07/13/2020 | Press release | Distributed by Public on 07/13/2020 06:14
Building successful client relationships is the key to long-term growth for every financial institution (FI). But clients' needs and expectations are changing fast, and the most agile FIs will have to be flexible enough to keep up. So, how do today's financial institutions create the kind of successful frameworks that help them grow and sustain long-term client relationships? The answer is modernization.
If you're in your 40s or 50s, there's a good chance you grew up going to your local bank branch as a family. Maybe you put on your Sunday best to walk to the branch and come home with a new account, a new passbook and maybe a lollipop. Your ATM or debit card would arrive in the mail weeks later.
Adults who banked that way, now in their 70s and beyond, are generally still doing so, relying on their branches for every transaction. Their children (that's us) are now in their 40s and 50s, and we're the ones who embraced online banking, and our kids are doing all of their banking from apps on smartphones and may never have set foot in a branch.
Modernization for today's FIs means being able to meet continually evolving expectations and easily and equally serve the diversity of customers today and in the future. Those new banking customers might be banking from their smart devices, smart appliances, smart cars, smart AI personal assistants ('Alexa, pay my bills') or whatever 'smart' comes next. And COVID-19 has only accelerated the changes, opening up new shifts toward contactless payments, online/app-based banking and other necessities that consumers will continue to push for.
What does that mean for FIs? Most are heavily built around an aging central core software solution. When new, the legacy core was probably a cutting-edge tool specifically designed for the best of banking. But now, those legacy systems are getting older, with limitations that are holding FIs and their customers back from modernized banking opportunities. Gartner is reporting that organizations' IT operating costs are increasing every year as systems age, and modernization efforts aren't keeping up. If today's FIs can't stay ahead of the shifts, they're going to start to see serious issues with the client retention they rely upon.
New challenger banks, unencumbered by legacy technology, are growing at exponential rates by leveraging modern architectures. These banks can offer better products, faster, via more cost-effective, cross-channel solutions.
For example, one challenger bank quadrupled its accounts from one million to four million in one year and doubled again to eight million the following year. Its customers are leaving traditional banks that haven't yet figured out how to build the business case for modernizing. As my father used to say, 'If you don't consider something a threat until it gets close to beating you, then you're too late. They've already beaten you.'
The first step for FIs looking to get ahead of the curve is to make sure you're doing everything you can right now to cement your client relationships. Make sure customers know you're on their side and make their priorities your priorities. Establishing trust will help customers feel connected and be more likely to stick by your side as you navigate the changing world of modernized banking.
Strong FIs will also want to make sure they have strong leaders in place who are ready to drive big initiatives toward modernization. Leaders who encourage communication, make space for experimentation, empower their teams and encourage big thinking will create a new class of FI professionals who are ready to take customers into the future of banking. That future offers benefits that will continue to drive long-term success for the FIs who embrace it, including better customer experiences, more revenue generation, sustained cost reductions and improved risk management. FI professionals must be able to fulfill specific roles tasked with driving competitive strategy, managing the shift to cloud-based IT configurations, owning institutional knowledge and maintaining the systems.
Next, you'll need to consider your options to begin the process. Gone are the days when your only modernization option was to rip and replace your core systems. Today's market offers strong tools and resources designed to help you take an easier, componentized approach to modernization. Whether your FI is ready to entirely replace your legacy application or looking to step your way through the process, embracing the drive to modernization will deliver a competitive advantage that will secure your long-term business success now and as the market continues to shift.
Real-time solutions are going to play a huge role in the path toward modernization. As the modern banking platform continues to evolve, FIs will continue to look for tech-based, cloud-capable solutions that offer all the needed functionality for the branch, website and/or app with continuously improving convenience and security. As modernization becomes the way of the future, FIs need to stay focused on taking advantage of new solutions, tools and resources that will support innovative options for customers. No matter what solutions you choose, as long as you're focused on creating value for your customers as you modernize, you'll be able to deliver continuous wins that translate to business success.