Podcast: Why an FI’s digital maturity matters

Whitney McDonald 0:03
Hello and welcome to the buzz of bank automation news podcast. My name is Whitney McDonald and I’m the editor of bank automation News. Today is November 21 2023. Joining me is Robin Smith. He is the chief revenue officer of praxent and he was appointed CRO in September and brings decades of experience in financial services and digital transformation. He is here to discuss how financial institutions can understand where they stand in terms of digital maturity and competitiveness.

Robin Smith 0:30
This is Robin Smith, I’m the Chief Revenue Officer for praxent and I’ve been involved with FinTech work for about the last 30 plus years, primarily from the core banking side of the equation. And as customers members and technologies have advanced and evolved, my role in working with institutions around you know, core banking type of activities, has kind of ever increasingly become more complex as the ecosystem around core banking has evolved in, you know, the surrounding solutions that are required to really support a bank and completely from a technology perspective have evolved, but particularly over the last several years, you know, as the emphasis has shifted towards advanced digital enablement, across the full spectrum of an institution’s offerings, a lot of my time has been spent in helping institutions, you know, create that ecosystem that allows them to, you know, digitally enable their organizations, as you know, customer demands have increased around that, that arena. And so that’s really kind of what led me to, you know, come to work and to work with practice. And, you know, as I’ve worked with both on the consulting side, as well, as, you know, on the product side, the solution side of the business, increasingly, you find, you know, both credit unions, banks, fintechs, a variety of different folks are struggling and are frustrated with the ability that they have to create your unique customer experiences, member experiences with their digital offerings. And so when you look at practice, and as a company, we are a financial services, digital consulting and development firm. And really, what we help our clients do is solve those frustrations, the frustrations that they have, with creating unique digital experiences for their customers and members. And we do this because, you know, we, we specialize in all things digital for financial services, and creating, you know, ways that they can leverage their legacy system technology, but do so in a more advanced digital environment. We’ve done over 400 digital transformations, in that regard, and again, exclusively focused on working with banks, insurance companies, credit unions, anybody that’s in the FinTech space, to help them achieve that. So that’s kind of what I do. And, you know, we’re, we’re looking forward to the rest of our conversation today.

Whitney McDonald 3:00
Great. Well, thank you, again, for joining us on the visor. It’s great to have you. Now, before we get into the technology that financial institutions can really implement, let’s get started kind of with a setting of the scene for the state of digitization today, within the finance industry, it’d be great if you could talk us through why it’s so important that financial institutions are investing in technology right now just keeping up with consumer demand and being competitive in the market. Can you talk through that importance? Yeah,

Robin Smith 3:31
it’s probably a worn out analogy. Because you hear it a lot. But I think you have to start from, you know, a consumers perspective, and what they expect in terms of digital experience. And you know, the foundation for that the standard bearer on that the Northstar on that is people look at their digital experiences, and they’ll immediately compare it to the experiences that they have from an Amazon or the experiences they have, from a Netflix or from some of the other large, you know, organizations that are exclusively, you know, digital and focused on, you know, enabling, you know, their customers to interact with them digitally. And so the expectation the bar is set very, very high in terms of what consumers Small Business commercial, regardless of what segment of the market you’re talking about. They all have very high expectations on what a good digital experience looks like. And so I think that’s the challenge that financial institutions face, you know, there’s an expectation to have very rich, data driven, digital experiences, very customer friendly, digital experiences, you know, that standard that’s been set, and they struggle with how to do that in a financial services arena. And a lot of that challenge that they face is because, you know, they have, in many cases, very old legacy systems. Have that sit behind the digital customer experience? And so it’s not only the challenge they have to upgrade and to modernize those legacy systems, but then also how do they take those legacy systems and empower them, you know, in the right way to service their customers, you know, with high quality digital experiences. So I think that’s where we start, right is, is that, you know, every financial institution out there is faced with that same challenge as to, you know, I’m going to be competing against, you know, expectations that are set by the likes of Amazon. But I’m also going to be competing against folks that are, you know, non traditional financial institutions, be it folks like chime, or borrow money, or, you know, or other Neo banks that have popped onto the market that I’m competing against, that’s focused on that customer experience. And so that’s the real challenge banks have banks credit unions have is how do they compete in that marketplace? With very, very high expectations? Does that answer your question? Yes,

