The technology to do great digitalisation has been around for years. So why did financial services get it wrong for so long, and why do many firms continue to do so? The answer is not technology. The answer is culture.
Examples of good digitalisation appear in many aspects of our lives. From that well-known taxi provider; to e-commerce; to apps for health, lifestyle and fitness. So why did financial services get it wrong for so long, and why do many firms continue to do so? The answer is not technology. The answer is culture.
The technology to do great digitalisation was around for years before Uber appeared — but very few firms in any industry used it to do what was most important: solve the real problem for their customers. Only when you solve the real problem with a new technology can you claim to have succeeded. Implementing new technology is not enough in its own right.
What is the “real problem”? For users of taxi services, it is the uncertainty of when the car will arrive or whether it will arrive at all. By making this information transparent to users via their phones, Uber solved the problem. Other features of the Uber services add value and show a good understanding of customers — e.g., naming the driver and showing a picture and feedback; estimating the duration of the journey; being allowed to pay from stored details; electronic tipping, etc. But these are value-adding extras — their absence previously was never the real problem. Amusingly, my local taxi companies all now have apps for phones, but none of them tell you where the car is currently or when it will arrive. They missed the point entirely. Those taxi firms implemented the technology without solving the problem.
In e-commerce the real problem was never about buying things. The real problem was knowing when your order would arrive, so you could arrange for someone to be there to accept delivery. That problem has now been solved, with regular updates to your phone from the e-commerce provider and/or delivery firm giving you an estimated time of arrival to within an hour (or you can collect from many possible destinations).
What is the “real problem” that needs to be solved in financial services? It is the ability to transact in a manner that is most convenient to the customer, rather than most convenient to the provider — i.e., digitally across all products and services regardless of location, time and device. Access to all necessary information, including news and advice, as well as balances, limits, and terms and conditions, is a prerequisite of transacting in an informed manner, so must also be available readily. The ability to transact in this way is a problem that still has not been solved for 80% of products and services in the industry. Technically, it should be an easy problem to solve, but the barriers to success include: highly siloed organisational structures of banks, with many of the silos having their own operations and IT departments; no meaningful centralisation of “digital” (with sufficient authority to control design and delivery); and, a company-centric rather than customer-centric culture that expects customers to continue taking what they are given.
Just because your large retail bank provides online banking for current accounts doesn’t mean that it has solved the problem. That digital solution will not work across all your products and services, such as investment and insurance/assurance products. If your bank does have digital solutions for those products it is unlikely that they will use the same or related application sitting on the same digital platform. If anything, you will have islands of (partial) digitalisation in your bank, that may or may not include completely separate solutions for retail, business, commercial and corporate customers. Outside of your main bank, you may also have limited or no digital service from any brokers, insurance companies or asset managers that you are using.
To date, digitalisation in financial services has been stuck in the 1990s model of combining “brochure-wear” webpages owned by the marketing department, with some parts of the paper-based process transferred to screen by the IT department and calling it “online banking” (or online insurance/investment management). This is not digitalisation and it does not solve the problem of transacting on any device from any place at any time with access to full information.
For a limited number of online products and services, the ability to transact now appears in mobile apps but often with functionality cut down from the version for desktops (a product of Pareto analysis that breaches one of the critical success factors of digitalisation: facilitating multiple customer journeys for multiple customer personas). The number of products is not being limited for sound operational reasons; it is just a reflection of the organisational structure. Your current account is owned by a separate division/company from your other products and services, and each division is (or was) doing its own thing with digitalisation (including nothing at all).
Digitalisation works when the “customer” — not the company — is at the centre of the digital universe. Customer-centricity is a behaviour and a belief as much as an approach to doing work. You and your company have to want to build things the way that people want to work, not the way that you want them to work. This is where cultural factors come into play. The ability to see your products and services through the eyes of customers is essential to success in digitalisation, one reason being that digital products and services bring with them an expectation from other business domains (e-commerce, taxi hailing, etc.) that you didn’t have when your benchmark comparators were only those firms in your immediate niche. Though firms toyed with benchmarking themselves against other domains back in the early and mid-1990s, it barely came to anything. Digitalisation has forced the issue and has raised the customer service bar generally. Your digital solution is being judged against those from e-commerce providers, hospitals and travel companies, whether you want that or not.
