Digital Innovation by Banks (Part 2)
We continue with highlights of the McKinsey article “Strategic choices for banks in the digital age” while relating it to features in the copyrighted CreditBPO Rating Report®.
Fundamentally, our solution significantly reduces the cost and complexity with which banks need to go through in order to implement digital innovation to compete effectively and survive. Our easy user interface and data analytics design will jumpstart banks’ implementation of digital innovation. We quote:
For CEOs, the good news is that each of these ways of creating value through digital can be applied to every bank function. However, developing a digital agenda and driving a digitally centered transformation is a complex task. It requires an unusually high level of coordination of cross-bank initiatives spanning prioritization, resource allocation, and collaboration in execution. Moreover, most banks are only in the early stages of developing the capabilities and culture of digitally native organizations, which include several elements:
User-centered customer-journey design. Customer journeys should be compelling and highly differentiated, combining personalization, speed, and ease of use for all processes, including applying and getting approved for a loan, opening and understanding how to make full use of an account, and reconciling payments. To make this leap in the delivery of customer journeys, banks need to act quickly to acquire deep capabilities in user experience and user interfaces.
Personalization, leveraging data, and advanced analytics. Most data still go unused. Yet there is significant value in applying advanced analytics to create targeted offerings for cross-selling and up-selling. This is achieved by making data usable in real time, such as at the point of sale, and combining the data with analytical tools to generate insights provided by “next product to buy” models or risk assessments, for example.
Rapid experimentation and agile development. Banks need to learn to rapidly acquire or imitate high-value initiatives, while showing tolerance of failures in trials. Banks often struggle with this trialing and testing culture. In addition, they need to move to “agile delivery,” with weekly sprints, from a “waterfall” approach in which there are months between releases. They must achieve this agile model at scale but still recognize that agile isn’t the right answer for every development effort.
While developing these capabilities is crucial, an equally critical part of the digital transformation is the need to develop a different culture. That requires adopting a mind-set similar to that found in successful digital enterprises when it comes to everything from establishing a challenging and coherent digital vision to acquiring new data capabilities and adopting a test-and-learn approach with rapid iterations.
Across the value chain—from operations and IT to marketing and sales to product development and finance—the data and technology required to realize this vision in the bank often already exists. What’s missing is the organizational orientation and mind-set to have small, cross-functional teams working together through rapid testing and improvement programs. Indeed, we have noted that many of the new capabilities required cannot be found in banks but instead need to be imported from other industries.
Becoming aware of the need for change is the first challenge that bank CEOs face. The next challenge is to take leadership in the development and execution of a holistic change program that simultaneously addresses the culture, systems, and capabilities required. Invariably, a number of issues will arise to test CEOs
Digitization is rewriting the rules of how banks compete. Incumbents that fail to grasp this risk damaging franchises built over generations. But if CEOs manage to address the multiple strategic challenges posed by digital advances, they can position their institutions to compete effectively and capture an emerging, long-term growth trajectory.