Transformation
With an ‘integrated channels’ approach a bank’s mobile app becomes the primary customer interface. It is used to orchestrate interactions across all other advice, sales, and support touchpoints. Relying heavily on data and AI-driven insights, it stitches together digital and human interactions to provide individualized experiencesYou along each customer’s journey. This becomes a new operating model based on interactions rather than channels, giving customers greater flexibility and choice.
Strategy
The world has become increasingly digital and interconnected, and leadership strategies must adapt to harness technology, use data-driven insights, foster collaboration, and handle complex ethical concerns effectively. Traditional leadership paradigms are less efficient in an era where innovation, technological agility, and digital fluency are crucial. Today’s leaders must:
- Have a digital mindset to understand the implications of technological obstacles and how digital literacy drives profit margins.
- Promote digitally-minded initiatives by prioritizing continuous learning and encouraging adaptability and experimentation.
- Facilitate effective communication and collaboration.
- Use data analytics and AI to enhance customer experiences and employee productivity.
- Maintain a culture of awareness about technological risks, and prioritize inclusivity and accountability.
- Establish an ethical framework addressing issues like data privacy and original authorship.
ESG/DEI
As climate change intensifies, financial institutions are increasingly affected as many provide services to customers in disaster-prone regions. This exposes them to compliance costs associated with evolving climate change-related regulations; operational risks due to resource availability affected by extreme weather; reputational risks from association with activities exacerbating climate change; and financial risks like increased loan defaults following disasters. To manage these risks, FIs can develop comprehensive risk management frameworks that include environmental, social, and governance (ESG) criteria, and collaborate with other institutions for resource sharing and best practices. By proactively managing climate change risks, they can protect their investments, remain competitive, and ensure operational sustainability and profitability in the face of environmental changes.
Transformation
Organizations striving for digital maturity must focus on three key areas to achieve success. These include having flexible and scalable technology that uses data to respond in real-time to customers’ needs, choosing partners who actively contribute to innovation and execution rather than just delivering a project, and treating innovation as a continuous process, not a one-time event. Success requires a culture that encourages continual innovation and leverages data and technology to create new growth opportunities. A study by Forrester found that digitally mature companies that followed these principles were twice as likely to experience double-digit revenue growth compared to less mature ones.
Data/Analytics
The rapid growth of data due to digital technologies, social media, e-commerce, and IoT devices provides enormous potential for advanced financial marketing. These data allow financial marketers to create personalized campaigns, understand customer preferences, and deliver extraordinary, hyper-personalized experiences. New technologies like Generative AI can greatly accelerate and improve this process. However, it also brings challenges such as data integration and analysis, data validation, internal data fragmentation, and data privacy and security. Financial marketers must navigate data overload, ensure data quality and privacy, integrate fragmented data, respond to talent gaps, and keep pace with evolving technologies to fully realize this potential.
Financial Wellness
The concept of gamification is being increasingly adopted by fintech companies and financial institutions to create engaging user experiences. Truist Bank is the latest to join the trend with the launch of Truist Long Game, a game that encourages financial wellness. The game rewards clients for behaviors like saving or engaging with financial education materials. Users earn in-game currency for exhibiting good financial habits which can be used to play games with the chance to win cash prizes. Developed by the Truist Foundry – a startup within the bank – the game also features daily quizzes and a diverse selection of games to keep users engaged. All cash prizes are directly deposited into the user’s bank account. Beyond just savings, future iterations of the game could include financial education materials on topics like debt reduction and retirement planning. Truist views this gamification as an innovative mechanism to drive digital adoption, engage younger users and promote healthy financial habits.
ESG/DEI
Bank of America is launching an accelerator program, the “Bank of America Breakthrough Lab,” aimed at promoting diversity within the fintech sector. The six-month program is open to pre-seed stage startups in various tech-enabled sectors, with a particular focus on supporting underrepresented founders identifying as female, Black, or Hispanic-Latino. The program will offer business management guidance, large enterprise partnership advice, and technical support. It will also facilitate networking opportunities with industry investors and capital providers. This initiative comes in response to persistent disparities in venture capital investment, with companies founded by women, Black, and Latinx individuals receiving a disproportionately small share of funding. The program aims to promote a more inclusive venture capital industry, aligning with findings that show women-led startups tend to outperform their male-led counterparts.
Digital Services
Earned wage access, which allows employees immediate access to their pay as they earn it, is becoming mainstream amid post-Covid economic uncertainties and a surge in inflation. Financial institutions such as Citizens Financial, PNC, U.S. Bank, TD Bank, and Santander Bank have adopted on-demand pay services. The service is seen as an added benefit for businesses, potentially improving the employee-employer relationship, bolstering customer-bank relations, and reducing turnover rates. The move towards on-demand pay is seen as a tool to help employees manage finances effectively without resorting to high-interest loans.
Partnerships
Rather than viewing each other as competitors, a shift is occurring towards collaboration between traditional banks and FinTech companies. Major institutions like JPMorgan and American Express have shown increased interest in acquiring or partnering with FinTechs, with 89% of banks now viewing such partnerships as important. Regulatory changes, such as the impending open banking rules by the Consumer Financial Protection Bureau (CFPB), are also driving collaboration, requiring banks to share consumer financial data with qualified third parties through APIs – a task in which FinTechs’ expertise can be invaluable.
Transformation
Branches are expensive, making it important to use these resources wisely. Careful thought should be given to defining the goals of in-person engagement and the role and training needs of branch staff, identifying opportunities to leverage technology to improve personalization, and tailoring the functioning of each office to the needs of the local community. These strategies aim to make branches more purposeful, efficient, and customer-centric.
