DX for Today’s Banks
Your Business, Digitally Transformed
A month ago, I wrote “Digital Transformation is Too Big to Succeed,” yes, I was being clever with the title based on Banks being deemed “Too Big to Fail.” One month on and I realize I need to delve into more specifics about what I meant.
What I call Rapid Digital Transformation (RDT) is where you pick a process, any process and you digitally enable that.
I based this on a number of data points supporting my thesis that Digital Transformations fail more often than they succeed. That remains true well into the age of COVID19. Further to the point we now need banks to be digital more than ever. Just one of the many quotes I used in that paper to drive the point home:
“61% of banks worldwide are in “digital deadlock” according to IDC’ research. Although nearly 100% of banks acknowledge the need for digital transformation, “
If you need to better understand these dynamics, now is a good time to go back and review my Medium Blog sited above.
What I want to do today is guide you on HOW to get that one process digital. I don’t want to be pedantic but let’s be sure we mean Real Digital !
Digitize: “convert (pictures or sound) into a digital form that can be processed by a computer.” Wikipedia 2020
I want us to go one further.
I want Digital to mean “enter once, use many”.
How many times have we all entered our address, our names, our phone number and the list goes on and on… I want to suggest that we focus on this simple goal:
All Data is Entered Once.
I had a personal example of this on the July 4th weekend as I was looking at my own personal cash position, I had retrieved data from 7 different websites and put it into the Excel sheet I track things on. I used to use Mint but found it too cumbersome. I know that Microsoft just added a Plaid API to do this into Excel. But that requires my Microsoft login which I have tried to reset for the past year with no success. But I digress…
I have been working in and around bank technology for about 20 years. I have been in innovation or startup roles for most of those 20 years and I am sad to say the amount of work I and others have put into Digitizing Banks is not commensurate with the actual progress in modernizing banks. My particular expertise is more around commercial banking than retail, but I have worked on both and seen fits and starts of progress.
It is not all doom and gloom, not at all. Let me take a moment and write about the Good News:
Open Banking / APIs
- Fintechs like Stripe, Plaid, Modern Treasury and others that are delivering well documented, easy to implement APIs.
- Banks have embraced APIs too with many hosting their own API portal
- You can honestly say Open Banking is a thing.
Mobile Banking
- Almost every bank and credit union has a mobile app
- Yes, there is a bell curve of quality and features but any every bank has one now.
P2P Payments
- Banks actually lead in P2P payments in the US as pointed out by Ron Shevlin in his excellent Forbes article “Venmo Versus Zelle: “Who’s Winning The P2P Payments War?” source: Forbes on-line February 11, 2019.
- And Ron also points out that the Bank consortium Zelle is moving up the leaderboard for B2B payments.
So yes, banks move slow, but let’s not forget they can innovate and do innovate when they need to for regulatory compliance OR a drastic cost reduction via efficiency OR a boost to revenue. So banks need to be forced to change.
Having sold to banks for years the old cliché about what to sell applies here:
Sell a painkiller, not a vitamin!
Sure we should take vitamins, but we are too busy we will wait until we are actually sick. The net is don’t pick a process that is OK, pick one that is truly BROKEN ! Like so broken the bank limits the number of deals it does, or the bank hires 3–4 extra people just to keep it going.
Pick a Process, Any Process
Back to the issue at hand. How does a banker GET STARTED? You need to go digital or do digital or be digital, but where to start? And I know it is overused, but let’s go with
Nike’s “Just Do It.”
Let’s look at on-boarding as a good spot to start since on-boarding is literally where a customer starts with the bank. What does on-boarding entail, or the better question, what does on-boarding NOT entail. It needs to be noted for all the talk in 2019 about customer on-boarding most banks on-boarding is far from Digital.
The bank knows very little about the applicant at the beginning, so they need to verify quite a bit, like who is this person, how is their credit, what is their income, do they have assets and how many/much? We know this information all exists but where?
Everywhere is the answer and not everyone has easy to us APIs yet, so there is quite a bit of work to do.
• Identity verification services
• Credit bureau checks
• Behavioral Scorecards
• Income verification service
• Expense validation
• Property valuation
• Asset valuation
Here is a diagram from my friends at Cloudcase showing how you could digitize on-boarding:
Yes, it is a lot of steps with lots of touchpoints. This is what Cloudcase solves for with their solution.
They pull all of the documents, data and processes together and orchestrate a better answer. Nothing is “automagical” but this seems close actually.
Full Disclosure: I am a paid consultant for Cloudcase and a huge fan of their DX approach.
What about other processes besides on-boarding, sure why not? Let’s look at this list of Corporate/B2B Bank processes here:
All of these processes are likely a motley mix of People, Process and Data. Wouldn’t it be great to optimize one after another until your bank is actually more digital than not. But as I have noted you need to pick one and get started.
How would you pick one? I would recommend the same give/take process I have used to decide on how to drive innovation in a large company over the years. This “recipe” requires 5 ingredients:
- Urgency: Is there urgency around fixing it? Urgency at banks comes from only 3 drivers: 1. Compliance 2. Revenue or 3. Cost Reduction.
- Champion: Is there a digital leaning champion in the department to lead or at least cheer on the project?
- Broken: Is the process “broken” enough to warrant needing a digital fix. Pro Tip: Look for lots of complexity and human touch points.
- Budget: Is there budget for a digital project and who holds the “checkbook” for it?
- IT: Do you need IT support to do it and are they likely to be available?
Looking at a process from the commercial bank list above, let’s say you pick Commercial Real Estate loans. As a multi-party and old school process we can assume it has enough complexity to warrant a change. Talking to the team involved in it will likely confirm it is broken in its’ current setup. So, numbers 1 and 3 are likely good to go. Complex processes are almost always broken and you can likely do a cost reduction spreadsheet to cover the transformation cost justification. That leaves 2 a digital champion, 4 budget and 5 IT support as the open questions to answer.
I would advise here to not discount digital champions out of hand, they can come from surprising people of all ages and backgrounds. Contrary to what millennials tell us, they are not the only digital champions in the bank. And the same on budget, don’t presume you need to find a line item in a budget labeled Digital Transformation. These budget items can be disguised as software upgrades, personnel hires and even just annual adjustments.
Side note on budgets: There is a “joke” with some truth at banks about: They pay annual maintenance on an old HP 3000 computer and tell everyone to not unplug it. When asked what it does, the answer goes “We don’t know, but just in case it runs payroll or the ATM network, we keep it running.” Like all jokes about banks, there is some truth in this.
IT support is the trickiest of the needed ingredients for your Digital soup. Just because they say NO WAY or not this year or…..<insert excuse here> does not mean it won’t get done. Maybe you outsource it. When your IT team knows they have competition, they might get on board quickly. Also, before you ask, be sure you have been building a bridge to IT all along. It never hurts to have friends in IT.
Now think of your own list of bank processes you are dying to fix. I am confident you have one that has the 5 needed ingredients so you can digitally transform at least one process and then another and another and voila, suddenly your bank is more digital than you thought it could be.
