Robo-advisors, AI, big data: well-known buzzwords we are hearing again and again. Digitalization has arrived with full force in banking – and is providing financial service providers with fundamental challenges. Financial service providers must figure out how to survive the digital revolution.
The majority of Swiss banks recognize that digitalization is no longer just a trend, but a fundamental social development and one which is also necessary for the financial industry’s survival. But before our financial institutions plan such a change, some essential groundwork needs to be done in order to ensure that the digital transformation is successful and that new technological opportunities can be fully exploited. The groundwork that banks most urgently need to do involves improving customer focus, strengthening process affinity and developing organisational flexibility. Once these three fundamentals have been established and it has been ensured that they are working, the next step towards digitalization can be tackled – with the help of additional investment and know-how from external sources.
Customer focus as the top priority in banking
Futurists and experts see the future of banking in customer-specific, flexible and self-regulated service models that are driven by automated processes and artificial intelligence. In this scenario, customers of the future play a much more active role in the banking business and put together their own individual offer package that they independently manage themselves via every possible digital channel. Whether or not this vision becomes reality will only become clear in the near future. Nevertheless, this theory strongly calls into question the traditional consulting and business model used by banks. Also, in view of the threat faced from fintech companies and tech giants, which are serving up new and innovative offers, financial institutions must radically reinvent themselves, have an in-depth understanding of customers and place them uncompromisingly at the heart of all their activities – not only when it comes to banking matters, but also in relation to every life situation.
This will require a holistic approach that includes information gathering, reflection, needs analysis, issuing offers and concluding contracts, as well as customer service, via a number of different channels that generate complementary benefits. Only then will it be possible to develop a new customer experience that promotes a sustainable customer relationship. Consultants should be supported by new technological possibilities such as artificial intelligence and data analysis, so that they can carry out their core tasks in a manner that is as targeted and beneficial as possible.
A first step – digitalization of banking advisory
Regardless of whether customers will act more independently via digital channels in the future, banks’ main customer interface remains personal advisory. The first priority for transitioning to the digital era in banking is to create the necessary foundation for efficient and customer-specific support. This applies to both corporate and private customers; it actually applies to all banking segments, i.e. to private, retail and regional banks as well.
The presentation of all relevant customer information in a comprehensive manner during telephone calls, for example, is a very useful initial measure. Traditional subject-specific customer needs, such as property financing or the investment of capital, can also be addressed. The maturity of the bank’s internal processes will play a crucial role in this regard. Depending on the degree of maturity and the flexibility of the bank’s processes, selective and complementary action needs to be taken in this area first, before new digital services can be developed.
Generally speaking, however, it can be said that process management and the provision of advice need to be simplified and better adapted to the customer experience. Such measures increase efficiency, create direct customer benefits and, at the same time, create indirect brand value for the bank. Another point to address is the targeted management of and provision of support to consultants in their core activities, which enable not only the achievement of operational and administrative objectives, but also overall strategic objectives. This means deriving measures for management based on the balance sheet structure risks, for example via the targeted promotion of specific mortgage products or by specifying the design of banking products.
Digitalization in banking: a learning process that brings continuous change
In general, with these ideas for digitizing traditional banking advisory, we are increasingly delving into the world of algorithms, artificial intelligence and data science. With the help of these, banks can, little by little, use their internal information holistically and enrich it with external data, in order to monetise it via new products and services.
We thereby come a step closer to the future vision of banks that make optimal use of the new technological opportunities for their own benefit. This is, however, also associated with a learning process with regard to how technology is applied and tolerated when it is used by and with people, which must be structured and very closely monitored from the outside. This requires a wealth of skills in the fields of technology, technical architecture and end-to-end integration, as well as in the design of the customer journey and the understanding of banking. If this multi-layered coverage is secured, digitalization projects can be started in a manner that ensures that they generate acceptance and value, both from the perspective of the customers and from that of the bank internally.