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Perspectives

Getting Digital Right: Is Your Bank on Track?

2018-11-28


Boost the return on your investment by using a digital capability model to better structure your initiatives.

If your bank is like most, you’ve launched many digital initiatives. And most likely the results haven’t met your organization’s investment objectives.

Despite an executive-level focus on digital, we see a sense of doubt, restlessness and frustration at many banks. Often there’s been a buildup of capabilities that fail to align with the stated needs or timing of business direction. Senior executives frequently find few of the change agents needed to support their digital plans. Among digital investments, there seems to be more misfires than bull’s-eyes. 

How did we get here? Our analysis shows that digital investments are often reactionary and short-sighted. For one thing, it’s hard to identify business direction when the marketplace and technology is moving so fast. For another, deciding on the large-scale bets that banks have to make requires balancing immediate objectives with longer-term strategic requirements.

Getting digital right requires an alignment of investments with your organization’s business direction. While we’ve observed banks using digital capability models to guide their investments planning, it’s important to know which capability levers to engage and by how much. It’s also important to determine the tradeoffs needed. For example, how might mobile self-serve features disintermediate bankers in the branches? The answers lie in proper alignment.

Keeping digital on track

Determining a capabilities-based digital transformation roadmap can help banks better align tactical execution and digital strategy. 

Take the example of a U.S. bank that successfully redirected its transformation efforts. (For additional examples, see the Quick Take sidebar, “How Transformation Went Off Track — But Didn’t Have To.”) Despite heavy spending on its digital buildout and recommendations from multiple consulting firms, the bank had experienced net negative customer growth and a steady drop in deposit share. Deposit flight over the next few years presented a significant risk to shareholder value. 

To get the initiative back on track, we reviewed the bank’s current state across 14 capabilities and 111 sub-capabilities. Our recommendations included refreshing the business and revenue-growth models, with a customized digital capability roadmap.

Figure 1

We recommended five key areas of focus: 

Business strategy  

  • Current state: High-level, vague intent to be “good” at digital banking.

  • Path forward: Be an experience leader with well-defined customer journeys supporting retail products. Target specific customer segments to realize significant incremental revenues. Initiatives identified to develop capabilities in digital portfolio management, performance management and refreshed business governance model.

Culture & organization

  • Current state: Tailored to legacy banking model. 

  • Path forward: Grow design-thinking capabilities. Encourage innovation with a new operating model. Launch initiatives to upskill and attract talent.

Marketing

  • Current state: Limited, generic digital marketing. 

  • Path forward: Change messaging specifically for millennials. Ramp up digital and social marketing for identified target segments.

Customer interactions

  • Current state: Excellent branch service, limited digital engagement.

  • Path forward: Execute rapid rollout of easy-to-open digital accounts and detailed client journeys. Develop innovative natural language processing (NLP) service model. Proactively provide analytics-driven financial advice.

Integration & infrastructure

  • Current state: Multiple, costly point solutions that require complex integration and restrict agility and speed to market.

  • Path forward: Fast-track a platform strategy and execution to move to multi-use standards based on repeatable integrations. This approach enables agility, speed, omnichannel service delivery, and opportunities with fintechs.

With five distinct areas to focus on, the client stakeholders clearly articulated their business strategy and planned outcomes to the board of directors. The team’s cost-to-value plans and detailed roadmap included 3-, 6-, 12-, and 24-month point checks with measurable outcomes. Impressed, the board allocated the requested funding to execute the refreshed digital transformation roadmap.

How Transformation Went Off Track – But Didn’t Have To

A large midwestern bank invested heavily in the rapid buildout of an enterprise big data and analytics infrastructure but was unable to anticipate customer needs, wants and desires. The bank then hired costly data-science teams with the goals of boosting customer engagement and improving cross-sales through personalization and next best action. 

  • Where digital fell short: The bank underinvested in delivering the next-best action recommendations to customers at the right moment in their digital interaction and in the right context. For example, presenting links to mortgage refinancing tools as customers paid rental bills via their mobile devices. Customers perceived the mistimed recommendations as distractions. Engagement was low. The bank is now struggling to meet ROI targets for the data infrastructure and has since scaled back on the investments.
  • How it could have stayed on target: Redirecting some of the bank’s data-infrastructure investments towards building capabilities that deliver insights at the right interaction point with the customer and with the right context would have resulted in a better ROI. In the example above, the bank could have created better value for the customer by presenting a rent-versus-buy comparison that mined their rental data and local real estate prices. 

A bank in the southern U.S. developed and began executing a cloud strategy to build agility, speed time to market and optimize costs. 

  • Where digital fell short: The bank failed to refresh its application delivery methods in favor of Agile and DevOps. The result is low return on its cloud investments.
  • How it could have stayed on target: Adopting Agile methods means a new way of thinking about application development (think continuous integration and delivery). By incorporating learning and change management strategies with transformation initiatives, the bank would have helped its organization to better understand platform- and product-based approaches.

Despite investing heavily in digital solutions, a regional U.S. bank has been steadily losing deposit share and customers. 

  • Where digital fell short: The organization never upgraded its business model to incorporate the prioritized digital interaction needs of its customers, as well as its customer-engagement and investment strategies. It now wonders why its digital investments are not paying off.
  • How it could have stayed on target: Better alignment of business strategy and digital capability buildout plans would have strengthened the bank’s plan, as would more questions about whether its investments helped support customer and product strategies.

Looking ahead: Reassess and realign 

Staying successful and relevant takes reassessment, realignment and synchronization. By taking the following steps, your bank can begin to refresh its digital focus and investments. 

  • Accelerate growth by recharging the business model. Make sure it aligns with the type of digital bank your institution wants to be. Be clear on how your bank wants to be known, as well as its business-critical competitive differentiators.

  • Build a capabilities-based roadmap. Solution-based roadmaps are limiting. With a capabilities-based view, your bank can ensure that it’s building the right competencies, tactically and strategically, to support your organization’s digital business model.

  • Prioritize and sequence your digital investments to deliver continuous customer value, and realize continuous business value, while progressively enabling long-term capabilities.

This article was written by Mahesh Subramanium and Anil Lakhanpal, Senior Partners in Cognizant’s Digital Banking Practice. The authors would like to thank Rahul Kumar and Daniel Marko — a Senior Manager and a Consultant in Cognizant Consulting, respectively — for their contribution and insights in developing this article.

For more ideas on how to optimally position your bank and ensure its investments and value realization strategy keep you ahead of your competitors, visit the Banking & Financial Services section of our website, or contact us.

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Getting Digital Right: Is Your Bank on Track?