How to build your digital banking strategy

It’s no secret that banks, fintechs, and credit unions need to offer an exceptional digital banking experience to their customers in order to compete. Let’s explore considerations you need to make as you’re creating a digital strategy that you can bank on.

Most of us would rather go online than wait in line to do our banking. No wonder banks, fintechs, and credit unions are in a race to create new digital solutions. You want to make it easy for a person to open an account and use banking services — without ever having to set foot in a physical branch. But today’s customers don’t just want speed and convenience. They also want a financial services provider who knows how to personalize the experience and serve up products that fit their individual needs.

And like the age-old chicken-or-egg conundrum, it doesn’t really matter which came first: the tech wizardry that lets you offer shiny new banking apps, or the consumer’s desire for more and better banking features. The point is, since digital solutions enhance the customer experience, financial institutions have a greater incentive to innovate their products and more opportunities to stay competitive.

Unless, of course, you don’t have a well-thought-out digital banking strategy.

Whether you are a new fintech service or part of an established financial institution, if you plan to launch a digital banking solution, you need to understand the challenges that come with these opportunities. In this guide, we’ll highlight some common pitfalls in digital banking and offer advice on how you can sidestep these potential issues.

What do customers want from their banking experience?

Let’s begin with two customer-centric truths for some inspiration:

1. The customer experience is king.

According to research from McKinsey, several factors shape the success of online retail banking. These include:

  • The ability to deftly implement new technologies

  • A hyperfocus on the online customer banking experience

McKinsey also found that banks with better customer satisfaction ratings overall enjoy much higher rates of new account applications from existing customers. In fact, customers who self-identify as “highly satisfied” are two and a half times more likely to purchase additional banking products or open new accounts compared to those who describe themselves as “satisfied.”

The upshot? Keep delighting customers with positive digital experiences, and they’ll seek out more of your financial products and services.

2. A successful digital banking strategy is all about seamless access and personalization.

In a study about customer engagement, senior consultant of banking intelligence for J.D. Power, Jennifer White, explained that, “A customer’s definition of what support from their retail bank looks like is changing rapidly as we enter a new economic cycle and move further along the digital adoption curve.”

The traditional banking model often results in siloed engagement — the exact opposite of what today’s customers want or need. A strong digital banking solution should centralize access to products and services, provide immediate resolutions to any problems or glitches, and strive for personalization.

Customers expect that all of the separate products and services available through in-branch services will also be available in an integrated digital offering. The demand is to quickly and easily access services, carrying out basic activities such as:

  • Opening an online consumer account

  • Managing debit card activities

  • Applying for a mortgage and other consumer loans

  • Ordering checks for checking accounts

Customers want to onboard quickly, access what they need as fast as possible, and move seamlessly between services, and even different platforms.

Check out our eBook: Crafting a hyper-personalized customer experience

Getting started with a digital banking strategy

As you’re honing in on your digital banking strategy, here are some points to consider:

1. Set clear and measurable goals.

Three good examples are:

  • Make it easy for everyone to open an account online, then track your conversion rates.

  • Improve the customer experience at every opportunity and monitor engagement rates.

  • Aim for $100 million in collective deposits (or whatever amount is realistic for your business) each year for five years.

2. Identify your executive champions.

Your rollout will be successful if your high-profile stakeholders champion the initiative.

If you want to shore up support for your endeavor, begin by rallying your management team and board members. Make sure they understand your vision and buy into your strategy. Then leverage their enthusiasm throughout the planning and execution stages.

3. Anticipate your main challenges.

With foresight and careful planning, you can overcome even the biggest challenges. Here are some common hurdles — and how to move past them:

  • Maintain your brand throughout the customer experience. Brand loyalty is still a huge factor in the consumer decision-making process, even for banking. If your brand has equity, align all your touch points so that you can reinforce and build on customer loyalty.

  • Predict cost structures. Even though digital banks tend to have a cost structure approximately 60% lower than that of traditional banks, it’s still imperative to predict how much you’ll have to spend on operational costs.

  • Overcome internal skepticism. Be prepared for the naysayers who may be entrenched in old processes and habits. Share the data on why digital banking is a major disruption to the financial services industry and highlight the reasons it is a great opportunity. Invite them into strategy conversations. You may not win over everyone, but open communication should increase your chances of convincing more than a few critics. This is also another opportunity to enlist the support of your executive champions.

  • Pace your business growth. The demand for digital banking is increasing at a fast rate. Create a plan that will allow your digital banking offerings to scale as your business grows.

