Here at Mercator Advisory Group we just finished a quarter of scrutinizing mobile payments, and one of the insights that Ken Paterson had was that mobile platforms are increasingly driving strategy and development across the enterprise. As mobile becomes a preferred channel for more and more people, financial institutions have to take that into account when making new technology investments and developing new products.
Last month, I participated in a podcast with Ashley McAlpine and Amanda Atcheson of CO-OP Financial Services, where we discussed the broader topic of digital transformation, based on a white paper Mercator co-authored with CO-OP Financial Services earlier in the year. CO-OP has made digital transformation the cornerstone of its strategy for 2018, and the mobile channel is an important part of that strategy. In our analyst roundtable on mobile payments last week, I remarked that the line between online and mobile is increasingly blurred. Many people work on laptops rather than desktop computers nowadays, and if you go to your local Best Buy, most of the laptops are of the “hybrid” variety, allowing you to fold back the keyboard and use the device as a tablet. Should these devices be considered “mobile”? For that matter, as smartphones become more and more capable, it is becoming possible to leave the laptop at home or office and do your work entirely on your phone. In our podcast, I remarked that one of the first things I do when trying out a new business is to see if they have an app for my iPhone. Digital-first enterprises like Amazon are increasingly setting customer expectations for service, including such conveniences as artificial intelligence-driven recommendations, personalization, and “one-click” transactions.
In order to meet these customer expectations, financial institutions have to abandon old ideas of “owning” the customer relationship and start thinking of how they add value as part of a broader ecosystem. This ecosystem includes device manufacturers, web services, third-party processors, retailers, and independent software developers. Financial technology firms, or fintechs, can be important partners in leveraging the latest user experience and development methodologies to deliver traditional financial services in a better way. Third-party processors such as CO-OP have an important role to play in vetting and integrating fintech solutions so that financial institutions don’t have to do multiple integrations with small companies that may not be able to scale.
While there are obvious risks associated with cooperation in the digital ecosystem, where you don’t control the entire value chain, the growth potential is much greater. Geography no longer need be a limiting factor; in the digital world, a good solution can come from anywhere in the world. Financial institutions can deliver their services wherever the customer happens to be, rather than forcing them to use a particular app or website or branch. The traditional strengths of financial institutions: trust, stability, reliability, and customer service – are just as important, or more so, in the digital world, where services tend to be offered “as is,” and click-through terms of service spell out in ALL CAPS that there is no guarantee that they will even work, much less fulfill your needs. Financial institutions are used to being held to a higher standard, and customers count on that, even if they are tempted by the quick and easy path of the fintech.
In short, digital transformation is a challenging but necessary journey. It is a marathon, not a sprint, and financial institutions need not fear it if they keep their core value proposition in mind.