Customization vs. Efficiency: Can Banks Have Both in the Digital Age?

Q&A with James Ransome, Digital Transformation Director at Backbase

Traditional banks face disruption. Explore the five key trends shaping digital banking and how to navigate transformation for a seamless customer experience.

In the rapidly evolving banking world, digital transformation is not just a buzzword but a necessity. Today, we bring you an insightful conversation with James Ransome, the Digital Transformation Director at Backbase, a global leader in digital-first banking platforms. With a rich career spanning over a decade in financial services and digital strategy, Ransome brings a wealth of experience and unique insights into the challenges and opportunities in the banking sector’s digital transformation journey.

In this interview, Ransome shares his career journey, transition to Backbase, and role in helping banks navigate their digital transformation. He discusses the key trends driving transformation in the banking sector, the challenges traditional banks face in transitioning to digital platforms, and how Backbase empowers these banks in their journey. He also shares his views on the future of digital banking and offers valuable advice to banks embarking on their digital transformation journey.

Join us as we delve into this enlightening discussion and explore the digital future of banking with James Ransome. Enjoy the read!

Excerpts from the interview; 

What key trends drive digital transformation in the banking sector, and what are their implications for traditional banks?

As banking falls at the intersection of transformation across industries, it is predisposed to multiple market trends. A change in mining regulations impacts the evolution of banking, as does a user requirement change in shopping habits, and so does the basis on which medicine is deployed. 

Zooming out, I believe that banking is mainly influenced by five key megatrends, in no particular order: 

  1. The evolution of technology is evident in how AI automates various parts of the end user and employee journeys.
  2. Regulation changes, as we will soon see with buy-now-pay-later (BNPL), which remains largely unregulated.
  3. Changing customer expectations, which are leading to quantum growth in embedded finance—increasing focus on the end goal behind a financial transaction and less on the product
  4. The increasing importance of sustainability pressures banks around which businesses they engage with and on what terms.
  5. Socio-economic advancement leads to more globalization and consequently increased competition in some cases.

How can traditional banks adapt to the evolving digital landscape, particularly in building their digital infrastructure?

Traditional incumbent banks still built on Siebol-type systems with monolithic point-to-point architecture are at serious risk of getting disrupted by both their peers, who are prioritizing large investments into transforming their technology stack, as well as from the increase in the competition coming from more nimble digital scale-ups. 

Often, a bank doesn’t need to conduct open heart surgery and replace the core banking system to transform. Rather, banks can replace just the digital channel layer, including modernizing their core by transferring various capabilities from their core system into the engagement layer that supports their ‘new’ digital channels. This places less pressure on the bank’s core systems to do the heavy digital lifting required to act like a digital scale-up. The other main route banks can follow is building a new end-to-end digital bank on the side and migrating customers from the legacy solution to the new one.

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As Digital Transformation Director at Backbase, how do you help banks navigate their digital transformation journey?

As a Digital Transformation Director at Backbase, I work closely with banking executives on some heavyweight projects to ensure we deliver on the expectations during the initial sales process. Furthermore, this involves deepening our understanding of the bank’s digital strategy, the progress in evolving the bank’s operating model, and assessing how Backbase’s suite of digital tools can best help to further accelerate the bank’s trajectory towards achieving its transformation vision. My clients are predominantly based in the Middle East and Central and Eastern Europe.

What common challenges do traditional banks face when transitioning to digital platforms, and how do you help them overcome these?

I see three main challenges coming through in almost every transformation. The first is a lack of alignment between what the digital or technology stakeholders of a bank and what the business stakeholders want. This often leads to a gap between the digital and business strategies. The best way to solve this is by contacting the key stakeholders within the bank’s organization to bring them together and establish cohesion between the individual plans. 

The second key issue I see is the obsessive need to reach feature parity when re-platforming — this means executives want all features currently available to customers (built over the last 100 years) to be included in the new platform, even though 80% are only used by 20% of the customers. From my experience, this debate can only be solved using objective hard data. If the data is available, use it to prove to executives what features are primarily used by current and prospective customer segments. Alternatively, data can be collected through primary research to prove the point. 

The third issue is that banks still have the antiquated mindset to customize everything, even though only a few features will differentiate a bank from its competition. This is normally solved with an effective impact assessment, which informs executives about the increase in implementation time and cost by choosing to customize.

Could you elaborate on the impact of a truly unified digital platform on the customer experience within banking?

A truly unified digital platform will provide a bank with five key benefits. 

  1. It will shorten the product development life cycle, allowing a bank to quickly launch new products and features. 
  2. It will increase the bank’s reliability as there will be fewer performance issues and defects. 
  3. It will ensure the bank has a 360-degree view of the customer, allowing it to deepen its engagement and cross/upsell. 
  4. It will remove all unnecessary friction, rendering the set of customer journeys truly seamless. 
  5. It will increase flexibility in responding to ever-changing regulations.

What strategies do you recommend for banks to enhance their digital offerings and improve customer experience?

As mentioned above, only focus on customizing what will truly differentiate. Ensure a thorough understanding of current and upcoming regulations, but don’t let regulation lead design, as your bank will never be truly innovative. Regulation, in most respects, will adapt to allow healthy innovation.

Ensure the customer voice has been collected, measured, and factored into the design process. It is crazy to see how many banks still design solutions based on what a consultant tells them and not by speaking to their current and prospective customers.

Ensure protection against antibodies in the bank, as, believe it or not, not every bank leader supports disruptive transformation. Lastly, I still recommend that most planning and design-related activities be done face-to-face. Rarely have I seen a completely remote process working without issues that could have been solved if everyone had been together in a room.

How does Backbase empower traditional banks in digital transformation, specifically creating seamless and engaging customer experiences?

Backbase empowers traditional banks by allowing them to effectively compete with their more digitally mature competition without completely overhauling their underlying technology stack. This is not a shortcut, as these do not exist in digital transformation. The advantage comes in how the Backbase Engagement Banking Platform is configured. The platform involves ten years of R&D investment, allowing banks to adopt many end-to-end digital journeys across retail banking, business banking, wealth management, and employee support. The platform also provides banks with the capabilities and accelerators necessary to build their journeys, often necessary for planned differentiation and sometimes to meet country-specific regulations.

In your view, what emerging technologies or trends are shaping the future of digital banking?

I believe the trends mentioned above will continue to play a role in shaping the banking technology industry in the future. However, one of the trends I believe will play a larger role is artificial intelligence (AI). As we disrupted the Internet in the 90s and mobile phones, social media, cloud, and blockchain in the 2000s, I believe AI will bring a new tsunami of opportunity for banks but also risk. Opportunities for using AI to automate and streamline typically manual journeys will be endless. However, the increased risk of fraud and the need for stronger cyber security will be paramount to a bank retaining its brand of trust.

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What advice would you give to banks starting their digital transformation journey?

Transforming a bank will not be easy, even with Backbase. Despite being challenging, Backbase has successfully done this almost 200 times in over 30 countries. It requires strong and consistent sponsorship at the executive level and realistic and informed expectations on the timeline. This budget allows for adoption and customization and a change management process that ensures antibodies are managed effectively and that high solution adoption by employees is achieved.

Most importantly, it requires a flexible mindset across all team members. A flexible mindset will unlock the huge benefits of working more agile under conditions of trust. A flexible mindset will also ensure that the team demonstrates resilience to pivot effectively when a roadblock comes (which it will). Lastly, a flexible mindset will ensure you go live with a banking solution that the bank’s customers, employees, regulators, and shareholders will love.