1、2024The Digital Transformation of Financial InstitutionsTOMORROWS BANKINGFacing the digital era of financial servicesDigital transformation pitfalls for financialinstitutions to avoid7 steps for financial institutions to begin oraccelerate digital transformationTechnologies and the future of financi

2、al services:Building digital experiences that customers love01030204TABLE OF CONTENTSTOMORROWS BANKINGThe Digital Transformation of Financial Institutionsx x01x xUnchallenged for so many years,the banking industry today faces an unprecedented task:Tech,retail and fintech are all moving deeper into b

3、anking and changing everything from products to customer expectations.While competition has been increasing,these firms do have certain advantages over competitors:Banks are generally considered trustworthy,regardless of income,age,and gender of the customer.And overall levels of trust in the bankin

4、g industry have been trending upwards over the past decade,according to recent data.People still want face-to-face interactions with their financial institutions,but they also need their digital interactions to be intuitive,convenient,and integrated with their financial life.Financial institutions n

5、eed to ensure that their digital services stand up to competition and disruption in the industry,especially when new competitors are seeing massive growth.For example,in 2024,Chime now banks more than 38 million customers.People are turning to different types of apps and services to support their ef

6、forts to grow their savings,get a loan,make investments,and more.According to Plaids research,the average individual reports using between three to four fintech apps.Moreover,90%of consumers also report that fintech has helped them in some way saving them time or money,giving them more control,reduc

7、ing fear,or helping them recover from a financial misstep.FACING THE DIGITAL ERA OFFINANCIAL SERVICES01TOMORROWS BANKINGThe Digital Transformation of Financial Institutionsx x88%of Americans managetheir finances digitally01x x02TOMORROWS BANKINGThe Digital Transformation of Financial Institutionsx x

8、“Were not going back to the old days-westill see millions of customers who use ourbranches,but theyre using our branchesdifferently.And so theyre coming for advice.Theyre coming for complicated financialplans.Its a different experience,andcustomers are shifting more and more oftheir transactions to

9、our digital channels.”Allison Beer,CPO&Head of Digital,ChaseFintechs,which apply modern technology and user experiences to financial services,are filling the gaps traditionally overlooked by financial institutions.Proven digital transformation strategies include improving the onboarding flow,automat

10、ing the processes of depositing and borrowing funds,reimagining overdraft protection and early access to paychecks,and eliminating data silos.In this whitepaper,we explore the opportunity presented by digital transformation,key challenges financial institutions face,a step-by-step strategy to tackle

11、 those issues,and the technologies driving digital transformation into tomorrow.01x x03TOMORROWS BANKINGThe Digital Transformation of Financial Institutionsx xDigital transformation means prioritizingthe customer experience From account opening to card issuance to lending,each customerjourney includ

12、es multiple touchpoints via online,mobile,in-branch,andover the phone-where banks can leverage new technologies and datato create better,more personalized experiences.Digital transformation is not merely the act of creating new digitalproducts and services;it also means revamping existing legacy sys

13、temsby partnering with third-party applications to layer in new services.Forexample,online lending marketplace LendingTree partnered with Plaidto extend into financial services beyond lending.With Plaid,LendingTreewas able to link customers external accounts to get a complete pictureof their financi

14、al data,which made it possible for them to offerpersonalized financial services that boosted engagement while givingusers a more holistic view of their finances.“When you build a business,you begin with thecustomer-the north star of the business has tobe addressing customer problems We spoke tomore

15、than 10,000 consumers to understand theirpain points and how we can address them.Weveused data,design,and engineering,along withcompetencies in risk management,marketing,operations,etc.-but the real magic is bringingall those capabilities together to make thingssimple,transparent,and valuable for co

16、nsumers.”Harit Talwar,Chairman of ConsumerBusiness at Marcus,Goldman Sachs01x xFront-endBack-endConsistent CX across all channelsPersonalized financial insightsSeamless mobile and online bankingNew solutions that exceedexpectationsConnected data and systemsAutomated processesCloud-based infrastructu

17、reArtificial intelligence and machinelearning04TOMORROWS BANKINGThe Digital Transformation of Financial Institutionsx xThe best customer journeys are built onstrong foundationsFinancial institutions stand out by creating an omnichannel customerexperience,from web and mobile to the call center and br

18、anch,where acustomer can begin an interaction in one channel and complete itseamlessly in another.Digital transformation on theback-end means eliminatingdata silos and automatingdigital processes.AI,machinelearning,and cloud-basedsystems can addresscustomer needs while helpingthe bank streamlineoper

