OFFICIAL PUBLICATION OF THE ARIZONA BANKERS ASSOCIATION

Pub. 11 2021 Issue 3

Digital Banking Facing Operational Challenges and Strategic Opportunities

Digital Banking: Facing Operational Challenges and Strategic Opportunities

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Digitalization continues to change the way financial institutions interact with clients. Lower levels of face-to-face contact, combined with higher expectations related to turnaround times as well as digital channel data volume, have created unprecedented operational and financial challenges for banks and credit unions. Additional digital-related pressures that demand management focus include increased card-not-present transactions, requirements for new KYC solutions, higher levels of fraud, and staff-related issues ranging from remote workforce oversight to recruitment and training.

Consumer and business customers have embraced the digital environment for information transfer, efficient inquiry and a broad range of transactions. The marketplace was primed for these changes, as the technology necessary to transfer information digitally has long been available in homes and small businesses. Digitalization has made some services not previously available on a large scale accessible to a much broader demographic. Information once captured by individual business units and siloed at financial institutions is now available for application across a growing inventory of financial products and services.

Over the past 18 months – driven primarily by pandemic-related market factors – many financial institutions and their vendor partners have accelerated the timelines for developing their digitalization and automation capabilities. Given the rapid implementation of those solutions, it can be beneficial to identify some of the challenges and opportunities that currently exist.

Two Operational Challenges Related to Digitalization


In today’s banking environment – which requires specific skills sets to support rapid response, accuracy, compliance and frictionless customer experience – the value of the generalist has been diminished, and there is now a premium on operational specialists. The demand for those individuals, however, currently exceeds the supply in many areas. At least in the short term, this requirement may be best supported by a combination of experienced third-party partners to ensure that cybersecurity, fraud mitigation and technology innovation are delivered at appropriate levels.

Another operational challenge related to digitalization involves data integrity. Financial institutions must ensure that incrementally larger volumes of client data ingested into the system have proper validation, appropriate internal user rights, and necessary data security and privacy controls.

Another operational challenge related to digitalization involves data integrity. Financial institutions must ensure that incrementally larger volumes of client data ingested into the system have proper validation, appropriate internal user rights, and necessary data security and privacy controls. While most organizations have managed this function well in the past, increased volumes of data are likely to tax existing resources. Specialized tools, including optical character recognition, may be beneficial to verify and catalog this information. Third-party partners can provide temporary or permanent solutions for both staffing or technology-related requirements and may also help to keep incremental costs in line.

Two Strategic Opportunities Related to Digitalization


Increasingly, consumer clients are applying enhanced budgeting and personal financial management (PFM) tools. To date, those tools have been reactive and static; but with effective collection and utilization of digital data, they can be dynamic and valuable. Ideally, financial institutions should offer timely and appropriate products such as PFMs without requiring customers to provide duplicate information that has been previously obtained or stored. Data warehousing tools are available to facilitate that convenience.

Digital data can help deliver a positive customer experience only if it is available to quickly and accurately resolve client requests, inquiries, and disputes. Whether the customer interaction involves an automated attendant or live support, having a complete understanding of the client relationship and specific transactions is essential for a successful, frictionless outcome.

Another significant digital opportunity involves small business relationships. Digitization of inbound and outbound information has created new ways for financial institutions to expand their role as trusted advisors. Most small-business owners have multiple responsibilities and employ knowledgeable third parties to assist them with tasks ranging from accounting to payroll and benefits. Financial institutions can provide small business clients with cost-effective and targeted information related to those functions to solidify and expand those relationships.
Cash management solutions, for example, are no longer exclusively for larger clients; now can be made available efficiently to a broader client base. Online banking is a useful platform to deliver those meaningful tools to your small business clients, as a consolidated view on an ongoing basis would be an appreciated service by most small-business owners.

In summary, interaction with clients in a digital environment can increase access to data across a broad range of applications; lower servicing costs; and free up employee time, allowing them to focus on higher valued tasks. A regular review of your financial institution’s existing digital tools and skillsets, as well as new opportunities that arise, is the best way to ensure healthy and long-term relationships with clients and to maintain competitive standing.

Robert Vandenbergh is a Strategic Advisor for Quinte Financial Technologies. He has nearly four decades of banking experience and previously served as Regional President and Chief Operating Officer of a $6.5 billion bank holding company in the Northeast.

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