Is the 1% Barrier Limiting 100% Digital Transformation?

"Digital isn’t a channel. It’s not an app. It’s not a website. Digital is an operating model.”  -David Brear

Digitizing a few financial services isn’t the same thing as making a true digital transformation. Many financial brands are digitizing only as a cost-cutting measure while forcing their customers to endure frustrating services, products, and processes.

Are you missing a golden opportunity for 100% digital transformation? James Robert Lay discusses this key question with David Brear, founder and CEO of 11:FS. 

1% vs. 100% Digital Transformation

David Brear believes most financial brands are only seizing about 1% of their digital potential. In his leadership role at 11:FS, he helps identify struggling financial brands and assist them, reshaping the future of finance through digital transformation.

To understand what 11:FS does for the financial world, take a look at the first few sentences of the 11:FS Truly Digital Manifesto: 

“The most successful financial services businesses of the future will be truly digital. Being truly digital means building products and services with the full possibilities of the modern digital landscape in mind. It's moving beyond digitized to truly digital.”

Related Content: Prioritizing the Digital Mindset 

Unfortunately, most financial brands are still failing miserably on the digital front. They’re taking a slapdash approach, picking and choosing a few digital products to offer their customers without fully embracing the digital mindset as an operating model.

This means they’re ignoring 99% of what really matters. As a result, they’re falling behind, entering a danger zone where they’re at risk of permanently losing their customers to more innovative competitors and fintech startups.

Why Digital Transformation Is So Difficult

Banking originated as an experience based in the physical world. Cash exchanged hands, goods moved from one physical place to another, and local bank branches were the community hubs of business and personal financial transactions for everyday people. At least, that’s how it used to be!

The financial services industry has gone through a massive change in the past 10 to 20 years. Everything is digital now. Money moves from place to place without cash ever being involved. Bitcoin and cryptocurrency are part of the dizzying new digital marketplace. Fresh fintech upstarts are springing up every day.

David says the big players like Wells Fargo, Citibank, and Bank of America are still resisting the digital revolution because they prefer an earlier time when big brands completely dominated the landscape. Even smaller community banks are still longing for days gone by.

Meanwhile, there’s a new tension emerging between financial institutions and their customers. People are irritated with their banks because it’s challenging to do everyday banking. Doing anything extra, like getting a mortgage or car loan, feels endlessly frustrating. Financial customers are underserved, overcharged, and overwhelmed. 

Do You Have Digital RICHES?

Most so-called digital banking products and services are just basic tools built to deal with digital transactions. They don’t do much to improve the customer experience and often cause more friction than they eliminate.

David and his team have created a definition of true digital products using the acronym RICHES:

• Real-time
• Intelligent
• Contextual
• Human
• Extendable 
• Social

Any new digital product should have all of the characteristics above. Otherwise, it’s probably too limited to serve people well and won’t provide a positive customer experience. RICHES is a reminder that banking should be a service, not just a product.

People don’t wake up in the morning hoping to do more banking. Instead, they want their banks to use their expertise to make things easier. Banking should be almost invisible in their lives, even as it makes their lives better.

Banking certainly shouldn’t feel negative, as it often does in today’s world. As David says, “Teslas can drive themselves down the road right now, but my bank will still charge me if I go into overdraft. That doesn't make any sense.”

Small Companies Make a Big Impact

Old, well-established financial brands are finding that their smaller upstart competitors are outshining them in almost every way. Fintech startups might have limited resources, but they have almost endless enthusiasm for the idea of innovation.

Paradoxically, the bigger the financial brand, the more likely it is to have a small and narrow focus on digital innovation. David would like to remind all financial brands of all sizes, “Digital isn’t a channel. It’s not an app. It’s not a website. Digital is an operating model.”

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Small teams at small companies are often able to absorb this idea and put it into action more quickly and effectively. They’re willing to try new things in low-risk settings, then scale up quickly whenever they see success. Plus, they’re less likely to be held back by preconceived notions and biases from old-fashioned thinking.

Roadblocks to Innovation

David says financial companies typically face two major hurdles to digital innovation. First, their culture kills the spirit of innovation. Because the digital-first experience isn’t built into their culture, they don’t understand its importance or purpose. 

In this situation, digital transformation is usually based on reducing costs. Instead of trying to increase the level of customer satisfaction or improve the customer experience, it comes down to dollars and cents. Culturally, they’re not making digital transformation a priority.

Related Content: Don’t Let Your Financial Brand Succumb to Digital Darwinism

The second major hurdle is treating digital innovation as theater. It’s just something everyone is pretending to care about and enjoy, even when hundreds of millions of dollars are being spent on this resource-intensive performance. 

If a transformation is just theater, the company’s senior managers usually think things are going great. After all, the stage performance looks fantastic! The CEO thinks accomplishments are taking place, but when you dig down through the layers of bureaucracy, something big is missing. There’s no substance. Money was spent but nothing has changed.

Go Back to the Purpose of Digital Transformation

To overcome these common obstacles, go back to examine the purpose of digital transformation.

Why are you doing this?

What does it mean to your employees?

Your customers?

Your stability?

Your reputation? Y

our mission?

Your future?

Purpose isn’t passive. It’s proactive. It pushes people forward and motivates them to work cohesively. Like a sports team, everyone is driving toward the goal together.

With a clear purpose in mind, it’s easier to push past an individual stumble or failure. So what if you’ve already had 5 failures or even 50 failures? Maybe next time, you’ll succeed. 

David says when he talks about the “1% barrier” to digital transformation, he’s not talking about the results of a research study or an actual measurable amount of something. Instead, the 1% barrier is a mindset. If you’re 99% of the way there but just 1% of you is negative, giving up, moving backward, and dropping the ball, you’ll never make it to the end goal.

Digital Transformation: The Big Takeaway

If there’s one takeaway from David’s message, it’s this: Just go talk to people.

Get to know your customers face-to-face. Make it your mission to understand their problems on a day-to-day basis. You don’t need a million-dollar consultant or a big research project to do this.

Ask your front-line employees what kinds of problems they hear from their customers day after day. Then go talk to customers and ask why these problems are happening. 

Consider your customers the experts and seek their expert advice. You might be surprised by how much you learn and how much it inspires you to accomplish true digital transformation.