Why Technology Isn’t Bank Transformation’s Silver Bullet

Is there a right way and wrong way to innovate?

For banks interested in transforming their brick-and-mortar branches, maybe, according to Diebold Nixdorf Senior Director of Advisory Services Chris Gill.

Gill asserts that most financial institutions, left to their own devices, may end up following a less than optimal path to innovation, and not because they have selected the “wrong” technology solution, since in Gill’s experience, what’s “wrong” for one FI might be right for another. That makes many FI innovation “fails” he said, the result of having the wrong mindset — one that doesn’t connect the dots between technology and the larger digital transformation picture it is intended to deliver.

“Technology isn’t by itself a solution for any problem, but an enabler,” Gill told PYMNTS. “One of the all too common mistakes banks make is letting the technology take the lead.”

It’s easy to let that happen, he said. One department or other catches a glimpse of a whiz-bang new idea, and wants to make an investment. Or the competitor’s branch up the road has added some new feature, which creates pressure to add the same feature as well, whether or not adding it fits into any broader transformative strategy.

“That happens more often than not, that shiny penny kind of approach that is driven by technology rather than a broader strategy,” Gill said. “Technology spend gets mistaken for branch transformation.”

But the “shiny penny approach” fails to consider some very important things, Gill said. Specifically, the employees who will explain the technology, the customers who will use it, the underlying processes and systems that will support it and the overall effect they are looking to create.

What’s needed is a holistic effort, he said, a much bigger job than merely picking out a few new technologies to try out. But it’s the right effort, he noted, if banks want their investment in updating their branches to actually pay off in any meaningful way.

Building the Right Support For the Technology

The problem with letting technology lead when it comes to branch transformation, Gill said, is that technology doesn’t exist within a vacuum, but within the very specific context of the bank that launched it. If the channel is not well suited to the technology — or is somehow at odds with it — the technology won’t be able to deliver what it should.

As an example, Gill described one of Diebold Nixdorf’s banking partners that had launched mobile check capture and couldn’t figure out why customers weren’t using it. A few surveys answered that question. Customers weren’t using it because they didn’t know it existed. They didn’t know it existed because 80 percent of the tellers hadn’t used it either, and thus couldn’t guide or instruct customers on it.

“People are the number one success factor,” in rolling out new tech, Gill said, and if a technology is rolled out without any staff support, it isn’t going to gain a lot of traction with customers.

And it’s not always a staff issue, Gill said — sometimes legacy processes and systems just plainly work at cross-purposes with new tech. Another banking client Diebold worked with had invested heavily in mobile check capture and P2P payment services — and again didn’t see utilization on the level it wanted. A closer look found why: The client’s legacy systems put daily transaction caps on both that rendered them less than useful for customers.

“That why all successful transformation programs really start with doing a foundational analysis of customers, markets, competitors, branch operations and internal processes,” Gill said. “From there you can build the appropriate strategies to move forward and identify the obstacles that need to be addressed.”

Sequence, he noted, matters tremendously when it comes to the steps involved in transforming bank branches — and if banks want to get any value out of the investments they are making in technology, then it pays to get a clear picture of where they are before they start trying to move forward with technology.

That most institutions don’t do it this way, he said, is to their detriment.

Measuring the Progress Forward 

There is no one path forward for what bank branch transformation looks like, Gill said, because no two banks are exactly the same.

Some banks, he explained, are highly risk-averse and have their transformation efforts heavily influenced by security and compliance teams — which usually means a slower path forward. Less risk-averse banks, on the other hand, tend to lead with a more aggressive push toward faster evolution.

Size, unsurprisingly, also matters tremendously. Top five banks can fund a fairly large amount of experimentation, smaller banks not so much.

“They have to make the right bets given the customer bases they serve,” he said.

What is critical, however, for any bank pushing forward on the path toward technological transformation within its branch locations, is measurement. Even if the bank has done everything right in the development process, addressed all of its internal issues and launched the technology in the right cross-channel holistic method, it still isn’t done. It’s important to see if and how the change is working.

And if that sounds pretty obvious — well, as it turns out, it’s not obvious to everyone.

“More institutions than not roll these things out and then don’t measure them properly,” Gill said.

Going in, he said, banks need to know what it is exactly they want an innovation to do — and have a way to measure if it is doing that or not. Without that, he said, there’s really no good way for banks to know if progress is being made.

And progress, at this point, is becoming non-optional. Consumer behavior, he pointed out, is changing very fast. Banks will either be able to provide what consumers want in terms of technologically integrated experiences — or those consumers will move on.

Running through technology initiatives won’t help, he said, because they won’t connect, and it’s better to build something customers will use and like than to rush something to market that goes largely ignored.

But, he noted, the pressure to move forward is ever present, because of those changing customer needs — and that will in the immediate future mean the market will keep driving forward.

“There is a lot of urgency to really move more quickly,” Gill said, noting that transformation is a complex initiative with “a lot of moving parts.”

“It is going to be very evolutionary, but I think banks are increasingly testing new things, piloting new approaches and that will continue.”