Image_hero-driving-digital-banking-breakthrough-app

Driving the digital retail banking breakthrough

By David Edelman

McKinsey partner Dave Edelman spoke at the recent LinkedIn Connect Finance conference about the opportunities - and commitments - needed for banking to truly become digital.

What did you talk about?

I talked about what banking might be like if it were created from scratch with digital in mind, then compared it where banks are today. That led to five points where I believe financial institutions need to make progress: 

  1. Digitize processes. You can’t offer a mortgage online if can’t process a mortgage online. This isn’t just about removing costs, but creating a better experience for the customer.
  2. Build segment-of-one intelligence for pro-active service and smarter decision making. For example, if I’ve used my credit card to book a flight to Paris, don’t reject my card when I use it in Paris. It’s interesting to see that some banks are starting to use social media and real estate value trends to provide visitors to their landing pages online with more relevant content without having to dig into that person’s credit history.
  3. Think about “app’ifying” services not products. Paying credit card bills online isn’t so much a transaction as opportunities for helping a customer manage their budget. That’s what apps need to focus on.
  4. Recognize the need to be part of an open ecosystem with APIs that pull in information as well as send out. There’s a great example of Commonwealth Bank in Australia where a person can take a picture of a house, then immediately see what it’s worth, what their mortgage would be, and connect with a real estate agent to see the house. That’s all done through APIs.
  5. Across all of that, banks need to develop a non-stop marketing engine that’s constantly figuring out the next best action a customer will take and providing content for that. For example, provide an app to help complete a task, provide incentives to get someone to download the app, then help them use the app, then provide loyalty incentives for certain thresholds of activity, then help the customer cash those in to feel good about the brand.  This all comes back to the reality that most financial services products are commodities. What is going to matter is how you help customers through their journeys. The journey will define the brand.

What were people most interested in learning more about?

People most responded to the idea of how to look at banking differently. Planning in many financial services businesses lacks a coherent strategy. Too often, digitizing processes is about reducing costs to serve. This is a mindset issue, and it’s about looking at opportunity not just productivity. The issue is that most banks are organized by products rather than organized by customers. Most grew by acquiring products, so haven’t integrated.

What is on the minds of the people you met at the conference?

The overwhelming concern I heard was around how to prioritize digital investments because it’s getting expensive. People are wondering if social media is going to be a serious driver of value, for example, and aren’t clear whether it’s worth the investment. What’s missing is a strategic framework to help make those decisions: which segments do companies want to go after, what do they know about what really matters to those segments, what is it going to take to deliver a distinctive digital experience, where’s the value creation of that, and what does that imply for investment priorities. Without a clear answer to those questions, a company is going to have a hard time prioritizing – and getting value from – their digital investments.

This article originally appeared on LinkedIn