Putting the horse before the cart: digitalisation as the basis for differentiation

The Retail Banking Compass 2018 study by the Munich MOONROC Institute urgently warns against turning digitalisation into a panacea. According to one central thesis, if everyone ‘goes digital’, this in no way changes the balance of power of the financial institutions as a whole. The competition will be conducted in a different or additional area. It costs a lot of money and everything stays the same. What role can digitalisation play in differentiating the banking industry?

The customer and their experience are currently booming across all industries. Not only is ‘customer experience’ on everyone’s lips, but it is increasingly being realised in companies with its own job profile: The CXO (Chief Experience Officer) deals with the experience that services and products provide. They coordinate all aspects of the user experience. In a recent study, the market research company Lünendonk surveyed around 120 representatives of this profession from large companies and corporations. On average, companies will be investing more than four per cent of their sales in 2018 in ‘projects to modernise the customer interface and develop a digital customer experience’. Last year, the rate was less than three per cent.

Customer focus leads to better business results

A large-scale, global survey of marketing, creative, and technology professionals conducted annually by Adobe also highlights the importance of the customer experience:

  • “Asked about the single most exciting opportunity for the year ahead, ‘Optimising customer experience’ (19%) again comes out on top, ahead of ‘Data-driven marketing that focuses on the individual’ (16%) and ‘Creating compelling content for digital experiences’ (14%).”
  • “Organisations with a ‘Cross-team approach with the customer at the heart of all initiatives’ are nearly twice as likely to have exceeded their top 2017 business goal by a significant margin (20% vs. 11%).”
  • “Organisations that ‘have well-designed user journeys that facilitate clear communication and a seamless transaction’ are 57% more likely to have significantly surpassed their 2017 business goals (22% vs. 14%).”

For Switzerland alone, Swisscom‘s FinTech Start-up Radar last autumn counted 208 technology providers in the financial sector that cooperate with banks in a variety of ways. There is, however, a downside to the room for manoeuvre that this opens up: FinTech’s offer nothing more than tools to implement strategies. Firstly, the organisation’s own brand essence, its core competence, that which constitutes the financial institution’s identity, must be mapped out in order to then be able to be transported to the customer by means of suitable digital applications.

First the way, then the means

The idea of the universal bank as a shopping centre, under whose umbrella customers can freely choose between all kinds of financial products, offers itself as a future scenario for very few institutions at best. However, a digital banking hub as an open banking platform allows an organisation to accentuate its own image with a few of its own or third-party applications – be it with an app for simple P2P (Peer-to-Peer) payment to address younger customers in particular, or with an application which wealthy customers can use to keep an eye on their investments at any time.

A company may also come to the conclusion that cooperation with larger players makes sense and integrate its own offerings into their ecosystems. Another way would be to sell special products via platforms operated by technology companies. If financial institutions position themselves distinctively and with a clear value proposition, they can improve the longer term customer experience with digital applications. Digitalisation itself is not a strategy, although today there is probably hardly any business model in the banking world that could do without a digital foundation.

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