Take a New Approach to Digital Banking

August 31, 2018

Contributor: Laurence Goasduff

Bank CIOs must evaluate their organizations digital priorities and transformation readiness before embarking on a digital banking initiative.

Traditionally, banking is known as a conservative sector. However, the radical changes in customer demands, regulatory requirements and competitive environments fueled by digitization are forcing bank CIOs to replace their online and mobile banking solutions. “Being change adverse is not an option,” says Stessa Cohen, research director at Gartner. “Bank CIOs planning to acquire a new digital banking solution must decide between two types of digital banking solutions: multichannel solutions or digital banking platforms.”

Every bank CIO should have a primary goal for digital banking

To succeed, CIOs must choose an approach that supports their banks’ strategic priorities, and the ability to be sensitive to customer needs, goals and other requirements.

The multichannel approach: When cost optimization matters the most

The multichannel approach is a good fit for banks that are still rooted in the traditional banking business, and have not yet tackled the cultural and organizational changes required for a digital banking transformation. The goal is to replicate and update the current functionalities, reduce friction between online and mobile banking capabilities, and streamline processes in those channels. This leads to reduced costs and a better customer experience without any major changes.

“When CIOs decide to prioritize cost efficiencies, it does not mean that they are opposed to digital transformation per se,” Cohen adds. “They simply acknowledge that transformation — at the moment — is not the primary driver of the business and that the organizational culture is not ready yet for the demands and challenges that a digital banking platform brings. Additionally, the multichannel approach is not a one-way street, but a partial foundation for future steps toward real digital transformation.”

The digital banking platform: When the bank is ready for change

If your bank has already completed all the internal changes necessary for digital banking and the board is sold on the idea of digitization, go for the platform approach. This strategy enables the bank to share data, algorithms and ecosystems to generate revenue and enhance the customer experience. One model does not fit all. Three types of digital platform are available to banks:

  1. Internal platforms allow employees and things inside the bank to share best practices and leverage competencies across business units more easily.
  2. Private platforms are intended for known customers, partners and things to create new value for themselves, the banks and each other.
  3. Public platforms are used to support known and unknown entities outside the bank.

“In the public platform, business ecosystem players such as third-party developers, partner companies, vendors and even competitors can be digitally connected. Together, they enable new mobile apps, products and even entire business models,” Cohen says.

Choose the right approach

It can be tricky for CIOs to select the digital banking delivery approach that is best suited to their banks’ digital strategy, business requirements and technological and organizational capabilities. “CIOs must realize that choosing a digital banking approach is not solely a technology decision,” explains Cohen. “They can’t rely on traditional parameters like asset size or number of customers.

Instead, CIOs must work with business leaders to identify the bank’s most critical requirements for digital banking.” CIOs’ next step is to assess and evaluate their banks’ capability to support digital banking by assessing their ability to embrace bimodal Mode 2. “Only then are they able to make an informed decision on whether the multichannel or the digital platform delivery approach is right for their organization,” Cohen concludes.

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