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Your Bank’s Digital Transformation: What to Know Before You Get Started

There’s no time like the present to go digital. With new entrants in the challenger bank, neo bank, and fintech categories, the financial services ecosystem is more competitive than ever before. These alternative banks comprise part of the digital finance transformation, creating new business models that put banking capabilities at our fingertips. That’s exactly where customers expect traditional banks and credit unions to be. 

It’s not just a matter of taking existing processes and putting them online. Digitalization requires the use of digital technologies and the innovation of workflows, products and services. It can’t be confused with digitization, which puts existing processes into digital form. Digitization is the equivalent of building a faster horse and buggy. It can’t provide the type of experience that creates new business models and fosters customer loyalty. That’s where digitalization comes in.

Maintaining Relevance in the Digital Age

James Robert Lay is the founder and CEO of Digital Growth Institute and author of the best-selling book, “Banking on DIgital Growth.” Lays says it’s important to go beyond the technology to consider the strategic impetus for digitalization. “Are we just trying to add technology thinking that technology is the cure?” 

“[The customer] experience is nothing more than well-defined systems and processes that have been strategically thought out and applied. And then the key is to optimize these experiences,” Lay says. Technology is how you orchestrate the experience, much like the backstage of a theater production is a critical part of the live performance.

Beyond technology, it’s creating that digital experience that keeps customers engaged and loyal. Therein lies the challenge. When customers go online they’ve been trained to expect a great experience. They already know how digital banking should look. It must be easy, fast and seamless. They can do it all with a few taps on a mobile or other connected device. If your bank or credit union can’t deliver, they may take their business elsewhere.

That’s the bottom line: If banks and credit unions want to maintain future relevancy, digital banking is not just something that’s nice to have. It’s a business imperative. 

What’s at stake for the banks and credit unions that are hesitant to take the plunge? Meredith Olmstead, founder and CEO of FI Grow, says that they risk losing market share to bigger banks that are already online. “Customers simply don’t want to take the time to walk in the door anymore. They want to do everything from the comfort of their homes. This is happening every single day, which is a hard lesson to learn,” Olmstead says.

The Challenges

Before pursuing a digitalization strategy, banks and credit unions must be well prepared. There are several key challenges that institutions ought to consider before investing time and money into their digital transformation. 

People Challenges

Digitalization is not just another technology initiative. It changes the interactions between employees, the customers they serve, and the environment in which they work. You can’t ignore the organization’s culture. Loosely defined, culture is “how things get done around here.” And that’s all about the people. 

Lay believes that although the directive for change may come down from the top, leadership must ensure that they’ve secured the buy-in needed for success. Change doesn’t happen because the CEO put it in a memo or because the people in IT say so. People must be sold on the benefits and what’s in it for them. “That’s the big reason that 60% to 85% of all digital transformation projects fail. They don’t fail because of the technology. They fail because the human experience is a less than stellar one,” Lay says. 

The other component of the people challenge is resources. According to Boston Consulting Group, digital transformation requires skills in the following areas: big data, advanced analytics, agile processes, digital content, infrastructure management, mobile interfaces, the digital customer experience, risk and security management, payments, digital branding and marketing. 

It’s likely that you will need to extend your existing workforce with contingent labor, whether that’s consultants, contractors or freelancers. An objective third party can help solve internal turf battles as banks and credit unions seek to reinvent their processes and banking platform. Remember, digitalization means reimagining how you work, not just using technology to offload pieces of the process.

Customer Experience

Customers come to digital banking with high expectations. Banks and credit unions are not just competing against other financial companies; they are competing against the tech industry drivers of the customer experience like Amazon, Netflix and Uber. But in the case of, say, Facebook, it’s not just an enviable customer experience. You can now send money free through the company’s Messenger app. Competitors like Facebook, since they are non-banks, are not bothered by (1) the rules and regulations banks and credit unions must follow, and (2) the inflexible legacy systems that make it challenging to put the customers’ needs first.

But because customer experience is hugely important, banks and credit unions must figure out what it takes to deliver. “A band-aid approach needs to be avoided. For example, just putting applications online and still requiring that someone come into a location to sign paperwork is not enough. True digitalization [means that] all aspects of the process be able to be completed in the digital space,” Olmstead says.

Another consideration is that there are customers who struggle with online technology. Some don’t trust that the system is secure. They’ve heard that data breaches, fraud, and cybercrime are on the rise. Others are frustrated because they have forgotten their password, don’t know how to access the technology, or find the system unreliable. Downtime issues can seriously undermine customer trust.


Digitalization changes everything …and nothing. Sure, there are loads of data. But beyond just having the information, banks and credit unions must use it to drive customer engagement. The longer the institution has taken a broadcast approach to marketing, the more difficult it can be to stop sending messages that target everyone and hit no one. 

The neo banks understand how to personalize the customer experience. It’s how the customer is won in this extremely competitive market. With no legacy system to grapple with, the customer garners all of the attention from these nimble organizations. This is what banks and credit unions must learn to do exceptionally well. And it may be where they have the greatest potential for competitive advantage: they can combine big data knowledge of customers with a deep understanding of banking. 

Lay maintains that banks and credit unions can use personalization for quick ROI wins. It’s a balancing act between helping the customer feel cared for versus overwhelming them with what can feel like propaganda. “You’re using a person’s buying signals and their specific areas of intent to provide the personalization. It’s probably the quickest low-hanging fruit to take action on.”


Banks and credit unions are in the business of banking, which, all on its own, is a complex business. In addition to the frequently changing rules and regulations, there’s the need for real-time processing and customer demands for 24/7 anywhere service. Digitization can put a strain on scarce IT resources. Many banks and credit unions do not have the type of in-house support needed for digital transformation

Building a proprietary solution may create a competitive advantage that cannot be easily duplicated. On the other hand, it’s expensive and requires resources that only the largest institutions can afford. There is also the issue of keeping up with the most innovative technology. Technologies such as artificial intelligence, cloud computing, API and chatbots are dramatically changing the skills required for anyone other than highly-trained specialists to keep up with the pace of change.

Further, banks and credit unions are still strapped with legacy COBOL technologies on the back end. Of course, legacy systems were never intended to be compatible with technology that didn’t even exist at the time. These rigid infrastructures make it challenging to offer the types of services that compete with fintechs and streamlined digital-native models. 

Whether banks and credit unions buy or build new technologies, they must consider how to get the greatest return on investment.

You are Here: Financial Digital Transformation

Despite the challenges, digital banking is not just the future, it’s where we are today. Customers demand 24/7 ease of a mobile application and the convenience of banking anytime, any place. In the digital world, employees are free to focus on mission-critical initiatives. The big competition is already there. The banks and credit unions that expect to thrive in the future will be there as well, with attractive digital offerings and the user-friendly interfaces that customers demand. 

Lumin Digital

Lumin Digital is redefining the way banking is done. Whatever unique challenges your bank or credit union may face, Lumin can help you through the process. We can help you can create a custom, secure personalized experience your users will love. They’ll be able to take the branch experience with them wherever they go. 

Banks and credit unions no longer have to be limited by internal capabilities and legacy systems. Our cloud-native platform allows you to give your customers the mobile capabilities they desire with zero downtime upgrades that continue to improve their experience. Contact us today to see how we can help your digital transformation.


Boston Consulting Group – The Power of the People in Digital Banking Transformation