A dynamic bank is one that adapts to the ever-changing environment by making banking enjoyable as part of the customer’s day-to-day life.
There are three takeaways from COVID-19 for banking:
- Invest in digital and put it at the core of your transformation strategy
- Integrate the bank into customer lifestyles to make banking a sub-conscious activity and very convenient
- Operate the bank as a start-up to achieve cost-cutting efficiencies to win.
To win, banks must know the difference between a software banking app on one side and a banking platform that offers an ecosystem of sorts to win with customers against the competition on the other side. Having a website, a mobile app, and integrating these to your core banking application as well as enabling APIs for utilities and other payments does not (YET) make a platform. It makes a cost guzzling monster that is automated but manually operated.
It is like a brand-new car, with a flat tire. However, you try to rev it, you cannot gain speed. To win, banks must rethink their strategies from a visionary point of view. This is not an incremental change. Rather, a complete review of the model and making drastic changes that respond to the new era challenges.
1. Invest in digital and put it at the core of your transformation strategy
A traditional bank is characterized by – a legacy banking application (where customers get recorded upon completing know your customer details); manual banking processes with lots of paperwork and approvals; unoptimized data as it lacks a data strategy for informed analysis, insights; and huge operations characterized by branch network. However, a bank may try to innovate in such a setup, it is a tough call. The legacy arrangement is set to fail. It does not matter how much money you try to invest to transform the banking experience, with a huge operation, a payroll full of staff with predisposed to manual affairs, the investment rarely delivers results. In the end, you have a digital bank that is ‘manually’ run. Such a hybrid arrangement drives costs and makes banking business unprofitable. The result is having a core banking investment but with a big proportion of investment income from securities!
A dynamic bank puts the digital agenda at the center of the strategy. Such a bank is agile at the core, highly automated, paperless, designed for no or very minimal operations department, leverages cloud technologies, has multiple open applications, and a platform business with an ecosystem business model. This is the future of banking. When you develop a digital strategy, you put digital at the core of the bank, and all decisions focus on winning with digital. Recruitment must be informed by your digital strategy, not the other way such that anyone who goes past the door is tech-savvy. You want only people with digital IQ in your operations. That way they fast track your business model of operations-less.
2. Integrate the bank into customer lifestyles to make banking a sub-conscious activity and very convenient
Tomorrow’s dynamic bank carefully studies the customer’s journeys to offer services that customers adore. The banks that will win are those that study and segment their market and offer products and services that are responsive. With mobile money and agency banking in Uganda, banks have been given a foundation to embrace a digital-only strategy without necessary spending in branch operations which are usually cash-intensive.
Customers want convenience at three levels – everyday lifestyle, family and personal finances and banking where and when they feel like. They need it on their terms, not on the terms of the bank, where you see announcements that our ‘xy branch shall remain closed on this day.’ Customers what anywhere, any time banking. When it comes to everyday lifestyle, this includes payments for basics – utilities, entertainment, travel, shopping, health, transport, education, house ownership, quality personal and family education, and of course car ownership and old-age planning. How does the bank facilitate these for their customers seamlessly? What is the customer journey that must be made easy? It is the responsibility of the bank to understand this journey and shorten it.
At family and personal finance level, customers must be able to provide payments, decide how to invest their money, choosing the ideal banking products and services, and above manage their insurance covers cost-effectively. And at the lowest level, the bank must offer convenience for anywhere, any time access by offering options and incentivizing those contact or touchpoints which make the bank more efficient. Although the bank may set up few branches for physical contact and banking, the mobile, internet and agency contact points should be promoted such that customers earn ‘banking points’ when they transact using such channels that keep customers away from the bank and those who visit the bank physically lose ‘points’.
Is your bank business model speaking to customer journeys? Or it is a ‘take it or leave it approach’ which is characterized by lots of paperwork and long turn around times for services.
3. Operate the bank as a start-up to achieve cost-cutting efficiencies to win.
And last, but not least, a dynamic bank of tomorrow must be data-driven, agile, and lead in innovation. The bank must develop capabilities to continuously engage with customers and prospects and offer services that customers adore. This customer-focused approach helps create value and sustain innovation.
In Uganda, the average cost to income ratio stands at about 85% industry-wide – that is a big figure as it means just 15%! Such a margin is not good for sector growth and development.
There is no happy customer without happy employees. The banks for tomorrow must engage the employees to win through human center design and reward a winning culture. This calls for collaborative workspaces, innovation labs, and design centers that put the customer at the forefront of the innovation agenda.
To win, a dynamic bank must create partnerships with start-ups, universities, research agencies, and top advisors as strategic partners. That way, an ecosystem of winning is developed.
You may win by accident, but that is not sustainable. Winning banks must be agile by design. They must make a deliberate choice to win. And having digital as a strategic driver remains the best choice to navigate the future and emerge triumphantly.
For a transformational talk to your board or top management team, or even to facilitate your next strategic retreat, contact us.
Is your bank’s strategy clear? Call us, let us talk about your strategy. Even if you have a group strategy, you need to adjust it to win within the local context.
Copyright Mustapha B Mugisa, 2020. All rights reserved.