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Banking, Digital Strategy                        

An ROI Model of Experience-Driven Banking in the Digital Age

The commoditization of traditional banking products has altered the playing field of banking. Banks and credit unions can no longer afford to compete solely by raising savings rates or decreasing fees. Meanwhile, banks must strategically shift from being a product-driven organization to an organization focused on customer-driven omnichannel digital experiences.


Dave Gledhill, the CIO for Singaporean bank DBS, equates the transformation in banking to the platform model most attributable to Netflix. Netflix viewers are paying for the overall experience and use of the delivery channel across a variety of devices, rather than just the individual show or movie. Just like Netflix, banks are shifting the model to a platform-based customer-driven experience, and banks that come out ahead in the race for customers will be the ones which are able to offer highly differentiated journeys and interactions over products and features.


Banks should focus on specific customer objectives and leverage their vast amounts of data to hone in on the leading, descriptive, or predictive metrics that truly deliver to those outcomes.


This paradigm change inevitably requires new ways of achieving and measuring ROI with a focus on the customer at the center. Achieving profitability targets will always remain a key foundational checkpoint; however, banks should focus on specific customer objectives and leverage their vast amounts of data to hone in on the leading, descriptive, or predictive metrics that truly deliver on those outcomes.

On the topic of ROI in digital transformation projects, Malcolm Cohron from BDO stated that “an implementation project should deliver immediate ROI, but it isn’t, in and of itself, transformational. It’s only when all of these projects lead to a bigger goal that digital transformation is truly effective.” Experience programs will lead to maximum financial outcomes when they start with a deep understanding of customer journeys. This could present a tremendous financial opportunity for banks who embrace digital transformation and customer experience. According to Forrester, for example, a one-point increase in the CX index for a retail bank can yield an additional $7.93 in revenue per customer annually. Even banks with a modest client base could end up seeing significant revenue uplift by embracing a customer-centric approach.


Focus on journeys with high impact

Instead, one faster and more effective approach is to start with the customer journeys that have the most impact on revenue and costs to solve the specific pain points across those particular journeys. As part of its process lifecycle, each product will have an onboarding, transacting, administering, and resolving phase. Identify the areas of opportunity where improvement in customer experience will lead to the greatest revenue and retention outcomes, then determine how to re-architect those journeys in a straight-through processing model to minimize the internal costs to support those journeys.

One example of a bank implementing this kind of strategy is DBS. Prior to 2009, DBS had a reputation for being highly bureaucratic and slow, thereby leading to overall poor customer experience. Incoming COO Paul Cobban decided to focus on speed and eliminating waste, the major pain points that, if improved, would yield the greatest ROI. He ended up saving 250 million customer-hours per year. DBS is now considered to be one of the most innovative and forward-thinking banks in the world.


Apply digitization with informed context

While digital technology solutions are both effective and efficient in solving customer pain points through the removal of friction in key journeys, financial institutions need to also understand the customer context and not jump to one-size fits all solutions too soon. A common trap is to impose digital solutions on traditional customers that don’t embrace or trust them. Taking this into account, the data strategy described above should also support identifying this challenge early and consider a “tech-centric” segmentation approach. This allows banks to identify fresh, agile, and relevant solutions that consolidate experience leadership through utmost relevance and appeal to each customer.


Dive into leading indicators for the digital age

Olivier Berthier CEO of Moneythor, a Singapore based digital banking provider, published the results of an interesting study which revealed some key insights on the way banks communicate ROI. Moneythor looked at the annual reports of 54 banks across 13 countries and found that the majority of the banks were only reporting “vanity” metrics, such as digital transaction volumes, number of digital users, and year-over-year changes. They noted that some survey responders used the same vanity metrics to justify individual performance and pay. This showed that banks were either uncomfortable revealing the deeper success metrics to the rest of the market or the trailing indicators were still the best measures of their digital transformation successes.

Vanity metrics are examples of trailing indicators. Trailing indicators can only be measured and assessed after an event has happened. Further, the feedback derived is often static and doesn’t explain why or how. Successful experience-driven banks should, therefore, leverage their digital platforms and focus on leading or even predictive indicators in the digital age.

Correctly identified leading indicators are the real-time feedback metrics that will drive positive customer outcomes and boost ROI. Josh Seiden, the author of Lean UX and the 2017 Medium post The Magic Question Which Unsucks* NPS, defines leading indicators as “…customer behaviors that you can measure, and that you can influence through design, copy, promotion, etc.” Journey mapping is a useful exercise to address this. By conducting journey mapping exercises, banks should be able to understand when indicators are either a boost or deterrent to enhancing the customer experience. A great example would be if a customer was considering switching banks, this customer would be identified early enough that a bank could offer the customer some incentive to stay.


Measuring customer success

With most banks somewhere along the digital enablement of customer journeys, it’s clear that the industry understands a transformation is taking place and that massive benefits can be reaped from a successful execution; however, success remains to be seen. Traditional measures don’t exactly sync-up with required, expected, and enabled customer outcomes. For example, highlighting the increase in the number of accounts is an old school indicator of customer success. In the digital age, where financial interactions are re-architected through technology and expected to be up to snuff with experiences provided by the big tech of GAFA, customer outcomes with context and lifestyle relevancy or AI-driven financial health take broader measurements.

Our hypothesis is that evaluating success criteria based solely on traditional ROI metrics and outdated lagging indicators won’t work. Instead, banks need to focus on specific measurable objectives and leverage their vast amounts of data to hone in on the leading or predictive metrics that truly drive customer satisfaction. Speak to aequilibrium about how you can generate greater ROI through experience-driven banking in the digital age. After all, digital transformation calls for a shift in thinking and we can provide the tools required to unleash the next generation of ROI.


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