Making Better Decisions in Digital Banking - The 11 Commandments

BY AASHISH SHARMA, risk lifecycle and decision management lead for FICO in Asia Pacific.

There is no denying that bank executives are under tremendous pressure to digitize their businesses. The battleground for new customers has switched to the digital environment, partly exacerbated by the Covid-19 pandemic limiting face-to-face interactions. Furthermore, the Asia Pacific region is on the cusp of a digital banking revolution with new challengers trying to break the data and relationship advantages held by the incumbents.

During the hardship of the pandemic, many customers turned to their primary bank and utilized digital channels they had never previously used. In just a few months, banks saw an acceleration of the digital banking trend which they had expected to take many years. This has put pressure on all players to capitalize on the willingness of consumers to embrace this new way of doing business and further developing their infrastructure and offerings.

One recent example in Asia was the launch of OCBC Bank’s 60-minute ‘instant mortgage’ approval service during Singapore’s Circuit Breaker (lockdown) period. This innovative digital offering helped the bank to maintain strong business momentum at a critical time when face-to-face meetings could not take place, underwriting $700 million in loans. Central to this success story was deploying a decisioning system that could transform the loan application process into a hassle-free, customer centric one, by drawing together all the relevant data sources, and automating decisions in a seamless ‘self-service’ application channel.

OCBC is just one example of a successful digital banking transformation, but to succeed, banking teams require not only the right technology, but also a shift in approach and mindset. So here are FICO’s 11 Digital Banking Commandments that we believe help financial institutions successfully navigate the challenges of digital transformation.

1. Digital lift-and-shift is not a strategy. Digital presents a great opportunity to build something new and differentiate yourself from your competitors. Instead of carrying over analogue assumptions or digitizing a legacy, paper-based process, start with first principles and reframe how you think about financial services.
2. Friction is not inherently good or evil. Thoughtfully designed points of friction can be extremely valuable for risk management and might even make customers feel safe. By default, assume customers are impatient and will move on if you make them wait. Save them time by importing data and using pre-fill whenever possible - small user experience (UX) improvements like real-time address look-up can have a big impact.
3. Be personable in this impersonal channel. Alexa, Siri – there is a reason why brands name Artificial Intelligence (AI). Personalization is about making customers feel comfortable and valued during every interaction. A little goes a long way; simple personalization when prominently displayed, is the digital equivalent of a bank teller greeting customers with a big wave and smile.
4. Respect the data. The data that customers share, explicitly or implicitly, is an asset. Demonstrate that you value it and are providing them with practical insights in exchange. For example, responding to the strong market demand for consumer loans in China, Home Credit China managed to optimize their loan process by leveraging data from customers’ loan applications, and combining it with useful internal and external scorecards, to underwrite and evaluate new clients with a thin file more objectively. This allowed the bank to not only lend to the underbanked, but also cut credit risk on point-of-sale loans by 25 percent and online loans by 15 percent.
5. Engage me, teach me — feed my TikTok obsession. Customers want to master their financial lives through high-quality content but they do not like to be lectured to, so make sure to mind the tone of your financial literacy content. While fun and fast videos are engaging, you only have seven seconds to make your first impression – make the most of it.
6. Use your branch wisely. Branches can be a differentiator, but only if they are used to serve your customers’ goals rather than your own. Ensure that your fraud and risk management processes are not forcing customers to visit unnecessarily. Omni-channel efforts needs to be customer-led. Give your customers the option to move seamlessly between channels but avoid prescribing the journey for them. Leverage technology — voice AI, chat bots, etc. — to handle easy interactions, while also making it simple for customers to speak to a human being whenever they want.
7. Respect your customers’ time and effort. Optimize each digital interaction so that the value your customer gets is commensurate with the time and effort they have invested. Be proactive in finding opportunities to increase value for them and highlight what they stand to gain.
8. Pester your customers...but only when they want it. When it comes to money, especially in a faceless channel, people want to be in the know. Timely communication through the right channels will help to reassure customers and make them feel in control. Err on the side of too much rather than too little. Overcommunicate when it comes to issues like suspected fraud and insufficient funds to prevent unpleasant surprises. Continually ask ‘Was this helpful?’ to create performance data to train machine learning models through supervised learning.
9. Be fascinated by your customers, not your technology. One size does not fit all, or even most - you need granular customer segmentation to know and engage with customers as individuals. The most sophisticated technology cannot replace an obsessive focus on and knowledge of your target customers. Make a habit of continually trying to uncover customer needs and pain points and keep up with the unpredictable, evolving nature of customers’ expectations.
10. Make your customers feel safe. Trust in financial services at a foundational level, is about safety. For fully digital businesses especially, building customer trust needs to be a key priority. Small touches such as lock icons can make an enormous difference to demonstrate “your money is safe”. A little friction in the service of security can also create trust so take advantage of what digital can offer like geolocation data and behavioral biometrics.
11. Come together like a symphony orchestra. It is painfully obvious to customers when a digital experience is disjointed. Invest in integration and orchestration and do not neglect the small details. Ensure you have a single “digital communications brain” driving customer interactions or risk having customers opt out or blocking your number.