19、ations and reconciliationactivities around its offerings.The result is repeatable,optimized processes thatbenefit the customer andenable the back office to scale.01x xTo keep your digital transformation efforts on track,avoid thesecommon pitfalls.Playing the waiting game.Businesses that fix it befor

20、e it breaks gainmuch more from their digital transformation efforts.While it may seemappealing to wait and see if there is truly a problem to fix before takingaction,companies that start earlier can generate significantly more valueover a three-year period.Failing slowly.With todays cloud-based tech

21、nologies,its faster andeasier than ever to launch new products and services.Being more agileand striving to launch sooner gives companies the chance to quicklyiterate and improve features,or dismiss offers that seem worthwhile butin effect do not resonate with customers.Not fixing high-friction proc

22、esses.Legally mandated procedures likeKYC and AML require a strong system in place that can monitor andevaluate new customers.Frequently,customers are asked to embark onsecondary customer journeys to manually collect and submit paperforms for their applications.The result is high friction in steps l

23、ikeaccount opening and loan applications.Transforming the obsolete.Increasing efficiency and reducing costs arecertainly important,but digital transformation is chiefly about creatingnew offerings and experiences that improve upon existing technologiesto maximize efficiency and customer centricity.K

24、eeping data silos.In the age of Amazon,where customers getpersonalized products and services,siloed data still needs to bewrangled.And it must,if the provider is competing against onlineexperiences like Netflix recommendations,for example.05TOMORROWS BANKINGThe Digital Transformation of Financial In

25、stitutionsx xDIGITAL TRANSFORMATIONPITFALLS FOR FINANCIALINSTITUTIONS TO AVOID01x x06TOMORROWS BANKINGThe Digital Transformation of Financial Institutionsx xFintechs and financial institutions must have a clear picture of who theircustomers are and how they can serve them.Its not just legacytechnolo

26、gy that can get in the way of being digital-its also legacythinking.Only competing with other financial institutions.When evaluatingwho to benchmark themselves against,banks naturally look at otherbanks.Customers,on the other hand,do not.Theyre more likely tocompare their experience using digital ba

27、nking platforms to otherdigital platforms such as Amazon or Google.Only responding to customers current needs.Meeting the needs ofthe existing customer base is vital for retention.At the same time,innovating for the future of banking requires looking outside thecustomer base as well,and building for

28、 what customers may wantdown the line.Slowing down.An important factor to keep in mind is that change isconstant,meaning digital transformation never ends.When a financialinstitution starts to slow their efforts is when theyre most vulnerable todisruption,no matter how much theyve already achieved.S

29、ource:Whats Going On In Banking 2023,Cornerstone Advisors01x xDigital transformation can take many different shapes,and mostfinancial institutions are already digitally transforming in some respect.The following steps will help accelerate these efforts to generate thegreatest impact.07TOMORROWS BANK

30、INGThe Digital Transformation of Financial Institutionsx x7 STEPS FOR FINANCIALINSTITUTIONS TO BEGINOR ACCELERATE DIGITALTRANSFORMATIONSource:Whats Going On In Banking 2023,Cornerstone Advisors01x xWells Fargos Head of Technology Saul Van Beurden oversees 40,000 techemployees and a$9 billion budget.

31、To set the innovation strategy for theentire enterprise,Saul breaks it down into six items,known as the“6Sstrategy”-skills,security,stability,scalability,speed,and satisfaction.Bykeeping this strategy simple yet effective,Saul makes it easy for employeesto get on board and keep digital transformatio

32、n efforts high priority.2.Invest in the right data platformsHaving access to real-time,relevant data enables you to create the services,apps,and experiences that keep customers engaged.Older systems thatwere built without data integration in mind effectively keep data in silos.When relevant data exi

33、sts in a siloed system-such as within an applicationthat nobody outside a certain department has access to-it cant beleveraged to power digital transformation.To unlock siloed data,financial institutions should invest in centralized“data linking”systems that act as an overlay to connect siloed data.

