Digital transformation has never been more of a hot topic. 79% of North American banking leaders believe their bank’s existence will be threatened if they don’t innovate faster. However, “digital transformation” is also a loaded phrase: it can mean a lot of different things to a lot of different people, and still puzzles executives in all industries. As a result, it can be quite overwhelming, particularly for debt collections teams who have been operating via the same systems and practices for years.
Some believe that digital transformation requires a complete system overhaul, which is simply not true. This could be part of the reason why Tier 2 retail banks are being put off investing: Efma’s 9th annual Innovation in Retail Banking report found that smaller banks are at a much lower level of digital maturity than their larger counterparts.
In truth, they don't need to go all-in with the whole toolbox. They could (and should) be choosing the tools that work for them. Indeed, there are surprisingly simple, seemingly small ways that debt collection teams in retail banks can make a big difference and gain a digital foothold without significant cost or disruption.
1. Think about your goals
Before you even consider focusing your digital resources, consider your objectives for the collections team - not only for the moment, but for the next 5 or even 10 years. Drill deep into the numbers and think laterally about where and how tech might help you achieve your goals. By knowing what you need to achieve, the brief for any digital transformation project becomes a lot clearer.
According to the EY Global Banking Outlook 2018, 62% of banks hope to be either digitally maturing or a digital leader by 2020. However, only 19% of the senior executives at the 221 institutions surveyed said their organisation had already reached this point.
Of course, every bank will have different goals. Larger, tier 1 banks with many high net worth clients might want to invest in stronger cybersecurity, which global banks identified as their number one priority for 2018 in the aforementioned EY survey. Tier 2 banks, meanwhile, might want to focus their resources on customer-centric mobile applications; beating the fintech rivals at their own game.
Deloitte Consulting CTO, Bill Briggs, said: “The metrics are going to vary depending on what the hero of the story and the noun of the action behind the digital transformation ends up being. But then, once you get those terms, you can typically have a pretty grounded conversation”.
2. Start small
Digital transformation is such a broad term that it might seem like an insurmountable task. If you highlight one key area that could be improved and invest in a small-scale test, it could have a knock-on effect on the rest of the business. Digital transformation is a flywheel effect, with one small-scale push often building momentum for the future.
Starting small means circling the one area where you can make the most significant impact with the least amount of financial and operational disruption. Think about digitally transforming your debt collection. With the right scaleable debt management software in place, it's remarkably simple for a bank to improve the efficiency, the success and the speed of debt collections practices. It can do this by catching the debts before they get out of control, closely monitoring accounts and making it easier for customers to pay in real time.
Other small digital transformations banks could focus on could include:
- Apps connected to an existing backend system.
- Touch ID and Face ID authentication.
- Cloud-based solutions.
- Robust and secure solutions for core functionality.
- Automating tasks without changing processes.
- Adding self-service kiosks at bank branches.
By focusing on these smaller areas, banks can build on them in stages and transform in iterations, adding platforms and scaling success as they become more familiar with the processes and their customers evolve with them.
3. Think about the process
Highlight the areas that take the most time for internal staff and look for a third party to improve one of them. Digital transformation really shines in streamlining internal processes. According to a study by Brandworks, 58% of organisations have failed to adapt internal processes for digital, but streamlining operations saves time, money and increases efficiency.
In many cases, legacy systems are impeding digital transformation for internal banking systems. While banks have focused resources on digital transformation in customer interfaces, internal systems are a lot harder to change without causing major disruption. Indeed, according to Payment Week author, Pat Patel: “Arguably, one of the biggest hurdles to change that the banks face is their entrenched legacy operating systems, so hardwired into their DNA that any talk of change is often dismissed or postponed.” Nevertheless, streamlined internal systems save time and eliminate (or at least mitigate) user error.
It's obviously more difficult for banks with decades’ worth of client data to replace legacy processes. Younger banks, however, should certainly consider making the change whilst it's still possible, as it will only get more troublesome as time passes.
4. Centre on the customer
Banks should engage customers at every stage of the consumer journey, giving them tools to develop a convenient and personal relationship with the bank. Assess your customer interactions and you'll soon find areas where going digital can help consumers have a better overall experience.
