Digital Transformation Is Redefining Customer Relationships: Are You On Board With The Digital Economy?

Davor Ebling

The digital economy has arrived. Many banks are updating their processes to streamline data input. But some haven’t yet implemented the tools available to improve customer relationships. With the right digital elements in place, your customer relationships will grow in number, improve in quality, and become powerful data reserves for your business. Even more importantly, there’s more focus on risk mitigation. Digital elements can improve this part of your business as well.

How digital connectivity boosts customer relationships

It used to be common to greet your clients at the door with a handshake. You knew their name and they knew your name. Lending decisions happened based on personal relationships, not just the cold, hard facts of a credit score. Today, you can begin to reach back across that bridge and provide more effective communication with your customers using digital tools. How can you build an intimate relationship?

Focus on the benefits of an omnichannel experience. When you interact with your customers on a real-time basis, you can achieve much more. By proactively managing your customers’ financial matters, you can become an integral part of their daily lives

Marketing is personalized

Creating a digital level of connectivity starts with marketing. By tapping into social media, account history, and other external data sources, it is possible to create personalized marketing campaigns for individual clients. For example, the customer who’s talking about buying a home on Facebook may need a loan. Your digital tools pick up on this. Based on this information, you can create a personalized email or even phone call offering a low-interest home loan, specifically tailored for the individual customer. Marketing changes from what the banks want to push to what the individual consumer needs.

Launch something new quickly

Your customer data shows your customers want to refinance but don’t want to deal with the hassle. You know area home values are up. Now you can launch a new product, such as a digital refinancing tool, that streamlines the process. It makes borrowing easier, which is exactly what your consumers want. With the ability to tap into what consumers want and create a new product to match it, it becomes easy to grow your client base. Ultimately, it allows you to launch products faster. This improves your turnaround cycles at rates not previously possible.

Allow cashless mobile payments

A digital economy means mobile payment tools. Banks that are not tapping into the world of mobile device payment apps will be left behind by more innovative companies such as Google and Apple. Both of these companies, along with many others, offer these tools. However, cashless mobile apps are not difficult to implement, and there’s virtually no consumer education required. Mobile devices can execute nearly all types of financial transactions directly.

The digital revolution accelerates replacement of cash by electronic payments, micro-payments, digital wallets, and e-currencies. Cashless payments offer a few benefits, including increased customer, convenience, satisfaction, and loyalty. In addition, it allows banks to reach new customer segments, such as millennials, who expect to bank on their mobile devices. It also stops the costly and time-consuming process of collecting cash payments, helps reduce risk, and drives incremental fee revenues.

Improve financial advice through robo-services

With nearly 50% of wealthy individuals controlling their investment decisions by themselves in 2014, according to Statista.com, it’s never been more important for banks to facilitate that process. Robo-investors are more than a possibility; they are reality. Robo-advisors provide algorithm-based financial advice and portfolio management without the need for human interaction.

Banks that offer robo-advisors open a new segment of customers without a large investment in staffing. Formerly, this type of investment system wasn’t accessible to banks without a large investment and profit margins were too low to make it lucrative. Today, it is highly accessible and a viable market.

Customer relationship engagement through digital banking operations easily opens doors for financial institutions while improving the way they interact with and reach customers. It even opens the door to new customer bases. Yet many banks haven’t taken this step due to concerns about risk.

Managing and reducing risk through financial technology enhancement

New laws, such as the Dodd-Frank Act, require financial institutions to stress-test their financial service providers. This makes it harder for banks to reach out to new segments or take on more high-risk lending. In addition, new financial surveys show that the cost of regulatory compliance is impacting the prices as well as availability of products and services. The good news is that digital tools can help to minimize this risk.

How can moving towards a digitally enhanced business format actually reduce your risk?

Data is the answer. A digital transformation creates new opportunities for collecting and using data. Every financial institution has access to vast amounts of highly useful data. However, this data has always been out of reach because of its size and the overall difficulty of breaking it into meaningful pieces. With new digital customer engagement and better collection tools for such information, it becomes incredibly clear what type of risk is present.

Data provides insight into the risks by allowing easy comparison of individual data points. It also allows banks to make better lending decisions based on more information. This reduces risks and improves outcomes. Big Data opens new opportunities for banks in every sector.

The digital economy is here, and it isn’t something businesses should worry about embracing. Moving towards digital transformation in banking improves overall costs, boosts customer relationships, and reduces risk. With enterprise application software, it becomes effortless and affordable to tap into these new customer segments and improve your bank’s bottom line in a digital world.

For more resources on this topic, check out the SAP Transforming Banking E-book.


Davor Ebling

About Davor Ebling

Davor Ebling is global director of Digital Banking at SAP.