Financial services: digital transformation must be tailor-made
Added inputs by external sources, specific regulation, mandatory changes, integration with other systems and a need for a more human interface. What does the financial industry needs customized solutions?
Felicitas Carrique / @felicarrique
Digital transformation is ubiquitous to every business sector and it is imperative for small and big players. Still, this does not mean the same thing for every industry and adding tools that are not specifically designed for the needs of your own sector can prove to be more damaging than helpful.
The PwC 2017 Digital Banking survey found that 46% of customers skipped bank branches altogether, relying instead on smartphones, tablets, and other online applications. This means that having a system able to articulate all this channels is vital.
However, integrating digital technology into different business areas is a major challenge that needs to be assessed taking into consideration its specifications. The financial industry is no exception to this premise: when it comes to adding a Customer Relationship Management (CRM) system into a bank operation, it must follow the peculiarities of its day to day concerns.
A CRM is a software tool that allows companies to save and manage all their customers’ data. It helps businesses build a relationship with their clients while creating loyalty and retention. This usually translates into a profit increase and simplifies routine operations for employees in a scalable way. But not all CRMs are a good fit for the finance industry.
According to PwC, many financial institutions understand that they need to invest if they are to transform. Retail banks spent US$20 billion on digital technology in 2017 but much of that investment hasn’t paid off. This underlines the need to take a different approach that focuses on the finance industry requirements.
A lack of holistic financial digitalization and knowledge, rigid organizational structures, an absence of a clear understanding of digital disruption business growth KPI’s, intense and critical client relationships, high levels of regulation, an exogenous interconnected ecosystem and legacy systems “drag”, are some of the particular requirements for the financial business model that generic CRMs do not take into consideration.
The financial sector calls for tools with less range but far more depth than what is generally available. For example, most of the CRMs are usually designed to attract new customers but this is not what most banks aim to achieve. For financial institutions, 85–95% of the revenues are generated by existing customers. This means they know that the best opportunities come from selling more products to existing customers, which have already been assessed and their behavior is well-known.
Even the behavioral funnel, that explains decision making in other business areas, lacks a key aspect in financial decision making: the risk assessment. Before a potential client can develop awareness, interest, make a decision and take action about it, he or she will assess the risk. This is the main difference between the finance industry and marketing, and most of CRMs were designed for marketing.
A matter of know-how
For traditional institutions, a broad change is a difficult but imperative endeavor. In order to articulate the necessary change to evolve the business and keep up with the markets, financial institutions must deal with several challenges.
This requires a system that can help them become a more customer-centric organization, allowing themselves to be shaped by customer demand, using more mobile, more two-way, more “right-now” experiences to give them what they want, when they want it. This is specially complicated for the finance sector because, while most industries have mainly two kinds of interactions, this one has a larger variety of interactions with much more higher frequency.
Another difference that can make a generic CRMs fail in any financial institution is the highly regulated nature of its operation. Each jurisdiction has its own regulations which means any tool needs to be able to adapt to this situation.
Furthermore, one of the main issues for banks is enabling new businesses while still preserving existing value. Financial institutions need to deal with added inputs by external sources, regulators, mandatory changes and adapt to integrated systems. This means a CRM has to be able to connect with multiple, slow and complex legacy systems, as the ones used in banks and give them the speed, flexibility and user experience of a fintech, with the confidence, security and stability of an established institution.
This can all be achieved with a tailored made system for financial institutions that integrates modules fed by legacy systems’ data and offers a diverse set of functionalities with core business impact. An operative ecosystem of elements that share elements regulated by specific business rules. The goal is to discover opportunities for business growth and have the necessary tools to make them become their best version.
This kind of tool can only be developed by a company that has real experience in the fields of technology, international business development and finance. Not every customer management software in the market is in the condition to offer this know-how. If bank CTOs and IT managers fail to spot the difference, they will not be able to surf the wave of digital transformation and become institutions of the future.