Whitney McDonald 6:05
thank you. No, before getting into where you can invest, or where you should be investing, let’s talk through this, this starting point. So how can financial institutions determine where they stand today on this digital banking maturity spectrum? How do they analyze Okay, here we are today before getting ahead of themselves into where they need to go.

Robin Smith 6:30
Great question, Whitney. I appreciate it. You know, one of the things that we’ve spent a significant amount of time on, you know, you know, with specific clients, as well, as, you know, in a more broader market sense, is, you know, creating and executing on helping an institution determine that, the answer to that question, through a, what we refer to as the digital maturity model, where basically, it starts with a heuristic view of what are they doing today? Right. So taking a look, I think that’s the first step towards remediating or improving or enhancing any of your digital experiences, is really getting a solid foundation of what are you doing today. So with the digital maturity model we’ve developed and that we’ve worked with, and, you know, a handful of our customers is basically about a 12 point, you know, review of their current digital experiences, and then basically working through, you know, looking at every aspect of how they interact with their customers and their members, from an attraction perspective, from a account, origination perspective, from a servicing perspective, from a transaction processing perspective, looking at, you know, their entire experience that they have today. And then level setting around how does that compare to other institutions in the marketplace. So for instance, was working with a small bank in Southeast Texas, who had basic, you know, internet banking capabilities that they enabled their customers with, but there was no transactional support, there was no account opening support, there was no, you know, ability for you to initiate bill payment transactions, you know, those types of things were not present in their current digital experience. So establishing, you know, that you know, what level they are. And we have kind of five levels that we talked about in terms of where an institution falls, establishing what level you’re at today. So that then you can target where you want to be. And then completing, once you’ve completed the analysis of where you are, today, you’ve assessed where you want to be, then that gives you the framework that you can build a roadmap around in terms of how you’re going to get there, whether that’s through working with a firm like practicin, whether that’s through working with one of your ecosystem providers, to you know, enhance their solution. It’s, then you’ve got that, that that roadmap that you can then work off of to achieve more and more maturity, in terms of what your digital experiences are. Does that make sense?

Whitney McDonald 9:16
Yes, it does. Now, when it comes to monitoring what you have versus what you want to what you want to implement? How do you look at your own digital usership? what your clients are asking for where you should be investing to make sure that you are maintaining a strong digital presence? And what could some of that technology look like that would help you achieve more of a digital presence that your clients are looking for?