34、Thesesystems pull data from many disparate sources into a single,unifiedplatform,making it usable for insights and actions.To create data linkingsystems,financial institutions can either build them internally or work witha vendor like SnowFlake Data Cloud.3.Forge the right partnershipsPartnering wit

35、h platforms like Plaid can give financial institutions access toan open ecosystem of financial data,allowing them to build apps andservices that deliver the new experiences their customers crave.08TOMORROWS BANKINGThe Digital Transformation of Financial Institutionsx x1.Get leadership buy-inDigital

36、transformation requires a cultural revamp that leads to new,innovative ways of thinking.To gain buy-in across the business,leadership needs a clear and concise digital transformation strategy with:1)focus on long-term ROI and the creation of a lasting competitiveadvantage,and 2)plan to ensure the co

37、mpany can thrive throughthe transformation.01x x09TOMORROWS BANKINGThe Digital Transformation of Financial Institutionsx xMarketing and co-branded partnerships can also fuel digitaltransformation.When Goldman Sachs decided to transform into a mainstreet bank,it needed to scale quickly to replace los

38、t revenue.Goingdirectly to customers can only grow so fast,so the company decided topursue a parallel partnership strategy by powering financial services forpopular consumer brands.Powering the Apple Card,for example,gaveMarcus the experience of both underwriting via API partners and managinga custo

39、mer debt portfolio led by the worlds strongest tech brand.4.Recruit the right peopleRecruiting the right talent starts with creating the right culture.Companiesthat succeed in recruiting talent embrace a culture of innovation.Evenfinancial institutions that know they want to hire innovative talent c

40、an findit challenging to do so.In fact,50%of financial institutions say it is eitherdifficult or very difficult to find IT talent,while only 12%say its easy.To helpfill the tech talent gap,financial institutions can create a culture ofinnovation by making innovation a top priority and promoting it t

41、hroughrecruitment,content,and PR efforts.Special incentives work to recruit tech workers as well.First Republic Bankoffers to pay off their employees student loans,for example.An evensimpler solution is to offer a high salary that competes with companies likeGoogle and Amazon.Source:The Evident AI T

42、alent Report 202401x x10TOMORROWS BANKINGThe Digital Transformation of Financial Institutionsx x5.Identify and prioritize gaps where digitaltransformation is neededOnce a financial institution obtains the talent they need,they can identifygaps to fill with digital transformation.In practice,this mea

43、ns analyzinginternal data to identify where customers are getting stuck and thenresearching the market forces and industry disruptors that address thesepain points.Finding and eliminating friction in traditionally sticky areas,such as newaccount opening and funding,will smooth out the customer journ

44、ey whileaccommodating the modern attention span,which is only only eightseconds.For example,Chime,a digital-first bank,decreased the time ittakes to open a new account down to 15 minutes,helping grow theircustomer base to roughly the same size as US Bank in just a few years.The customer acquisition

45、cost(CAC)for banks averages$925 per newcustomer.The easier it is to fund new accounts,the more ROI the bankwill get on that upfront CAC.For example,microdeposits can take up tofive business days,while instant verification via Plaid Link takes as little asseven seconds.Plus,by establishing a connecti

46、on with the customersoutside financial accounts,banks can do things like confirm the usersidentity and verify the balance of their outside accounts,smoothing the CXwhile decreasing fraud and increasing revenue.6.Map new solutions according to customerneedsCustomer data can be used to recommend thing

47、s like loan offers,debtconsolidation,savings,and investments.It can also be used to createpersonal financial management tools that give users deeper insights onareas like growing wealth and paying off debt.For example,Bank ofAmericas virtual financial assistant Erica offers personalized insightsthro

48、ugh the banks mobile app,and tools that include spending snapshots,viewing balances across all accounts,refund confirmation,recurringcharges monitoring,and bill reminders.01x x11TOMORROWS BANKINGThe Digital Transformation of Financial Institutionsx x7.Track your success and keep transformingTo know

49、if your new solutions are making an impact,you need to selectand track several KPIs.According to Gartner,digital transformationinitiatives should track 5-9 KPIs,and they should be kept to simple,impactful metrics that can influence business decision making.For a new financial solution,KPIs could inc

50、lude user adoption rate,reduced time to fund new accounts,customer experience survey results,and money saved.KPIs will also vary across institutions,with each usingtheir own metrics to measure their own success,and across the stagesof integration.For example,for an institution launching a robo-advis

51、or,an initial metric would be user adoption rate,which would later changeto retention and time spent on the app.Digital transformation requires constant assessments of customerneeds.This includes implementing interventions for improving responseto crises,and measures for improving information system

52、s such asanalytics,forecasting,and changing risk models.This helps build moreaccurate customer personas and improve personalization engines.Financial institutions can commit to an operational model with continualimprovement built into the core strategy.Transformation is not a singlestep but an ongoi

53、ng process of adjusting and creating services to bestsuit customers.A great example of a digital transformation solution comes from RBC.Five years before the pandemic,RBC committed to digital transformationacross their entire service catalog.The commitment paid off,particularlywhen the pandemic forc

54、ed their customers to rely entirely on digitalbanking channels.As a result of their digital transformation efforts,RBCcreated the NOMI online platform,an AI-based assistant that offersinsights,budgeting,savings opportunities,and a Q&A chatbot.NOMI hasbecome a valuable tool for customers to better un

