Digital Agility in Financial Services: Three Critical Pivots for Success
Financial services organizations, including banks, insurance companies, and wealth management firms, must accelerate their digital transformation if they are to remain competitive in the post-pandemic world.
This assessment is the clear consensus that emerges from analysis conducted by Forrester, Deloitte, and other prominent industry observers.
Although players in the financial services sectors have made progress in developing their digital engagement capabilities during the pandemic, they are still falling short of where they need to be.
So, what’s holding them back? And what’s at stake in this struggle to develop digital touchpoints and experiences?
We explore the answers to these questions in this post — as well as three key pivots financial sector organizations must make to enable digital agility.
Financial services organizations face an inflection point
Banks and other financial services companies are operating in a changed world, in which there is increased pressure to provide digital experiences from both consumers and competitors.
New consumer expectations in personal banking
Even before the pandemic, much of consumer banking had shifted to online and mobile touchpoints, but the COVID-19 pandemic has further cemented these changes relating to personal finances.
As noted in the Forrester report “The State of Digital Banking, 2021”:
“Many consumers have accessed their financial accounts via their desktop or smartphone, opened a new financial product online, or made digital payments for the first time amid the pandemic. These new digital behaviors are here to stay.”
Consumer expectations of digital tools also extend to other financial services:
- 53% of wealth management firms report that customers are demanding increased digital engagement.
- And according to the Forrester report “The Digital Transformation of Corporate Banking,” enterprises also want digital tools for their corporate banking and financial services and are demanding better digital experiences and innovation.
Technology-driven disruption: pressure from fintechs
Financial services companies feel pressure to digitally evolve not only from consumers but also new startups.
In particular, so-called fintech (financial technology) companies have disrupted the industry by offering fast, easy digital solutions, such as —
- A no-commission investment-trading platform (offered by Robinhood)
- An artificial intelligence platform that handles marketing, underwriting, finance, and compliance for insurance products (offered by Lemonade)
- Automated savings and investing digital solutions (offered by Acorns)
- A cloud-based payroll software solution for businesses (offered by Paycom)
As this list implies, the fintech revolution has touched every corner of the financial services universe.
Adding to the pressure on traditional financial services organizations, fintech companies are particularly popular among the demographic juggernaut of millennials (the largest generation by size in the U.S.), with 94% of them using online banking.
High stakes in financial services’ altered landscape
As financial services organizations navigate this changed landscape, they must choose between irrelevance or adaptation.
Option A: lost business or worse
Those companies that fail to digitally transform may fail to survive.
As one commentator wrote in Forbes, “With banking becoming increasingly branchless and digital, survival now hinges on the speed at which firms can reinvent their financial services and meet the changing demands of their customers.”
Similarly, the Forrester report “Use The Pandemic Market Impact To Improve The ROI of Digital Transformation” advises that a speedy digital transformation is necessary for banks to remain viable during the next four to five years.
Insurance companies, brokerages, and wealth managers also must adapt to survive.
As the technology consultancy company Avenga recently explained, “Established banks, investment managers, brokers and insurance providers face fierce competition from tech whales [Google, Apple] and FinTech companies, and they have to move fast in order to remain relevant.
Option B: increased profits and customer satisfaction from digital dexterity
For those financial services organizations that can accelerate their digital transformation, marketing and service agility, the potential gains are substantial.
Across all industries, digital maturity results in multiple advantages, according to Deloitte research:
“Digitally mature companies enjoy a wide range of specific benefits arising from their digital transformations that include, but go well beyond, the bottom line. Many of these benefits, such as improved product quality and customer satisfaction, contribute to better financial performance."
Studies from the financial services sector bear out this trend.
For example, McKinsey & Company reported that omnichannel engagement led to a European bank achieving consistent sales growth of as much as 20 percent over several years.
Akamai has reported similar findings, noting that digitally engaged customers contribute 37% more annual revenue to their banks than customers who are less engaged.
Likewise, in their study of the value of digital customers to Bank of the West, Fiserv and Bank of the West found that “customers who enroll in digital banking result in higher value for the bank in terms of revenue, level of engagement and loyalty.”
Based on the demonstrated value of digitally engaged customers to banks, those financial services organizations that can develop a digital-first, omnichannel customer experience can expect to thrive.
Why financial services organizations are struggling to digitally transform
With so much at stake for financial organizations, why aren’t more companies succeeding in their digital engagement?
To better answer this question, Crownpeak recently partnered with market research firm Vanson Bourne to survey 80 financial services companies about their challenges in achieving digital agility.
The vast majority (97%) of the respondents agreed that speed and agility are either extremely or very important to their organization when delivering digital experiences and managing their online content.
However, digital agility is rarely achieved — almost seventy percent (69%) report that their organization requires improvement in this area.
While organizational process gets some of the blame, technology takes two out of the top three spots:
- 35% say technology is slow to implement
- 51% say that too much time and budget are spent on infrastructure
Another challenge is that survey respondents operate an average of 21 websites, which are hard to centrally manage and make consistent using legacy approaches.
All of these problems prevent financial services companies from quickly deploying new digital experiences and new digital engagement tools to customers, costing these organizations business opportunities.
If the surveyed financial services companies could make improvements in digital speed and agility, they believe they would see, on average, a 40% uplift in revenue.
Three pivots to achieve digital agility
Financial service organizations can overcome the barriers to digital agility and prepare for success in a post-pandemic world by making three critical pivots:
- Pivoting from Product Owners (Agile IT) to Digital Product Management (Business-Driven)
- Formalizing Marketing Technology Ownership & Cross Functional Governance
- Shifting to Modern Digital Stacks & Approaches (Cloud, Decoupled, Content Hubs)
Of course, there’s a lot of information to unpack in these ideas, which is why Crownpeak has partnered with industry experts, Al Collins, Founding CEO at VShift, a premier digital transformation partner specializing in regulated industries, and Charles Harkless, Managing Director, Satori Consulting, to host a deep-dive webinar to explain these shifts and share strategies and tips on how financial services organizations can make these three pivots.
If you’re part of a financial services organization, join us on August 5th, 2021, to learn how your company can build resilience, increase scalability and responsiveness, and ready your organization for whatever comes next in the post-pandemic world.