Banking Innovation Model

1. T H E C U S T O M E R - O B S E S S E D
B A N K I N G I N N O V A T I O N
M O D E L
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2. Summary
03
Introduction
04
Challenges with Digital Transformation
05
A New Transformation
06
T A B L E O F C O N T E N T S
The Customer-Obsessed Innovation Model
07
Conclusion
14
About Us
15
U P S W I N G

3. Banks across the world are investing in digital transformation in a race
to keep up with changing customer expectations. Reputation,
customer growth and profitability are the prize.
Yet, traditional Banks are facing many challenges in getting this right;
from legacy matters to misaligned objectives, to regulation and
getting the right analytics to drive meaningful innovation.
We can learn a lot about digital success from smaller, more nimble
challenger Banks who operate with a different structure and mindset.
These players are setup for speed and put increased focus on the
customer experience. As a result, they receive better customer
satisfaction results.
Banks who reimagine not only their customer experience but their
entire organizational model with customer obsession in mind – are
bound for success. This article will cover both the organizational
fundamentals and customer experience required for success.
S U M M A R Y
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4. I N T R O D U C T I O N
Traditional banks are competing with small and nimble challenger banks and fintechs on one front
while also large e-commerce platforms, that are driving customer experience expectations and
embedding finance, on the other.
Banks across the world are engaged in a digital race to keep up with rapidly
changing customer expectations.
Digital Transformation is a top priority for most traditional banks due to the potential benefits,
which include:
Digital transformation can help improve customer satisfaction ratings, customer engagement and
loyalty
Customer Experience
Growth Catalyst
Digital transformation can drive customer acquisition and growth in banking
Bottom Line
Digital transformation can help improve operational efficiency and effectiveness, reducing
costs and improving profitability.
38% of organizations that believed they had deployed digital banking
transformation solutions at scale were not receiving the level of results expected.
31% of organizations with partial deployment had not received the results
expected. *
As a result, Banks are not yet realizing the full benefit of digital transformation. The
Digital Banking Report found:
STAGE OF TRANSFORMATION JOURNEY
Customers are becoming frustrated with the lack of listening and personalization offered by financial
institutions.
Much work remains to realize the benefits of digital transformation. This article will explore the challenges Banks are facing in deploying their digital transformation, and propose a customer-
obsessed digital transformation model to realize the benefits.
Only 26% of customers say they are completely satisfied with the level of
personalization offered by digital tools
29% deplore banks’ ability to listen to them on these same channels.
46% of customers surveyed say they would open an account with a non-bank player
*https://thefinancialbrand.com/news/digital-transformation-banking/digital-banking-transformation-trends-for-2023-157279/
*https://www.soprasteria.com/newsroom/press-releases/details/digital-banking-experience-report-2022---banks-challenged-to-accelerate-personalisation-security-and-environmental-
responsibility-in-the-hyper-connected-era
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5. Traditional banks face inherent challenges that come with their history and established nature which
predates many technological advancements of the 20th century.
Traditional banks may have a culture and organizational structure that is not conducive to rapid
innovation and change. This can make it challenging for them to adapt to new technologies and ways
of doing business.
Many banks have outdated technology systems that are not easily adaptable to new digital
platforms. This can make it difficult and expensive for them to integrate new technologies and digitize
their operations.
There is often cultural resistance to the transformation. It can be difficult for leadership and current
employees to accept the required changes to the way the organization operates. Thus, it can be
challenging to ensure the entire organization is aligned with the digital transformation strategy.
C H A L L E N G E S W I T H D I G I T A L T R A N S F O R M A T I O N
1 LEGACY MATTERS
Regulatory matters often constrain and deviate resources away from, digital transformation.
Rigid and outdated regulations, coupled with the rapid pace of technological change, is beyond the
regulator's to keep up and can drive the organization's internal teams like risk, legal and compliance
to become more conservative.
The ongoing regulatory and compliance agenda requires a significant and continuous resource
commitment. This means dollars and key subject matter experts are drawn away from digital
transformation efforts.
3 REGULATION
Shareholders and management measures of success are often over-weighted towards the short term.
Shareholder Expectations often constraint digital transformation initiatives. Investors of mature FIs
tend to have a lower risk tolerance compared to investors in technology companies like start-ups or
FinTechs. This often leads to a different level of expectation for mature FIs when it comes to making
investment decisions for digital transformation initiatives.
Management ambition to meet short-term business targets is often misaligned with longer-term
digital transformation initiatives. Transformation initiatives are often led by executives that are
responsible for the current and immediate business model. Thus, there’s a potential conflict in their
current measurement of (personal) success.
2 MISALIGNED OBJECTIVES
The volume of data often overwhelms traditional Banks while there are many regulatory and
governance considerations.
