Digital Banking: Facing Operational Challenges and Strategic Opportunities

22 September 2022

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DIGITALIZATION CONTINUES TO change the way financial institutions interact with clients. Lower levels of face-to-face contact, combined with higher expectations related to turnaround times as well as digital channel data volume, have created unprecedented operational and financial challenges for banks and credit unions. Additional digital-related pressures that demand management focus include increased card-not-present transactions, requirements for new KYC solutions, higher levels of fraud, and staff-related issues ranging from remote workforce oversight to recruitment and training.

Consumer and business customers have embraced the digital environment for information transfer, efficient inquiry and a broad range of transactions. The marketplace was primed for these changes, as the technology necessary to transfer information digitally has long been available in homes and small businesses. Digitalization has made some services not previously available on a large scale accessible to a much broader demographic. Information once captured by individual business units and siloed at financial institutions is now available for application across a growing inventory of financial products and services.

Over the past 18 months – driven primarily by pandemic-related market factors – many financial institutions and their vendor partners have accelerated the timelines for developing their digitalization and automation capabilities. Given the rapid implementation of those solutions, it can be beneficial to identify some of the challenges and opportunities that currently exist.

Two Operational Challenges Related to Digitalization

In today’s banking environment – which requires specific skills sets to support rapid response, accuracy, compliance and frictionless customer experience – the value of the generalist has been diminished, and there is now a premium on operational specialists. The demand for those individuals, however, currently exceeds the supply in many areas. At least in the short term, this requirement may be best supported by a combination of experienced third-party partners to ensure that cybersecurity, fraud mitigation and technology innovation are delivered at appropriate levels.

Another operational challenge related to digitalization involves data integrity. Financial institutions must ensure that incrementally larger volumes of client data ingested into the system have proper validation, appropriate internal user rights, and necessary data security and privacy controls.

Project management has always served as the cornerstone of an outsourced partner’s ability to deliver on its service level agreements. With the current Covid-related disruption – creating a performance gap between the digital front-end expectations and the back-end delivery capabilities – project management discipline has become even more important for Credit Unions. Outsourced partners should be expected to demonstrate in detail the methodologies it will use to manage projects, track results, analyze member data, resolve issues, avoid re-work or inaccuracies, and to maintain member satisfaction. They should also provide a detailed explanation of their onboarding process, and how well prepared they are to be fully operational in 30 – 45 days. Look for process improvement capabilities, and their ability as a long-term partner to scale up or down as market conditions change. Avoid outsourced partners that are reluctant or unwilling to get into the weeds regarding these details.

Two Strategic Opportunities Related to Digitalization

Increasingly, consumer clients are applying enhanced budgeting and personal financial management (PFM) tools. To date, those tools have been reactive and static; but with effective collection and utilization of digital data, they can be dynamic and valuable. Ideally, financial institutions should offer timely and appropriate products such as PFMs without requiring customers to provide duplicate information that has been previously obtained or stored. Data warehousing tools are available to facilitate that convenience.

Digital data can help deliver a positive customer experience only if it is available to quickly and accurately resolve client requests, inquiries, and disputes. Whether the customer interaction involves an automated attendant or live support, having a complete understanding of the client relationship and specific transactions is essential for a successful, frictionless outcome.

Another significant digital opportunity involves small business relationships. Digitization of inbound and outbound information has created new ways for financial institutions to expand their role as trusted advisors. Most small-business owners have multiple responsibilities and employ knowledgeable third parties to assist them with tasks ranging from accounting to payroll and benefits. Financial institutions can provide small business clients with cost-effective and targeted information related to those functions to solidify and expand those relationships.

Cash management solutions, for example, are no longer exclusively for larger clients; now can be made available efficiently to a broader client base. Online banking is a useful platform to deliver those meaningful tools to your small business clients, as a consolidated view on an ongoing basis would be an appreciated service by most small business owners.

In summary, interaction with clients in a digital environment can increase access to data across a broad range of applications; lower servicing costs; and free up employee time, allowing them to focus on higher valued tasks. A regular review of your financial institution’s existing digital tools and skillsets, as well as new opportunities that arise, is the best way to ensure healthy and long-term relationships with clients and to maintain competitive standing.

– by Robert Vandenbergh
Strategic Advisor
Quinte Financial Technologies

Source: This article was originally published in “The Arizona Banker” on September 21, 2021

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