time.
The change is going on at an unprecedented rate in the industry. So, the focus should be on how one evolves data analytics strategies and branch channels to serve the best to the members.