Digital evolution in consumer banking

Digital evolution in consumer banking 1. Executive Summary In the past, banks interacted with customers and prospects in a limited number of ways. There was the branch, the phone, the ATM and the occasional mailed letter. In today’s fast-paced world of smartphones and connected devices, banks must be prepared to interact with anyone, anywhere and at any time.

To succeed in this digital age, banks must ensure the customer’s user experience is seamless, modern and transparent. Each interaction point must be consistent in look and feel, and offer the right tools, features and products for that specific customer at that specific place and time. The ability to successfully create such an experience is known as digital engagement, and it allows a bank the opportunity to re-imagine what the customer journey can be. Enabled by modern technology, a robust digital engagement strategy allows financial institutions to make previously unthinkable improvements to the way customers bank, ultimately resulting in increased wallet share and more profitable relationships. 2. The Building Blocks of a Digital Engagement Strategy Effective digital engagement starts with a thorough understanding of customer behaviors and how those behaviors affect the customer’s expectations of the financial services provider. The bank must answer two fundamental questions: 1. In what digital channels do customers interact with their financial service providers today? 2. How can the bank harness these channels in a strategic, cohesive way to both improve the experience of banking and achieve business objectives? Technology will drive the answers to both of these questions. Customers expect a quick and easy experience in every interaction with their bank, whether it be online, over the telephone or in the branch. \"Speed, efficiency and seamlessness is very important to our customer base. We look at speed as a new business currency,\" said Pam Kilday, head of operations for SunTrust, a $205 billion-asset institution based in Atlanta. In today's digital marketplace, you must do all you can to engage your customers. However, simply providing a mobile app or other technology feature does not automatically ensure you are giving your customers a true digital experience or engaging with them in the right way. specialist in helping financial institutions through such digital transformations, encourages banks to go through a four-step review process before crafting their digital engagement strategy. “First, define your ambition. What is your intent? What technologies and industries will you be inspired by? Then think about the client experience that you want to create - and the banker experience that will represent the face of the brand to that client. Then consider the engagement

platforms that will enable that experience - and lastly the operational evolution necessary - the impact to your people, processes and the change required to realize your vision. This framework forces the bank to re-think what the customer relationship looks like and manage for the future with a robust, dynamic and adaptive digital engagement strategy. 3. Everything Accessible Online, In One System The ideal single platform is transparent, easy to use, and critically, linked directly to data in the bank’s core system. It is customizable and flexible, and far less prone to user error personalized experience across any channel or device, at any time. This includes her smartphone, tablet, computer, in the branch, or over the phone. 4. THE CLOUD, ARTIFICIAL INTELLIGENCE AND BLOCKCHAIN in BANKING New technologies being used in the banking and capital markets sector are bringing operational efficiencies and lowering costs for financial institutions. Of the many technologies, three major players are cloud and cloud-enabled solutions, artificial intelligence and analytics, and blockchain technology. The Cloud - Cloud and cloud-enabled solutions like Software-as-a-Service are helping firms modernize their IT and legacy infrastructures, by migrating or building new core systems into the cloud. This increases speed of adoption, agility, potential for external connections, and efficiency while also reducing fixed costs.

The cloud offers greater and more affordable computing power than existing on-site capabilities, with similar security capabilities. By integrating in- house and external data in the cloud, it enables data management and analysis on a bigger scale than previously possible. This helps companies more easily aggregate their assets and data to meet regulatory requirements and stay competitive with improved insights to drive differentiation Artificial intelligence - Machine learning (ML) and analytics are key in creating a single view of the client. By aggregating and deploying ML techniques across a client’s investment banking transactions and trading activities, banks can be sure that they are delivering the best services for what their customers need, resulting in higher levels of retention and acquisition. Embedding artificial intelligence technology into different parts of the business will streamline operations and drive financial insights and predictions. This in turn will reduce information asymmetries, helping detect fraud and potentially making markets more efficient and stable. Blockchain- Blockchain technology establishes trust and diminishes disputes with its ‘single version of the truth’. It removes the need for an intermediary and therefore reduces cost. Blockchain makes for a more streamlined and effective customer experience. Blockchain and distributed ledgers hold a lot of promise for this sector as they can bring greater transparency and significant performance enhancements when huge funds are being transferred, reducing the occurrence of fraud and errors.

5. Challenges and barriers There are several challenges when it comes to trying to implement these new technologies – let’s review the top three. First, there is the question of trust. With sensitive information, different systems that need to interact with each other, and complex data privacy rules - cyber security and data privacy are key concerns both for customers and regulators. In addition to greater protection against hacking, resilience needs to be strengthened in the case of equipment failure, power cuts or extreme weather events. With more and more banks placing their data in the cloud, a solution is to have massive data centers that are able to secure that data and quickly recover from any operational failures. A second challenge for incumbents is how to manage or update complex legacy IT systems and infrastructure, especially in capital markets where there are many bespoke front-end systems. It’s not just the systems themselves. Another challenge is to manage the expertise nee ded to maintain this outdated technology and integrate it with new digital systems Speaking of expertise, a third challenge is to attract the talent needed to implement and manage new technologies – especially in the face of competition from leading companies like Google, Amazon, and various start-ups. The nature of the workforce is also changing as younger generations are looking for more flexibility and different reward structures. The overall culture and leadership style will need to be overhauled to allow innovation and to encourage experimentation with a new ‘fail fast’ mindset.

6. Looking to the future The pace of change in the sector is unprecedented, with new players entering the market, and new regulations and technologies causing continuous disruption to the banking and capital markets ecosystem. As a result, the future is quite hard to predict. Clearly, technology will continue to evolve and with it will follow implications for the sector and its players. For example: As blockchain matures and real-time, mobile payments continue to grow, the payment ecosystem will start to look very different and previously trusted middlemen will face disintermediation – this is one technology that is likely to bring huge disruption as the number of use cases increases. With artificial intelligence and machine learning becoming more advanced, the consequences of ‘trading without traders will become more apparent as more and more processes are automated, and questions will arise about the role of human insight and customer interaction alongside these machines. Quantum computing, although still in its infancy, will bring huge leaps in computing power and will prove vital in handling the ever-increasing volumes and complexities of data that are being generated, enabling things like faster and more accurate portfolio optimization, fraud detection, and stronger cyber security. Traditional players in the industry urgently need to find ways to disrupt themselves – or else risk being disintermediated. They will need to explore new business models, identify, and partner with the FinTech players of the future, and experiment with how these new technologies can help create a stronger value proposition that will be competitive in this ever-changing landscape.