Robin Smith 9:47
So I think there’s two sides to that equation. There’s a functional side to that. There’s a functional side of what functionality do I need to have present in my digital experience? You And then secondly is what’s the underlying technology, you know, that is supporting that functionality. So on the functional side, what you’ll see, particularly with a lot of community banks and credit unions, is you’ll see that they’ve done the basics, right, as I was describing earlier, they’re providing information they’re providing, you know, where their branches are, they’re providing, you know, what types of services and, and product offerings they have. But it’s highly informational in terms of the functionality. As you move up the maturity curve, what you find that this is the functionality needs to start progressing towards more transactional type activities and more directed informational type information for a bank’s customers in a credit unions members. So for example, being able to incorporate from a functionality standpoint, that if you’re a member of the credit union, and you want to, you know, apply for a new loan, and you want that loan to be processed, you know, from a, an automated perspective, incorporating that type of functionality, you know, into your digital experience, is part of moving up that curve, moving up that maturity curve, to the far end, right. So you know, if your informational today, you know, which we would consider to be a level one, then in a level two type scenario, you’ve added new account opening, or you’ve added new account opening for consumers, and for folks like you and me. But then as you move to the next stage, where you’re, you know, optimizing that maybe you’re extending that type of capability to your small business customers. So it’s a, an evolution, you know, of functionality as you move up that curve. Now, identifying the functionality you want to, you know, incorporate, you know, as you move up, the maturity curve, is probably actually the easy part of the equation, right, in terms of, you can look at what your peer group is doing, you can look at what your competition is doing, you know, if you’re competing against Bank of America, you kind of know what that threshold is. And so you can identify fairly ease, delay the functionality that you want to add to, you know, mature from a digital experience standpoint, where the real challenge becomes, then is the underlying technology that you’re using to do that. So things like what types of mobile apps are you going to use? Are you going to, you know, create mobile apps for both iOS and Android? Are you going to do that in a native fashion using, you know, react and some other tools to help you, you know, create those, you know, mobile experiences? What kind of data do you need from your core and your legacy systems to be able to feed those digital experiences? And that’s where really the long pole in the tenant is? What kind of technologies do you have in place today? What kind of technologies do your other vendors employ? And how easy is it then to use those technologies to be able to, you know, incorporate that functionality. So if you’re working with vendors who haven’t provided or don’t provide, you know, API enabled micro services enabled, you know, technologies with their solutions, it becomes much more difficult to be able to architect, you know, those digital experiences from a functionality perspective. So part of what we do with our clients is not only review the functionality, but review all aspects of their technology stack. And in many cases, they own that technology stack. But in a lot of cases, particularly with community banks, and credit unions, they’ve outsourced that technology stack to, you know, some of the major providers in the industry like Fiserv FIS Jack Henry, you know, other people like that. And so you’ve got to then, you know, connect the dots, right? You’ve got to connect the dots between what capabilities, what technology capabilities are available from your vendor community, and which ones you have internally within your organization? And how does that fit in then to you being able to fulfill you know, what those functional requirements are that you need to increase, you know, the digital experience and improve the digital experience for your customers and your members. So that makes sense.

Whitney McDonald 14:27
Yes, and I know that you’ve talked through the functionalities. I know you talked about the different levels that you could implement, you gave some great examples of some of the technology that is implemented, and I know that you could go very basic on the needs depending on what your clients want, or you could go kinda way up the charts go crazy with some of the capabilities that that some FIS are implementing just kind of depending on the competition you’re keeping up with. Maybe we could kind of talk through some of those non negotiables what’s the technology that’s just like a must have maybe Give me more on the basic side of what’s a good building block.

Robin Smith 15:07
So at the very least, as, as we see it with with institutions that are looking to evolve, and to move up that curve, they have to have kind of the fundamentals that you and I expect as consumers, right. So, you know, there’s your basic snacking transactions, I call them snacking transactions of, you know, what’s my balance, when, what were the, what were the transactions that I processed yesterday, I used my debit card last night, you know, is that showing up, you know, on my transaction history, I mean, those are kind of basic fundamentals from a functional standpoint. In today’s world, though, you also have to, you know, consider things like electronic bill pay, right, your ability to pay your utility bill, you know, from the website, or to pay your mortgage payment. From, you know, your the website that you have your, your primary banking relationship with, those are really kind of table stakes. From a functionality standpoint, if you don’t have that fundamental transactional capability, then you’re really at risk that your customers are going to go somewhere else are going to perform those traction those transactions somewhere else. And every time you know that a customer starts performing transactions, you know, through their primary financial institution, that relationship becomes stickier and stickier, I don’t know, if you’ve ever had the experience of having to move from one bank or one financial institution to another and set up your online bill pay, you know, solution, again, right. So the you know, you have to go through everybody you’re spending bills to you have to reset it up on a new site, they may be using a different platform for bill pay. But so once you secure your customers and your members with those types of transactional activities, you’re you’ve got a very sticky relationship that you can then grow, right. So I would say those fundamental transactional type of capabilities are really the table stakes for you know, where you need to be. And then if you’re below that, that needs to be your highest priority. As you then move forward in terms of digital maturity, you start to get into those topics around, okay, I’ve attracted you to my website. Now, how do I get you not just to transact on my website for those daily transactions? But how do I get you to initiate new relationships with the financial institution, whether that’s opening up a new account on the deposit side, whether that’s applying for a loan, applying for a mortgage, those types of activities become the next stage. So that’s where we see the progression. I think, from a table stakes on the technology standpoint, that’s where it becomes real, you know, it can becomes real critical that a financial institution is working with their, particularly their core providers to make sure that they have easy access to the data, easy access for integration, you know, that whether that’s enabled through micro services, or through open API’s, those become kind of the the long pole in the tent for them to work through with their core providers as to whether or not they have that kind of support, and how easy and how cost effective the core provider can make that support. And that’s some of the work that we help our clients navigate is not only working with those technologies that the vendors have, but you know, putting in other technologies that will ease that integration.