55、derstand theirfinances,and has led them to spend more time engaging with the bank,especially during the pandemic.01x x12TOMORROWS BANKINGThe Digital Transformation of Financial Institutionsx xStaff a team to build and maintain a solution internallyHire an implementation partner for the buildPartner

56、with a vendor to build it allWhen going through the steps above,financial institutions will typicallyend up considering three options:1.2.3.The right answer will depend on your resources as well as demands forcost,efficiency,and speed.A large financial institution may have therecruiting power to sta

57、ff its own technical teams to build and maintainsolutions,while a smaller institution may not.For midsize institutions,itcould end up being a mix of hiring and partnering to reach the rightequilibrium.There are also benefits to hiring a vendor to quickly create awhite label solution that meets an im

58、mediate need,as opposed to staffingan internal team that can take much longer when starting from scratch.To buy,partner,or build?“Its all about embedding financial solutionsat the point in time of need for a customer.Embedding all the other solutions that arenecessary,as opposed to just giving themt

59、he advice and then letting the customerfigure out over time what action to take.”Eric Sager,COO,Plaid01x xNew solutions that arise from digital transformation efforts can come fromanywhere.And some are making a bigger splash in the financial servicesindustry than others,including APIs,cloud,and AI.1

60、3TOMORROWS BANKINGThe Digital Transformation of Financial Institutionsx xTECHNOLOGIES AND THEFUTURE OF FINANCIALSERVICES:BUILDING DIGITALEXPERIENCES THATCUSTOMERS LOVEDigitalsolutionsAPIsCloudAIApplicationProgrammingInterfaces(APIs)Today,APIs create asecure way to exchangefinancial data betweenfinan

61、cial accounts andboth internal andexternal applications.APIs make it easier tocreate solutions formultiple use cases,suchas new account funding,personal financialmanagement,wealthmanagement,loanverification,and more.01x xCloud Access to customer financial data across every part of the customerjourne

62、y helps to modernize infrastructure and create a consistentomnichannel customer experience.To achieve the flexibility they need fordigital transformation,CIOs are increasingly shifting their operations topublic and private clouds.However,lift-and-shift services that simply migrate legacy application

63、s tocloud-based servers are not necessarily the answer.With successful implementations that take advantage of cloudtechnologies,financial institutions can expect to go to market faster withnew digital products and ensure that they are secure,scalable,and fastenough to meet growing demands.TOMORROWS

64、BANKINGThe Digital Transformation of Financial Institutionsx x14“Consumers will growingly want to havemore visibility and transparency into whatinformation is being shared,and where,and then have the ability to do somethingeasily about that if they dont agree.”Gareth Gaston,EVP&Chief DigitalOfficer

65、of Enterprise Platforms&Capabilities,US BankWith open APIs,banks create a safer way for customers to utilize theirfinancial data as they see fit-as well as help banks partner with vendorswho can build new apps and services.Plaid Exchange,for example,is anopen-API platform that makes it easy for bank

66、s to implement safe externalAPIs while helping their customers do more with their financial data.01x xArtificial Intelligence(AI)AI has numerous applications within the financial services industry,including chat bot assistants,fraudulent activity detectors,and back-end task automators.It s estimated

67、 that for the global banking industry,AI may be able to add$1 trillion in additional value every year.AI also has the potential to impact the firm s relationship with its customers.It can help with improving customer service through tools like chat bots but also helps companies learn more about thei

68、r customers through data.For example,BlackRock has opened a research center dedicated to AI.A leader in the investment space,BlackRock will use the center to explore how employee productivity can be increased and how it can improve customer interactions through technology.15TOMORROWS BANKINGThe Digi

69、tal Transformation of Financial Institutionsx xSource:Whats Going On In Banking 2023,Cornerstone Advisors01x x16TOMORROWS BANKINGThe Digital Transformation of Financial Institutionsx xWith an array of powerful technologies,financial institutions have a massiveopportunity to build the seamless digita

70、l experiences that customersexpect.By breaking data silos and emulating customer experiences outsidethe industry,banking experiences can be as frictionless and personalized asthe customer experiences pioneered by Netflix and Amazon.Likewise,by implementing digital transformation best practices,incum

71、bentfinancial institutions can stave off challenger banks,fintechs,and big techcompanies acquiring their customers,taking market share,and siphoningoff their revenue.Financial institutions can create new experiences thatcustomers love.Thats an important path forward to retain existingcustomers and gain new ones in an industry undergoing constant change.Final thoughts