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Digital transformation initiatives in banking tend to fall broadly into two categories: on the one hand, there is the core banking system. This refers to all the backend IT that keeps the bank running like a well-oiled machine. On the other hand, there are frontend technologies. This refers to all the customer-facing technology that directly impacts the bank’s customer experience.

When banks contemplate a digital transformation, they often think of different types of core software, including CRMs, loan origination software, deposit and withdrawal systems, and more. But given the huge expense and complexity of replacing these systems, banks are often hesitant about making these changes. On the other hand, a strong customer-facing frontend that plugs into the existing core is typically easier to undertake with a high ROI.

Here, we’ll discuss why a strong core banking system is indeed imperative, and how a better frontend can turn a bank into a powerhouse – quickly.

Core Banking Systems Are Mission-Critical — Which is Why Few Banks Are Ready to Overhaul Them

Core banking systems are, as the name implies, a core part of a bank’s operations. They are often the first thing banks think of when they think of digitization. Traditional core banking required customers to visit a physical bank for the majority of banking tasks such as depositing checks, taking out cash, or making a bank transfer.

Those days are for the most part long behind us. Instead, the vast majority of banks today employ a digital core banking system that allows customers to carry out bank transactions from a website, mobile app, or other digital channels. The backend systems work their “magic” from the backend, allowing the transaction to be successfully completed. However, the frontend — the interface the customer actually interacts with — may vary considerably in terms of efficiency, ease of use, and look and feel.

Core systems impact many customer touchpoints; some digital and some not.

Banks employ core software for a wide range of use cases to improve the backend processing of the following:

  • Deposits
  • Withdrawals
  • Check processing
  • Cash transfers
  • Business loan and credit processing
  • Business credit card
  • Debit card management

Clearly, the core banking systems are an essential part of the functioning of any financial institution. The smoother the backend, the easier it is for bank employees to complete mission-critical tasks.

However, these backend systems are rarely bastions of innovation. And that’s for the simple reason that banks rarely update them. According to recent industry research, a mere 4% of banks plan to replace or overhaul their existing core banking systems in the next three years.

It’s understandable why. Overhauling the backend means potentially ripping apart bank infrastructure that has been a significant part of the bank’s operations for years. It may be based on legacy code, it may have reduced functionality, but it works.

Many or even most banks don’t have the time and budget to undertake such a herculean task. Even if they do, the disruption it’s likely to cause bank employees and customers will likely make it a no-go. Given the tremendous risk involved, it’s no wonder only a small fraction of financial institutions plan on replacing their core.

The Banking Frontend: Also Mission-Critical, But Less Fraught With Risk

As we’ve seen, the vast majority of banks are reluctant to touch their core systems. And that’s where frontend solutions come into play. Even an up-to-date, digital core needs a digital frontend. Frontend solutions can involve revamping the entire customer-facing architecture, or simply making small strategic changes to processes that affect the customer experience. Either way, financial institutions tend to see immediate ROI when they update their frontend.

Here are eight of the top reasons why investing in technology that’s visible to customers can often make the biggest difference — with the least risk.

1. Customer-centricity

Net promoter score (NPS) represents customer satisfaction with the brands they interact. It’s an easy shorthand for gauging the customer-centricity of a company, and many banks have begun embracing it.

Investing in frontend technology can quickly boost NPS, and it makes sense why. Customers don’t know what’s going on in their bank’s backend, but a seamless frontend is immediately noticed and appreciated.

NPS is more than just a vanity metric. Bain research found that a promoter is potentially worth five times more than a detractor in lifetime value. This is mostly thanks to better retention.

All banks that are interested in improving their NPS should consider adding intuitive customer-facing technology, seeing as the two are now intrinsically connected.

Customers’ expectations for easy and intuitive banking experiences are at an all-time high. This is likely due to a combination of the rise of digitization in all areas of customers’ lives, as well as the coronavirus that boosted demand for better remote interactions. A Lightico survey conducted in Fall 2020 found that a whopping 79% of customers now say that they want more all-digital processes from their bank in the future.

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Yet the same survey found that banking customers continue to be bounced to physical channels during a purportedly all-digital interaction. 57% of consumers were directed to a branch during an online interaction between July and September, and a similar percentage were asked to print, scan, or fax during an online interaction.

Want a better NPS? In today’s world, it’s practically impossible to improve without smooth digital journeys.

2. Higher Conversion Rates


Real-life example of a choppy digital onboarding process

The average banking customer lifetime value stands at $45,600 (for the average customer lifespan of eight years). So every prospect that drops out of the onboarding process is $45,600 down the drain.

Unfortunately, disjointed and confusing frontend processes increase the probability of prospective customers abandoning the onboarding process. Most banks won’t necessarily know how many prospects they lose due to choppy onboarding. Many will simply vanish after the buggy online form fails to load properly, after they are redirected to sign paperwork at a physical branch, after they struggle to understand what credit card they need.