Banks have access to valuable customer data but are lagging in utilization. They have access to rich
on their customers' financial situations. However, most still have work to do to leverage internal data
before expanding to insights from external data. Many organizations find that they have not been
capturing the right data attributes for developing insightful analysis.
Regulations on data security, customer privacy, and ethical use of data, such as the E.U.’s GDPR, are
inconsistent and make it increasingly challenging for FIs to share data among entities and across
borders, and can create constraints around data usage.
4 ANALYTICS
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6. Thinking about product
Think customer first
Thinking about experience
Thinking about marketing
Thinking about Org Structure
Thinking about talent
A N E W T R A N S F O R M A T I O N
Customer obsession must go beyond one-off customer service gestures that are not scalable. Instead, it needs to come from a company’s commitment to providing
great experiences every day.
Customer-obsession must be at the foundation of the
evolution of business models going forward. Banking
institutions will focus on improving the customer experience
by offering personalized services, improving the value
proposition, simplifying the distribution channels, and using
technology to make banking more convenient and efficient.
To realize the true benefit of digital transformation, we must truly obsess about the customer – and this obsession
must be embedded across the organization.
Many banks and credit unions believe they are focused on their customers. But, most are still focused on product
metrics — such as new accounts, cross-sales, loan volume – and their competition.
Customers want solutions, products and services specifically tailored to their individual needs, and are becoming
increasingly frustrated with the lack of listening and personalization by financial institutions. Only 26% of customers
say they are completely satisfied with the level of personalization offered by digital tools
To define customer obsession, we must first define obsession:
An idea or thought that continually preoccupies or intrudes on a person's mind. Stating the obvious, in customer
obsession, the customer is that idea or thought.
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7. T H E C U S T O M E R - O B S E S S E D I N N O V A T I O N M O D E L
Technology & Analytics are enablers of the Customer-obsessed innovation model. Technology is an enabler of the functionality customers expect while data is an enabler of the insights needed to drive effective personalization, content and
journey management. Without the right infrastructure, including technology and data management – innovation will run into legacy roadblocks.
CUSTOMER OBSESSION
ORGANIZATIONAL FUNDAMENTALS:
Organizations that master customer obsession focus on the things they can do to provide a great experience
every day
CUSTOMER EXPERIENCE:
Organizations that focus on the customer journey deliver better customer experiences.
LEADERSHIP TALENT COLLABORATION PRODUCT CHANNELS INSIGHTS
ENABLERS
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NOTE: This model is meant to provide a framework for the components which need o be informed by an understandimg of customers needs,
attitudes and expectations of their Bank.

8. S E N I O R L E A D E R S H I P
According to an article from Deloitte United States in Harvard Business Review, an organization’s innovation portfolio should allocate:
plays a critical role in communicating the vision and setting the tone across the organization
from the top-down
To build a customer-obsessed culture, leadership needs to make customers’ needs and expectations a priority across the business, and
redefine success in terms of customer obsession – with KPIs such as NPS and CSAT. These goals must cascade down to customer-
obsessed goals at all levels and across all departments.
A customer-obsessed company must be fanatical about customer engagement. This means understanding customers by collecting
feedback and actively doing something with it.
70% to enhancing existing core business
20% to expanding into adjacent businesses or markets, and
10% to developing breakthrough innovations for markets that don’t yet exist.
ORGANIZATIONAL FUNDAMENTALS
Firms must also excel at innovation portfolio management. They must have a budget to simultaneously invest at three levels of ambition,
carefully managing the balance among them and ensuring that funding needs for customer-obsessed digital transformation priorities are
met.
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9. T A L E N T
Employee
Engagement
The organization needs diverse talent with the right skillset and mindset to be successful
Skillsets mean capabilities with rapid innovation tools, data analytics, experimentation, etc. Mindset means being customer-focused with
a willingness to make mistakes and be comfortable with ambiguity.
Talent can be sourced from a mix of existing talent, new talent from elsewhere in the organization/industry that is seeking a start-up-like
environment, or external talent from industries with high innovation and/or customer obsession.
ORGANIZATIONAL FUNDAMENTALS
is almost as high a priority to the customer-obsessed
organization as customer engagement is. There are a
few reasons for this:
Better
Performance
An engaged employee will take the extra time needed
to thoroughly solve customer problems. Unengaged
employees can sometimes go on autopilot and not
really think about what the customer needs.
Reduced
Turnover
An employee who feels engaged with their company
will be more likely to continue working there, building
up their institutional knowledge, and refining their
skills over time. Veteran employees are invaluable for
creating great customer experiences.
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10. C O L L A B O R A T I O N Every department needs to be customer-obsessed. And that ripple effect starts from the top
down
Customer-obsession isn’t a responsibility that falls on customer service, or any single team, to earn on behalf of the entire organization.
It’s important that collaboration across the organization reflect this and that different departments are aligned on what gets done, when
and how.