[Related: “Why Investment Banks Have the Digital Edge”]
To achieve customer centricity, digital services must be designed from the ground up and not just transferred from non-digital processes. To understand the real problem to be solved, you must not start by assuming that you know the answer; or by guessing the answer. You must start by asking customers directly and then you must keep asking customers at every part of the design and build process. Understanding the true needs of customers through questions and answers can be fraught. It is hard to design valid and reliable questions, and harder still to mitigate for all the factors that stop customers opening up. Instead of questions and answers, a better approach is to use the Lean product development method. The method involves showing prototypes to customers and then changing the design (“pivoting”) and producing further iterations based on their feedback.
For the process to work better than the standard model, “customers” have to be real customers, not proxies such as “product owners.” The development team should keep iterating the prototype through to being an MVP (minimum viable product) that can be used for real business processes, including transactions. As well as feedback, it is also worth collecting usage information on your digital development as people often use digital products in a different way from how we think that they do. Pride and ego must not be allowed to get in the way of building digital products. If you end up building the digital product that you first imagined, then you were not listening. Prototypes have an amazing ability to generate opinions and feedback in a way that verbal and written questions do not.
Another crucial aspect to digital development is to build an enterprise-wide digital platform as the foundation for all digital services. That way you get consistency and efficiency across the enterprise — efficiency for customers not just efficiency for the company. Without the bedrock of a single digital platform, you risk perpetuating the siloed developments that have plagued the industry.
As part of the ethos that digital is cultural (a state of mind/a way of organising) rather than just technical, your digital platform should always be regarded as a technology-enabled business model. It is not an “IT system” (though it contains all of the hardware and software components and modules used in the platform); it is a business model in its own right. Amazon is a digital platform, as are TenCent, Alibaba, Facebook and Google. People talk a lot about the business success of those platforms, so that should be your aim as well: for people to be talking about the business success of your digital platform (and its subset of digital products and services). The platform will facilitate information exchanges between multiple groups, including third parties as well as customers. As part of that, the platform must have some form of open connectivity to allow in-house and third-party developers to create new services and thus extend the business. The digital platform is really working when people use it as a framework to build new businesses and products for the company. The best digital platforms inspire new ideas. As such, it must be able to scale massively without performance issues arising. For this reason, it must not be scoped simply on the first digital business, service or product to be built. Instead, it must be scoped with a digital strategy in mind. A strategy that assumes millions of consumers using the products and platform concurrently on every device possible (think: Google).
As well as digitally oriented product design and the need for an enterprise-wide digital platform, a customer-centric organisational design must face the customer when services go live — preferably a multi-disciplinary team that owns every aspect of the customers digital experience. All skills and disciplines are in each product/service team: e.g., systems development, support and operations; customer services; product design; billing; reporting, etc. This is much better than the functional model with a small part of multiple organisational functions supporting a service (where the customers feel that they are supported by no one).
In summary, to succeed with digital services you should:
- Be truly customer-centric rather than company-centric.
- Understand and solve the real problem for customers.
- Understand, facilitate and satisfy all the needs of all your customers equally (multiple customer personas making multiple customer journeys).
- Ensure full transparency of information and leave nothing “behind the curtain.”
- Make it as easy as possible by providing intuitive digital interfaces.
- Ensure consistency of experience by building all digital services on a single digital platform.
- Use your digital platform to create new businesses, services and products.
- Employ Lean (iterative) development methods using prototypes, pivoting and MVPs.
- Organise yourself to satisfy digital expectations in a digital world.
Good luck!
By Cliff Moyce,
Chairman of Advisory Board, Finance Practice at DataArt.
Originally published at TABB Forum.