A seamless digital interface gives banks peace of mind that all customers that intend to onboard will complete the process.

3. Simplified Compliance

Banking is notorious for being a highly regulated industry. To add to the complexity, the specifics of regulations are constantly changing based on the CFPB and current administration’s policies and approach.

Moreover, different states often have their own variations of privacy and compliance laws. So while staying compliant is key to avoiding hefty fines and reputational damage, it can feel like a moving target.

Frontend technology can ensure banks stay compliant without adding additional time-draining requirements to onboarding or servicing processes.

How is that?

  • Digital forms and documents sync with core banking systems including CRMs, making it easy to securely store and retrieve sensitive customer information.
  • Electronic documents come with a timestamped, tamper-proof paper trail, preventing ambiguity and legal disputes.
  • ID verification can now be digitally completed by having the customer send the banking agent a picture of a photo ID and selfie taken in “live” mode for instant verification. This makes it possible for banks to follow AML and KYC procedures with both remote and in-person customers.

4. Faster Servicing Time

The faster customers can complete a task (e.g., requesting a credit card, depositing money, applying for a personal loan), the faster bank employees can move onto serving other customers — and the fewer overhead costs.

Cycle times are speedier when customers can get the same ease of digital service from any channel, whether they initiate a task on a mobile phone, computer, or IVR. For instance, mobile-optimized eForms make it easier for customers to quickly submit requests from any location without clunky physical paperwork or PDFs.

Customers who can instantly complete the entire servicing process from their mobile phone (or another channel of their choice) with an agent’s guidance are far less likely to make errors, forget a stip, or require later follow up and chasing. Time is money, and digital frontend technology saves both.

5. More Referrals

Medallia research found that more than half (55%) of bank customers expect a frictionless flow of information between the channels they interact with. Frictionless experiences lead to greater satisfaction — which is proven to generate more referrals. Among consumers who report a positive experience with their bank, 40% tell friends and family about it.

Word-of-mouth referrals account for 20% to 50% of all purchasing decisions, according to McKinsey. Referrals are a highly cost-effective way of generating new business. And the good news is that they tend to happen on their own, even without a formalized referral program. A truly seamless, delightful frontend experience can make a bank’s reputation.

6. Better Information Flow Between Departments

A strong frontend often the missing link between different bank departments. Customers who are able to easily complete tasks the first time around don’t attempt to connect with multiple departments due to confusion over the contact point. They don’t waste their time, or their bank’s time, repeating information over and over again. The information flows directly from the customer to the relevant department without a middleman.

In addition, better collection of customer information through the frontend ensures that the backend systems are up to date and accurate. Any bank employee can refer to this information as it is safely stored in the CRM.

7. One Digital Platform to Rule Them All

The best customer-facing technologies are all-in-one. Rather than stitch together a hodge-podge of disparate tools and services, banks can simply adopt an end-to-end solution that ensures a unified customer experience across all channels. This means adopting a single platform that combines eForms, eSignatures, instant stip collection, automatic ID verification, digital payments, and more to ensure consistency in the customer journey.

8. The End of Physical Paperwork — And Even Email

A compliant and secure digital frontend can allow banks to forgo physical paperwork altogether. Paperwork takes up valuable customer and employee time, requiring printing forms, filling them out, and re-working them from scratch if errors are made. Email is an improvement, but no longer the gold standard, as it’s not as instant and intuitive as the mobile- and web-optimized processes. Connecting a digital automated frontend with a digital core banking backend is the ideal combination to avoid paperwork.

The Bottom Line: A Robust Customer-Facing Workflow Maximizes ROI

Banks needn’t rush to overhaul their deeply-embedded core systems, particularly if they already have some degree of digitization. As we’ve seen, updating the frontend can advance banks’ goals faster and with less risk.

But what sort of frontend changes have the greater ROI?

As with anything else, banks will get what they put in. Cosmetic changes to the user interface (UI) or standalone point solutions like eSignatures can help, but they are unlikely to make a dramatic difference. That’s because they don’t change the end-to-end customer journey on a fundamental level.

From working with a wide variety of banks, from regional to national institutions, we’ve seen that financial institutions tend to see the highest ROI by adopting a business process management (BPM) solution. This allows customers to glide through the steps of whatever task they’re trying to undertake — whether it’s onboarding, servicing, or taking out a loan.

An automated workflow ensures constant momentum between steps in the process. An admin can simply set up business rules based on conditional logic, prompting bank agents to request documents, forms, and signatures based on the customer’s characteristics or task type. This ensures a high degree of accuracy, reduces re-work due to errors, and boosts turnaround time.

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