  • Manage fraud and compliance risk. Fraud prevention and compliance risk management are more than just check-the-box items. This holds true whether the compliance process is virtual or in-person. Rolling out your digital banking solution is a great time to update your in-branch services and standardize your onboarding processes across channels. As you plan, think beyond compliance and imagine a continuum that reinforces a seamless, institution-wide approach to secure and convenient onboarding.

Build your digital banking solutions with the ability to scale

You can grow your digital business effectively, but only if you are able to scale efficiently. Your solution should allow you to do more than respond to customer preferences. You want to get ahead and anticipate their needs and wants. You also want to make sure you’re positioning your business for steady, sustainable growth.

Here are some specific measures to incorporate into your digital banking strategy:

1. Prioritize risk mitigation and fraud prevention.

If you don’t know how to identify fraud risks and other red flags, you’ll be putting your business in jeopardy right from the start. Instead of seeing KYC regulations, KYB regulations, and fraud monitoring as compliance add-ons, make them centralized components of your product plan.

It is possible to turn compliance into a competitive edge. Learn how it’s done.

2. Continually enhance the customer experience.

Use your digital tools to reimagine the customer experience and work backward from what your customers expect. Rather than planning for incremental improvements or reactive fixes, operate from a proactive position that values both front-end services and back-end efficiencies.

3. Create seamless, secure AML, KYC, and KYB processes.

Incorporate an automated digital identity verification method into your solution. By automating your approach, you can streamline checkpoints, significantly decrease manual reviews, and deliver a better experience to every customer. You’ll be able to achieve regulatory compliance without slowing down your customer conversion rate.

Learn how an Identity Risk Solution can ease the burden of digital identity verification during customer onboarding.

4. Adopt flexible technology infrastructure and management processes.

Strive for a flexible solution that allows you to keep up with the growing demand for digital services. Your data and technology infrastructure should enable a holistic view of each customer. Use your expanded data sets to create customer profiles that help you detect unusual behaviors and indicate potential fraud risks.

Ongoing monitoring gives you a clearer view of your customers’ activity to provide an evolving view of their identity and risks.

These profiles also make it easier to personalize product recommendations and conduct faster, more precise credit underwriting processes that include auto-credit decisioning.

Credit underwriting is a balancing act. Learn how you can optimize your processes to confidently extend personalized credit offerings.

5. Optimize your costs.

Digital banking requires an investment in more agile technology that will advance and protect your business. While you could build these tools in-house, partnering with trusted third-party vendors can be faster and more cost-effective. When you buy instead of build, you can focus on developing your core product offerings while leveraging the expertise of specialized providers.

Partnering with a trustworthy vendor can help you:

  • Integrate and orchestrate data from multiple sources

  • Accelerate your time to market

  • Reduce your long-term operating costs

  • Access the advice of industry experts in various domains

For instance, when it comes to managing fraud, using an Identity Risk Solution like Alloy eliminates the burden of manually adding new data integration builds. Alloy’s easy-to-use software development kit (SDK) keeps engineering costs low while fostering a developer environment that supports more agile, iterative workflow testing. At the same time, Alloy reduces the time spent on manual reviews and boosts customer conversion rates.

Partnering with vendors in domains such as data analytics, machine learning (ML), customer experience design, or fintech enablement can similarly expand your offerings without having to build extensive in-house capabilities. By focusing on your competitive differentiators and leaving the builds to fintech partners, you can increase the agility and effectiveness of your digital banking solution.

Learn how Grasshopper Bank used Alloy to create 150+ iterations of their fraud decisioning workflow — reducing manual reviews by 58%.

6. Stay true to your brand.

Is your brand well-established? If so, build on that brand loyalty when rolling out your digital banking solution. A key aspect of maintaining customer trust and delivering a superior experience is ensuring that your digital banking services are protected from fraud in a seamless, unobtrusive way.

When Elements Financial Credit Union started working with Alloy, they not only saw a 40% increase in auto-approval rate for new members but also strengthened their fraud defenses without compromising the user experience. By leveraging the same decisioning standards for existing members adding on new accounts and new applicants, Elements Financial Credit Union meets their members’ expectations of high-quality, secure services.

Live Oak Bank also used Alloy to help streamline their services into one centralized platform and expand their small-dollar lending portfolio to more customers. With Alloy’s seamless fraud protection, Live Oak not only decreased their investigation time by 30%, they also saw a 27% reduction in fraud year over year. This keeps all customers, new or preexisting, much safer without adding friction to the banking process.

When your digital banking strategy helps drive innovative services that provide customers with what they really want and need, you can continue to deliver on your brand’s promise. And the brand loyalty you earn along the way? It’s yours to take to the bank.

Alloy is an end-to-end, omnichannel Identity Risk Solution that helps you manage fraud, credit, and compliance risks throughout the customer lifecycle.

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