3 Challenges Your Digital Banking Transformation Strategy Needs to Anticipate

Oct 21, 2021

As an industry with old-school attitudes about technology, it’s no surprise that the financial sector has made an uneven transition to digital banking. According to a Cornerstone Advisors survey, 66% of senior executives across mid-sized banks and 49% across credit unions had not launched a digital transformation strategy prior to the pandemic. Though the global crisis accelerated adoption, these reactionary responses did not put financial institutions on stable footing for the road ahead.

As 2022 approaches, there is an opportunity for financial services organizations to take stock of looming challenges and create a top-down plan of action. Rather than falling behind the curve, here are three challenges that your digital banking transformation strategy should prepare for in the coming years.

1.) Greater Customer Comprehension

On the surface, achieving a deeper and more exhaustive view of your customers is the type of challenge you want. However, you are not the owner of an exclusive dossier of data on your target consumers. There is a galaxy of data available to be gathered by your traditional competitors and fintech startups that can help them poach your customers if you do not approach them with a customized touch.

A robust and real-time data lake or customer data platform (CDP) is a cornerstone for any digital banking strategy focused on greater personalization. Creating an automated data pipeline that allows your bank to extract customer and demographic data from a variety of sources and load them into an up-to-the-minute dashboard can provide a 360 ° view of your customer base.

Whether the solution you choose is a CDP or data lake, its success relies on a clear top-down decision. The touch points necessary to create a “market segment of one” for every single customer require organizational reach, and most individual branches are unable to do this well – if at all. At best, they’ll have slightly varying silhouettes of your target customer rather than a picture-perfect, single source of truth. When your leadership team implements this solution comprehensively, you clarify customer motivations and behavior, enhance the personal touch across interactions, and improve customer lifetime value (CLV).

2.) Fortification of Digital Channels

2020 was a tipping point for digital banking. As COVID-19 spread worldwide, the desire for contactless payments and money management surged along with it. A transition that was already in the works reached a point of no return. In fact, 50% of consumers in a Deloitte survey indicated that a “well-designed banking app” is one of the key considerations when they decide where to bank – and that is only one of the many channels expanding across the digital landscape.

Consumers use a variety of channels to access their money, make payments or investments, apply for loans, and access other financial services. Businesses that strategically use the omnichannel approach within their digital banking strategy will be better equipped to anticipate the full range of products and services each consumer needs.

By now, customers expect a seamless transition from one channel to another. Interactions that “wow” are no longer the gold standard. Exceptional customer experiences are now measured by the level of convenience and reliability provided by products and services. Any hiccups can result in frustration that at best hurts net promoter scores and at worst prompts consumers to take their business elsewhere.

For banks and credit unions to create a robust omnichannel experience, there are a few key technologies you need to implement across your organization:

  • Effective APIs – Omnichannel banking not only requires a variety of in-house systems, applications, and platforms to connect, but increasingly applications from outside the organization. With the rise in popularity of peer-to-peer payments, more organizations need to have APIs that integrate with these preexisting platforms to foster a smooth payment experience without needing to scale up your own unique application.Additionally, creating open banking APIs can allow nimbler fintech startups to build upon your services and select data in a way that is profitable to both your organizations.
  • Proper data management – With customer information inbound from a multitude of channels, it’s important for your organization to create a reliable and up-to-date foundation. By implementing data management solutions across your organization, you empower your people to rapidly find the information they need with the full assurance that it provides a current and accurate view of your customers.

3.) Rise in Cyberattacks

As consumer information transitioned to the digital world, cybercriminals had a new opportunity to compromise sensitive data. Last year marked another turning point in the banking cybersecurity fight. As both consumers and operations went remote, cyberattacks against the financial services sector worldwide jumped by 238% between February and April and attacks have remained frequent to this day.

Any digital banking transformation strategy that fails to account for these challenges will suffer through the same problems.

As always, compliance is the major starting point. Regulators have expanded mandates governing the financial services industry (Sarbanes-Oxley, PCI-DSS, etc.) to include augment legislation surrounding cyberattacks. As a result, all digital transformations should take the perspective of cybersecurity experts into account.

Before any cybersecurity measures are taken, it’s vital for organizations to audit their current protections and protocols to determine any gaps with compliance or cybersecurity best practices. Regardless of your findings, implementing a zero trust security model can effectively stifle the actions of hackers trying to use compromised credentials by forcing them to verify their identity with every and any attempt to access sensitive information.

Moreover, your bank needs to employ a sophisticated business continuity and backup plan to counteract the common use of ransomware, allowing your branches and whole organization to restart their systems rather than surrender to the demands of cybercriminals.

Working with the Right IT Consulting Partner

The expansion of customer-focused data, omnichannel options, and cyberattacks will be challenges for mid-sized financial services organizations now and for the immediate future. The challenge is that not every organization has the budget to hire enough in-house experts to achieve the best outcomes for their business.

However, if you work with the right IT management solutions and consulting partner, you can harness this innovation in ways that align with your business goals and allow you to respond to new challenges as they arise. That way, your business can stay on solid ground, no matter what the world throws at you.

It’s time to do more than enhance your digital banking transformation strategy. Stay current with the latest innovations and keep ahead of the curve by checking out our financial services insights page.



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