Five Things We Can Learn from the Digital Banking Revolution
The digital banking revolution which we have come to take for granted did not happen overnight and took over a decade to become standard. Financial institutions started experimenting with internet banking in the 1980s. Security First Network Bank began operations in 1995 and Bank of America made history in 2001 as the first US bank to gain over 3 million internet users. By 2006 80% of US banks offered online services. In Europe, the percentage of online users doubled between 2009 and 2019.
Two decades later, while banks are doing everything they can to keep up with technology and innovate their next breakthrough digital service, the insurance industry is just now going through the same processes of digital transformation. Both industries are perceived as being conservative, traditional, and quite similarly heavily regulated, yet the banking industry has somehow managed to push through to a new digital era much faster.
Luckily for the insurance industry, it does not need to reinvent the wheel, technology-wise, and can utilize and leverage what the banking industry has spent years researching and developing. So what can we learn from the digital banking revolution that can be implemented in the insurance markets?
Here are five points from the world of banking to consider and learn from:
- Customer-Centric Approach
Financial institutions such as banking and insurance have traditionally revolved around product-related triggers, which were matched to significant life events: the birth of a baby, establishing a new business, marriage, acquiring a property, experiencing a casualty, and so on. The high-tech approach focuses on the customer regardless of their stage in life. This approach generates more touchpoints with customers, with greater engagement and trust which will always supersede any legacy approach. With the customers at the core of the whole process, they don’t have to deal with an excessive burden of departments, people, papers, or a lack of access and transparency of information to name a few. Digital transformation means centralizing the whole process on a single digital platform that is consistent throughout the customer’s journey.Many insurance organizations are starting to adopt a customer-centric approach, developing a substantial digital eco-system to match. Few however take it to its full potential of a new customer experience by integrating for instance, a customer journey builder and API configurations. A feature that allows insurers to quickly and easily add new customer journeys and configure existing ones, or develop a platform that supports multiple customer journeys from pre-engagement to onboarding, servicing and claims would be a game-changer.
- Paperless Culture
The paperless culture puts the bank’s customer-centric approach into practice. This is where all processes take place, on a single, unified digital platform where consistency rules. The customer progresses frictionlessly throughout the process from one department to another.Creating a paperless culture goes far beyond paper and sustainability. This is where digital transformation starts. This is where innovations such as mobility, apps, and online service thrive. Elimination of paperwork stands at the core of every technology-based, customer-centric company. It is where omnichannel interaction, end-to-end, and two-way communication are made possible, where the response is consistent, anytime and anywhere.Follow the Paper vs. Follow the Money
Prior to digital transformation, more money meant more paperwork. Banks have made a conscious decision to follow the money rather than the paper. To do it effectively, new tools need to be developed alongside a new digital eco-system. Following the money demands transparency to all stakeholders at all times.Accelerated and automatic underwriting processes will pave the way to a paperless insurance culture. It will streamline underwriting case flow, speeding and upgrading the entire process for carriers and their distribution channels. We need a system where all stakeholders digitally can customize features and underwriting rules to fit business needs, and make informed underwriting decisions that are transparent and consistent.
- Digital By Default
A paperless culture that follows the money and is customer-centric leverages any provider’s digital touch point portfolio as the company’s main operation model. The use of online banking is expected to grow from 2021-2024 with the number of online banking users expected to reach 2.5 billion.
In Asia alone, since 2015 the number of digital banks has grown by 190%. A digital touch point portfolio most often includes mobility, apps, and online service, making customer engagement convenient, seamless, user-friendly and personalized.
A digital engagement platform provides the means to expand insurance business and make it accessible in a manageable and controlled low-risk manner via low- and n0-code, user-friendly tools. Such a platform enables quick and flexible integration with solutions that complement and complete any engagement channel.
Banks have come to understand their customers’ needs and engage with each customer individually thanks to AI and machine learning technology, and by leveraging big data and analytics for tailored customer engagement. Chatbots have quickly taken over simple, first touchpoint engagement, and serve as an automated dispatch unit to provide quick responses, guiding customers to relevant information, contact details, etc. With a customer-centric approach, the banking workflow was developed with customer profiling and customer journey in mind. Additional benefits include less time spent servicing clients, less manual labor, fewer manual transactions, in-person loan applications, and manual risk assessments, resulting in improved efficiency, less manpower, and lower costs.Integrating innovative analytics solutions as part of the digital insurance transformation will produce actionable insights on each customer that optimizes data to engage with each customer on a personal and relevant level. The engagement will be tailored to the customer’s specific journey and needs. The actionable insights are based on relevant current (rather than stale) data and will automatically comply with changing regulations, focusing the customer’s engagement on immediate needs.
- Moving to the Cloud
Digitalization is only as strong as your back-office technology and platform. A significant evolution in this regard is transitioning from legacy on-site to cloud computing, enabling fast scalability, with seamless real-time database updating, maintenance, and development. Furthermore, cloud-native computing enables effectively infinite data storage and on-demand processing power to align with AI’s vast data requirements and algorithms.
Banks pioneered breaking through the conservative market with digital transformation. But they didn’t invent the digital technology wheel. They relied on Fintechs, and had the luxury of two full decades to experiment, without massive consumer demand for convenience, accessibility, and 24/7 service.
Nowadays, consumers demand it all, and digitalization is no longer a luxury. The insurance industry doesn’t have two decades to plan and develop their digital evolution. The race is on! The pioneers will win. The question is: who will be first?
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