How to build your digital banking strategy

It’s no secret that financial institutions need to offer a digital banking experience to their customers in order to compete these days. This guide will take you through the things you should consider to create a digital strategy you can bank on.

Most of us would rather go online than wait in line to do our banking. No wonder banks are in a race to create new digital solutions. They 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 like the age-old chicken-or-egg conundrum, it doesn’t really matter which came first: the tech wizardry that lets financial institutions 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 greater incentive to innovate and more opportunities to stay competitive.

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

If you plan to launch a digital banking solution—whether as a new fintech service or as part of an established financial institution—it pays to understand the challenges that come with the opportunities. In this guide, we’ll highlight some common pitfalls and offer advice on how to preempt them.

Understanding customer expectations

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 online retail banking success. These include the ability to deftly implement new technologies and a hyperfocus on the online customer banking experience. McKinsey also found that banks with better overall customer satisfaction ratings enjoy much higher rates of new account applications from existing customers. In fact, customers who self-identify as “highly satisfied” are 2.5 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. It’s all about seamless access and personalization.

Commenting on a study about customer engagement, Jennifer White, senior consultant of banking intelligence for J.D. Power, explains: “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 digital disruption has certainly exposed the limitations of brick-and-mortar banking, especially in the area of customer engagement. Disjointed and product-driven, the traditional banking model results in silos. And that’s 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 all of the separate products and services they can get through a brick-and-mortar bank, but as an integrated set of digital offerings. The demand is to be able to quickly and easily access services and carry 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

Getting started with a plan for digital banking

If you’re ready to get in on the digital banking boom, here are some points to consider.

Set clear and measurable goals.

Three good examples are:

  • Make it easy for everyone to open an account online and then track your conversion rates
  • Improve the customer experience at every opportunity and monitor engagement rates; and
  • Aim for $100 million in collective deposits (or whatever amount is realistic for your business) each year for five years.
Identify your executive champions.

When one full-service regional bank unveiled its internet banking service, the rollout was very successful in large part because three high-profile stakeholders championed the initiative. If you want to shore up support for your endeavor, begin by rallying your management team and members of your board. Make sure they understand your vision and buy into your strategy. Then leverage their enthusiasm throughout the planning and execution stages.

Anticipate your main challenges.

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

  • Maintaining 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 touchpoints so that you can reinforce and build on customer loyalty.
  • Predicting cost structures. Even though digital banks tend to have a cost structure roughly 60% lower than that of traditional banks, it’s still imperative to predict how much you’ll have to spend on operational costs.
  • Overcoming internal skepticism. Be prepared for the naysayers who may be entrenched in the old ways of doing things. Share the data on why digital banking is a major disruption to the financial services industry and a great opportunity. Invite them into conversations around strategy. You may not win over everyone, but open communication should increase your chances of convincing more than a few critics. This would also be a great opportunity to enlist the support of your executive champions.
  • Pacing 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.
  • Managing fraud and risk. Fraud prevention is more than a check-the-box item. This holds true whether the compliance process is virtual or in-person. Rolling out your digital solution is a great time to update your in-person experience 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 to scale

You can grow your digital business effectively, but only if you scale your efficiencies accordingly. 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 strategy:

Prioritize risk 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 onboarding and fraud monitoring as compliance add-ons, make them a central part of your overall plan.

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.

Create a seamless and secure digital onboarding KYC process.

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

Adopt flexible technology infrastructure and management processes.

Strive for a solution that’s flexible and will allow 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 to help you detect unusual behaviors that might indicate fraud risks. These profiles will also make it easier to personalize product recommendations and conduct a faster, more precise credit decisioning process, including auto-credit decisioning.

Optimize your costs.

Digital onboarding in banking requires an investment in more agile technology that will advance and protect your business. To manage fraud and risk, for instance, you could build additional tools, but it may be more efficient and cost-effective to buy that part of your solution. Partnering with an IDP vendor will connect you with experts in fraud prevention and help you save on long-term operating costs.

Stay true to your brand.

Is your brand well-established? If so, build on any brand loyalty when rolling out your digital solution. Take the case of one regional bank. Founded in 1895, it developed a distinctive brand rooted in superior service. Today the bank operates almost 20 full-service community branches in 11 counties. Its internet banking service, a solution for 21st-century customers, reinforces a promise made more than a century ago. And it’s a promise that today’s very satisfied digital banking customers still appreciate.

Alloy makes digital banking less risky.

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