2020 Is Rewriting the Rules of Digital Transformation for Financial Services
Digital transformation for financial services has, compared to many other industries, lagged behind. 2020, with its ups and downs (and downs), is proving that financial institutions need the right data management strategy to bolster digital transformation. With research showing that almost one-in-four consumers are abandoning in-person banking due to the global pandemic, digital transformation for financial services is happening whether they’re ready or not.
Covid-19 showed every industry— including the most stalwart of financial institutions— that agility comes from the data and technology foundation. The companies that had the data foundation in place to pivot and react to new situations, strategies and requirements are the ones who are turning this moment into an opportunity.
For the financial industry, the most acute example of needing to pivot came from the chaos of the Payroll Protection Plan (PPP). The Federal Government lent billions of dollars through banks to millions of companies in record time. For banks, the enrollment process required them to act on a dime as they waited up until days before (and after) the program was launched for clear instructions; then they needed to collect and take action on an incredible amount of data.
From that chaos, financial companies were given an opportunity. The American Bankers Association noted that the PPP created new customers and growth opportunities for many institutions. But, it was the “financial institutions that have adopted digital capabilities to scale PPP loans [that] have established a distinct competitive advantage.”
I was recently on a FIMA panel discussion entitled “Aligning Data Strategy and Technological Capabilities to Meet Regulatory Requirements Following COVID-19” with industry leading data professionals from Scotiabank, BNP Paribas, and TD Bank Group. I wanted to share my thoughts on how having the right data management strategies can help accelerate digital transformation for financial services— to not only get you through this moment, but to help you through the crises to come.
Understand what agility really means in digital transformation for financial services
If you’ve been around any company undergoing digital transformation, you’ve probably heard too much about agility. Maybe you even roll your eyes when someone says that your company needs to be agile.
What the lockdown and recession from Covid-19 showed so many companies was that without the right data foundation in place what they thought was agility was static.
Yes, agility is at the heart of digital transformation, but agility requires three things in digital transformation for financial services to remain competitive against natively digital fintech competitors and alternative currencies like Bitcoin:
1. You need urgency. Digital transformation has been happening for years, but according to PwC 81% of banking, CEOs are concerned about the speed of technological change, more than any industry sector. When PwC does their survey again, do you think CEOs will be less concerned with the technology deficiencies after Covid-19?
Without the urgency to address the data foundation now, companies will be dragged further behind their competitors by legacy systems.
2. You need accessibility. Financial organizations have so much data at hand, but much of it is not ready to act on. Covid-19 rewrote business needs in record time, and the organizations without the ability to make data-driven decisions to solve new problems and create new strategies felt the pain.
One of the most significant changes data teams are seeing is that Covid-19 resulted in more requests for data. Prioritizing the accessibility of data to make it easier for groups to consume and act on it and makes adapting to new challenges so much easier.
Legacy systems have a ton of valuable historical data, but it is often not accessible. Making that data available and putting it in concert with other sources of data is key for long-term agility. That’s one reason why we’re seeing more finserv organizations interested in a unified single view of the customer through a Customer Data Platform.
3. You need efficiency. There’s no shortage of data from a growing number of sources available to financial institutions. Digital innovators have the technology and processes in place to efficiently transform this data into insight and action. The rest are hampered by manual processes of wrangling and cleansing data. In many cases, the moment of action passes by.
Data management strategies that prioritize agility for today and for the long term will give financial institutions the edge they need to meet the many needs they have: from improving the customer journey to meeting the many regulatory requirements and empowering employees across multiple departments.
Turn the conversation from cost to value
Digital transformation for financial services doesn’t come without a cost; but what we’ve seen is that more companies understand that the data foundation underneath digital transformation is a discussion about value, not cost.
Groups from legal to marketing and analytics to IT are coming together to learn about and buy Customer Data Platforms because they recognize the potential of a real-time, single view of the customer.
By connecting the customer data management technology and data management strategies to the high-level business priorities of your company, it becomes easier to accelerate the transformation. If financial institutions weren’t feeling the urgency from emerging fintech competitors, Covid-19 certainly injected urgency into the conversation around data management strategies.
Start small but think long-term
Of course, achieving digital transformation in financial services and deploying new data management strategies can’t happen overnight. The path to agility means making the right small actions today that build up to long term changes. Start small; learn, evolve and expand; repeat. Your new data management strategies aren’t just about the tech and the data; success comes from organizational and cultural transformations as well, which happen with constant learning and evolution.
The right use cases today can set the stage for success tomorrow. Moving away from legacy systems onto more adaptive systems is a great place to start, sure. But taking the leap into digital transformation learning to do foundational data management strategies like governing privacy preferences or getting a single view of the customer will deliver huge value now and later.
Since once-in-a-generation events seem to happen more often these days, later and the corresponding “new normal” are probably sooner than we think. As your organization evolves, those foundational skills will make adapting to new crises less taxing. The faster your organization can respond with data-driven insights and actions, the quicker you can get out of crisis management mode and into a growth mindset.
And of course, put privacy at the forefront
When people were spooked by the financial crash at the beginning of the 1930s, they started taking out all of their money, causing banks to fail. Financial institutions made it through the Great Depression because regulations were put in place to instill trust in them.
New consumer attention to privacy provides a way for financial organizations to cement their role as trusted institutions in a new way. Financial institutions have long been required to safeguard private information; new consumer privacy regulations are making trust a key differentiator.
As financial institutions join the digital revolution in earnest, privacy has to be at the forefront. A privacy-by-design approach should influence everything data and customer experience-related, from the way you handle data to the way you market your apps and services to consumers.
Luckily, the value of good data governance doubles for personalization and other digital transformation end goals. Making sure data is the right quality, in the right place, and ready to use is important to data privacy as well as broader customer experience efforts.
Covid-19 made it readily apparent that the organizations with the best digital customer experience will prevail today and in the future. The teams responsible for providing the data and technology that fuel the customer experience are critical to that effort. And, as cautious companies shift from acquisition to retention and cross-selling, the agility these teams and technology provide will accelerate the time frame for achieving these new priorities.
Want to learn more about how a Customer Data Platform like Tealium AudienceStream CDP can help financial organizations weather uncertainty? Check out our latest talk on the topic today.