This could be anything from a more in-depth customer self-service portal to a bespoke app that gives the customer something no other bank or service can offer. The Commonwealth Bank in Australia, for example, created an augmented reality app, allowing users to point their smartphones at a property and instantly see its current price and sales history. The app also provides a mortgage calculator and the option to connect directly with local realtors. In the six months after the app’s release, customers searched more than a million properties, and the bank estimated the project’s return on investment to be more than 100%.
In particular, AI chatbots offer a solution to many common problems faced by banks. Poor customer service is one of the primary reasons that customers leave banks, but chatbots alleviate many of the issues customers often have with bank customer service. With a chatbot, you get speedy 24/7 customer service and an impartial voice, which can be particularly handy in the field of debt collection. According to a report from Juniper Research, chatbots will be responsible for around $11 billion in annual savings by 2023. Major banks such as HSBC are already reaping the benefits too. HSBC's “Amy” has been in place for years now, and has learned enough that it can now answer the vast majority of common questions without having to pass customers on to a flesh and blood consultant.
Of course, where automation is concerned, there will always be those striking up old fears about 'machines stealing jobs'. However, as JPMorgan Chase chief innovation officer, Dana Deasy, points out: “People always talk about this stuff as displacement, but it's actually about freeing people to work on higher-value things, which is why it’s such a terrific opportunity”.
5. Find a digital transformation partner
Digital transformation doesn’t necessarily have to start in-house. In fact, it can be much more effective with external expertise; specialists that understand what the right solution might look like and how you can implement it with the least resistance possible. By working together with a digital transformation partner, you could potentially instigate real, beneficial transformation without lifting a finger.
A digital transformation partner like EXUS will provide a range of tools for you to initiate digital transformation in any of the areas mentioned above. You'll also gain expert advice from consultants who have spent decades implementing these solutions for banks at all stages of their growth cycles. They will go through your data with a fine toothed comb and pinpoint the areas that would benefit most from transformation. They will also help bank leaders make more informed and impactful real time decisions with long term benefits.
Banks setting the digital transformation standard
To show how digital transformation can do what it promises - transform your bank's practices - we’ll put the spotlight on a few of the global banks doing it right.
- JPMorgan Chase recently introduced the Contract Intelligence (CoiN) machine learning platform, which analyses legal documents to extract relevant insights and data. With this system in place, a task that usually takes hundreds of thousands of hours can be achieved in seconds, and is far less prone to error than a fatigued staff member.
- With potential fraud perhaps the greatest setback of digital transformation, Citibank has taken steps to mitigate the problem by acquiring data science company Feedzai, which specialises in identifying and eliminating fraud in real-time. This is a perfect example of a bank finding the perfect partner.
- The Bank of America has implemented an AI savings manager known as ERICA, which has proven to be a major success for the bank. Over a million users signed up in just three months. According to Michelle Moore, head of digital banking: “It goes to show how quickly we can grow, and we expect the numbers to continue to grow”. This shows how a focus on customers has paid off with a dramatic increase in business done.
- Capital One has integrated its existing online banking platform with Amazon's Echo, allowing customers to use voice commands to “ask Alexa” for real-time information regarding their accounts and perform transactions without lifting a finger. Again, this transformation brings the customer experience to the fore.
In each case here, the bank has singled out a specific area and made one major change which has had a profoundly overall positive effect.
Make Your Move
To achieve effective digital transformation, develop a clear view of which capabilities can deliver the most value quickly, and power a broader transformation over time. The important thing is to get going now, as waiting around for your competitors to make their moves offers no benefit.
According to PulsePoint group founder, Michael Gale, 84% of digital transformations fail, but that's because those transformations are often too vague and all-encompassing. As the man himself says: “if you can't get the sum of the parts to be greater than the cost, you're going to fail”.
Banks should be following the lead set by their global peers, focusing less on the wood and more on the trees. With enough attention, those trees will grow past the wood that spawned them and into a more connected, flexible and secure future.