Meeting your customers’ needs through digital transformation

The pandemic has played a big part in supercharging the digital transformation trend in financial services. In 2020, online banking usage increased by 23% and mobile banking use was up 30% over the previous year. This represents an acceleration of a long-term shift toward digital banking. According to a 2022 survey from Ipsos and Forbes, 78% of consumers prefer to bank digitally.

For traditional regional and community financial institutions that have built their business on mutual trust, impeccable reputation and outstanding service, this transition to the digital realm presents a challenge. According to a national study of 1,500 U.S. consumers, digital banking engagement is associated closely with higher customer penetration. Yet, according to the same study, accountholders at regional and community financial institutions are less likely than any other group to believe their financial relationship will grow over the next 12 months.

Digital transformation is imperative for financial services organizations. This is because it’s the clearest route to addressing changing consumer expectations and it enables financial organizations to create efficiencies in back office operations that will enable a more agile, cost-effective and competitive enterprise.

The need for digital transformation is clear. But the next question for financial institutions is where and how to prioritize their efforts. Should they focus on implementing new front-end products to address the customer or member experience (CX) or deploy leading-edge technologies like AI, RPA and data warehousing to create efficiencies in the back office?

We will explore this question in a series of three articles on digital transformation in banking. In this first article, we discuss how banks and credit unions can best address their consumers’ demands for a full-service digital banking experience.

Five key questions to ask before you begin transforming your CX

Before reimagining the customer experience for the digital age, it’s important to ensure any transformation projects fit within the organization’s larger strategic goals and objectives. Answer the following questions to help define your priorities:

  1. How does the branch fit in with your digital transformation plans? The role of the bank branch has been evolving for decades. Traditionally the center of activity for routine transactions like check deposits, cash withdrawals and loan payments, such processes have largely migrated to smart ATMs, online banking and mobile apps, leaving relationship-building as the highest and best value of the branch.

Many consumers seeking financial advice value in person interactions, and the branch is where they go to have their financial problems solved. To make the most of this opportunity, it’s important to staff offices with a range of expertise.

“These days, customers who make the effort to visit a branch probably have a specific problem they need addressed,” says Melissa Poole, partner at HORNE. “Bankers need to consider how to make that a seamless experience. For instance, there should be someone in every branch who is an expert in all of the bank’s digital platforms and can show any customer who walks in how to accomplish what they need to get done on those platforms. The role of the branch is really evolving toward having people who are experts in using the technology.”

As you develop your project plans, consider how the branch will best complement your digital services:

  1. What are you trying to accomplish with your branches?
  2. What tasks bring your customers or members into the branch today?
  3. Do your customers feel irritated when they need to visit a branch?
  4. Is your branch the right size and staffed with the optimal level of expertise?


  1. Do you understand your customer segments? Before you develop your digital banking project plans, you need to understand the needs of your existing customers or members. This is no easy task, as most institutions serve an array of demographics, each with their own unique needs and desires. Moreover, these same institutions often have difficulty accessing and analyzing the relationship and transaction data they have within their core—information that is critical to developing an understanding of consumers’ needs. That is why 82% of financial services executives surveyed say they struggle with identifying new customer segments.

“It’s about the generational shift at this point,” says Zak Kinchen, director of Financial Institutions at HORNE. “Banks must consider how to best attract the next generation of consumer at younger ages so that they continue to bank with you going forward.”

To fully understand the needs of your customer base, begin by analyzing the data you already have. Dig deep into the transactional data flowing through your customers’ checking accounts to see how and where they are earning and spending their funds. Then match that up with demographic data (age, income, geography, employment) and the additional products they have with you to create clear customer segments. Lastly, take each segment and begin mapping their unique customer journeys.

  1. What are your customers demanding from you? Once you’ve identified the core segments you serve, you can begin understanding their needs. Within each grouping, review how regularly they log into online banking and the mobile app. Have they applied for a loan or mortgage? Do they apply online, over the phone or in person? What other digital financial services do they use outside of your institution — financial aggregator tools, budgeting tools, investment apps, P2P and digital wallets like Venmo, PayPal, Zelle or Apple Pay?
  1. Are you meeting your customers’ needs right now? The next step is to perform a gap analysis between your current offerings and your customers’ needs. You may have a mobile banking app, but does it offer all the transactional services your customers require? Perhaps it offers basic functionality like balance inquiry and transfers, but they may be using other services (read: fintechs) to transfer money to friends and family, invest in crypto-currency or manage their retirement assets. You may offer an online loan application, but is it simple to use? Or do they still have to visit a branch to provide proof of income and sign the application? These could be frustrating steps that may result in a high percentage of application abandonment.
  1. What are your competitors doing better than you? Lastly, compare how you are currently serving your customers today, versus the competition. If many of your customers within specific generational or lifestyle segments (say Gen Z) are leaving your institution, where are they going? Which segments are underrepresented in your portfolio?

There’s a good chance that a portion of your customers are moving to innovative fintechs, challenger banks and big banks. According to research from Capgemini and Efma, “75% of customers surveyed are attracted to fintechs’ cost-effective and seamless services, significantly raising their digital banking expectations. However, traditional banks are struggling to deliver, with 70% of banking executives concerned they lack sufficient data analysis capabilities.”

Once you’ve answered these questions, it’s time to develop your digital transformation implementation plan. Be sure your plan aligns with your core mission and values. As a last note, recognize that digitization must support your overall strategy for growth and profitability, not be your strategy.

“It’s important to recognize that digitalization is a tool used to support your broader strategy,” says Tim Morgan, a partner at HORNE. “Your strategy itself isn’t to be digital — rather it must be aligned with your mission and vision, and how you serve your clients, and then digitalization helps you get there. You need to start there, by understanding how your strategy aligns to your mission and vision, and then how digitalization can support that.”

In the next article in this series, we will explore the back-office side of digital transformation and offer some tips and best practices to ensure success along your road to digital optimization.

HORNE’s Financial Institutions team is here to help guide you on your digital transformation journey. Contact us today.



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