ORGANIZATIONAL FUNDAMENTALS
All departments must understand the digital transformation and customer-obsession priorities, and governance functions need help to
become more comfortable with the nuance required for experimentation and potential mistakes
Necessary resources for these initiatives may need to be walled-off to ensure rapid delivery - we must also recognize the need to pivot
for customer driven emergencies.
The organization must embrace the fail fast mindset and experimentation required for success.
Engaging with external partners early is also important. By bringing external partners, like regulators or vendors, in on the customer
problem and approach early, we can help expedite buy-in and/or help identify creative solutions/steps to experiment.
One real-life example had us engage with a regulator early and presenting customer personalization needs for a new product feature.
This allowed us to gain their approval for a new MVP.
Approach and objectives were defined in advance and we moved quickly through these steps thanks to the initial engagement.
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11. P R O D U C T What products, services and complimentary features will customers need for financial
success.
Thinking about journeys, you can identify at what point certain customer segments will have a need for certain products. For example,
savings and chequing accounts when they get their first job. Credit cards when they start college or university.
Then break down within each product what complimentary services or tools might be needed down the road.
CUSTOMER EXPERIENCE
Some examples of value-added features or services that have been introduced recently are:
The more usable data you have about your customers, the more effectively you can break down their journeys and develop new
products, services or tools to satisfy their needs.
Free credit reports or free credit monitoring services for credit card or loan account hold
Remote cheque deposits through a mobile app for chequing or savings account holders
Free budgeting/PFM tools for chequing account holders
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12. C H A N N E L S Where and how do customers prefer to engage with their Bank and how are those preferences
changing over time.
We are moving in the general direction of greater digital adoption through mobile and web channels for banking
services. While customers expect the ability to move seamlessly across channels, they also prefer certain channels
for different activities.
For example, low complexity and higher volume activities such as
basic transactions or account opening and frequently asked
questions are better serviced by digital channels – with AI-driven
chatbots becoming commonplace for the latter.
Some physical locations and/or human interaction will still be required for certain complex products, services or
customer situations.
All of this can vary depending on the types of customer your organization attracts. Therefore, it’s important to understand your customers and their values and preferences.
Are they comfortable with AI-driven chatbots or do they want to be directed to a FAQ page or maybe they want to hear a human voice?
Do they need some help getting started or are they self-starters?
For example, decision support and new product setups like a
loan, mortgage or Investments or Retirement planning all may
be better served by human interaction.
CUSTOMER EXPERIENCE
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13. I N S I G H T S What content and communications do customers need and want from their Bank and how are
we delivering this to them where they need it.
Customers are seeking greater personalization from their financial institutions. Banks can address this need and
become a catalyst in their financial life by using relevant content and communications.
For example, content or insights on noteworthy items which may impact their finances, with actionable insights:
Interest rate changes for mortgage account holders
Significant stock market activity for Investments account holders
An upcoming bill payment on their chequing account, based on historical
Connecting customers with existing products that address a newly uncovered need can also help re-frame these
communications from annoying marketing to relevant insights. This can again show that you understand your
customer and have the products or services they need.
CUSTOMER EXPERIENCE
These are all examples of opportunities to show customers that we know them and we understand their emotions
and needs.
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14. T H E C U S T O M E R - O B S E S S E D I N N O V A T I O N M O D E L
U P S W I N G
Technology & Analytics are enablers of the Customer-obsessed innovation model. Technology is an enabler of the functionality customers expect while data is an enabler of the insights needed to drive effective personalization, content and
journey management. Without the right infrastructure, including technology and data management – innovation will run into legacy roadblocks.
CUSTOMER OBSESSION
ORGANIZATIONAL FUNDAMENTALS:
Organizations that master customer obsession focus on the things they can do to provide a great experience
every day
CUSTOMER EXPERIENCE:
Organizations that focus on the customer journey deliver better customer experiences.
LEADERSHIP TALENT COLLABORATION PRODUCT CHANNELS INSIGHTS
ENABLERS
NOTE: This model is meant to provide a framework for the components which need o be informed by an understandimg of customers needs,
attitudes and expectations of their Bank.

15. A B O U T U S
We are digital banking veterans, having worked for over 20 years at one of the first, at
the time, Direct Banks in the world. ING DIRECT Canada which launched in 1999 – and
was later bought by Scotiabank and re-branded as Tangerine. Tangerine is a Banking
innovation success story that now serves over 2 million Canadians who prefer banking
in a digital-first way.
CONTACT US TODAY
We help you get the most out of the investment you’re making in your digital
transformation by bringing a customer-obsessed mindset to your team.
We consult and advise with a customer-first approach on:
Business Strategy
Digital Strategy
Innovation Portfolio Management
Complex Problem Solving
Implementation support
MATTHEW WILCOX
FOUNDER @ UPSWING GROWTH
Matt@upswinggrowth.com
312-694-3862
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