“Digital and AI is not a strategy—digital and AI enable a strategy, augment a strategy, make a strategy better, but that initial strategic direction is actually quite important,” McKinsey’s Eric Lamarre commented during a Banking Transformed podcast.

“Strategy” is the key word in Lamarre’s statement. In the financial services industry, bank and credit union leaders will neither realize the revenue boost they expect from digital transformation nor their expected cost savings, without one. Thankfully, a strategy that focuses efforts on a “specific journey” will help lead to successful transformation, according to Lamarre, who jointly authored the new book “Rewired: The McKinsey Guide to Outcompeting in the Age of Digital and AI.”

So, what’s the definition of digital and AI transformation? It’s “the process of developing organizational and technology-based capabilities that allow a company to continuously improve the customer experience, lower its unit costs and sustain a competitive advantage.”

Take note: Customer experience comes first. In fact, in its global survey, McKinsey asked senior leaders how they would differentiate their business strategies from competitors over the next two years, and the top performers often cited a focus on customer engagement and innovation strategies. Many of their peers, on the other hand, placed more emphasis on operational efficiency.

For financial institutions, improving customer engagement pays off. In fact, “Rewired” relays a case study of DBS Bank’s successful digital transformation, which revealed that customers who use the bank’s digital tools and services produce twice the revenue of traditional customers. Thanks to modern technologies, such as AI-powered virtual assistants that can be utilized across multiple interaction channels, banks and credit unions can deliver a personalized customer experience and target customers and members with relevant marketing offers and other value-adds that deepen loyalty. More engaged consumers interact more and spend more, and they stick around.

McKinsey also looked at data from 80 global financial institutions spanning the time period from 2018 to 2022 and discovered that digital leaders significantly outperformed laggards in key categories like return on tangible equity (ROTE), price-to-earnings ratios and return to shareholders. Making “improvement and uptake of [bank’s/credit union’s] digital customer experience” the center of your strategy may be the smartest choice for lifting loyalty and revenue.

“Rewired” recommends and details six capabilities to make digital and AI transformation successful, but I would boil it down to this….ensure AI technology is supported by:

º Quality data that is accessible by all institution channels

º Modern customer experience solutions that are unified and user-friendly

º Strong security for enrollment, authentication and fraud detection

Artificial intelligence can truly transform nearly every aspect of your financial institution, but to keep customer experience front and center with your strategy, it must be reinforced with data that enables tailored customer interactions, next-gen CX solutions that facilitate those interactions, and a level of security that protects customers’ or members’ sensitive, personally identifiable information during those interactions.

Introducing customers or members to an interactive virtual assistant (IVA) is a powerful move within a strategy to prioritize digital customer experience. These AI-based, digital assistants take CX to the next level by:

º Making it quick and convenient to find answers to questions, such as, “What’s the bank’s routing number?” or “What are the bank’s branch locations and hours?”

º Staying available always, 24/7 – unlike humans, IVAs never sleep or take a break

º Cultivating an AI learning loop, so the IVA gets smarter over time, as the collection of data grows

º Freeing up customer service agents to focus on complex and meaningful customer/member interactions by automating simple requests

So, remember: Adoption of digital and artificial intelligence technologies is not a strategy on its own…but doing so can play an important role in a strategy that is designed to achieve the vision for your financial institution. Bank and credit unions leaders, take time to think through the steps your team needs to take to achieve its goals and objectives. Artificial intelligence can surely enhance your roadmap to get where you want to go.

LeackStat 2023