Whitney McDonald 18:48
Yeah, absolutely. I mean, you talk through those, those basic kind of getting the clients a frictionless experience from the get go, but also retaining that client as well seeing how else they can interact with the bank, and where else there’s frictionless experiences to be had with the technology at hand. Now, speaking of what consumers want, and the frictionless experiences, wondering if we could kind of get out the crystal ball here, look ahead to 2024. Any thoughts on how consumer demands might change or what digital capabilities might rise up as most popular next year? Just kind of wondering what you’re looking for or watching for in 2024?

Robin Smith 19:30
But you can’t you can’t address that topic. I don’t have that ball. I wish I did. I probably be with Warren Buffett right now. Case, but you can’t have the crystal ball conversation moving into 2024 without dealing with the 800 pound gorilla that’s on the table right now, which is all things generative AI, right. So when you think about the popularity and the emphasis that has gone on on for the last year with the introduction of tat GPT, and all the other generative ATM AI projects that are and solutions that are out there, I think that’s one of those things that everybody has their eye on. And everybody is trying to figure out where that fits into the whole, you know, ecosystem of the digital experience for customers. And so, you know, money 2020 This year, which was, you know, a major conference back in October, that was probably one of the hottest topics that money 2020 was, you know, the use of generative AI, and how and where you incorporate that into, you know, the overall, you know, experience in financial services. So, I think that, to me, is going to be kind of the area in 2024, that gets a lot of attention. You know, there’s been a lot of work over the last few years, you know, on pre generative AI types of activities, right, so you’re on a website, and based on your previous interactions, we’re recommending this next product, right, or we’re recommending, you know, this approach to your investment management criteria. That’s all been pretty much done with a data analytics and data science and other tools. And I think what’s going to happen as we move into 2024 and beyond, is there’s going to be much more emphasis on the real time nature of that, and performing those types of activities via the integration of generative AI, that you’ll see more and more institutions start to look at, you know, using AI to empower their websites and their digital experiences, you know, across channels and across platforms in a more intelligent way. You know, that’s, that’s got lots of positive benefits to it. But there’s a whole lot of issues around that in terms of, you know, you know, regulatory issues, identification issues, all of the issues that you’re hearing about K, what about, you know, AI, are going to be forefront issues that have to be addressed, it’s not as easy as turning on a chatbot. And, you know, being able to script that chatbot, once you start to invoke generative AI into the equation, there’s a lot of variables there that you don’t have any control over. Right, is the information being presented that accurate? Is it, you know, in compliance is that, you know, causing you to go down a path that, you know, is reliable and trustworthy, you know, for your customer to work with? You know, that’s one of the things that banks and financial institutions credit unions have, you know, in their, in their, you know, strengths is that they’re considered very highly trustworthy organizations. And so when you start to bring in AI into the equation, you’re you’re opening up that field of information as to how reliable and trustworthy that information is that then your consumers are going to use, you know, to drive some of their banking and financial services activities. And so there’s just some caution around that. But I think that’s going to be the hot topic for the next couple of years.

Whitney McDonald 23:18
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Transcribed by https://otter.ai