Digital transformation has been the next big thing in banking for the better part of a decade. The problem with a term floating around for so long is that it starts to lose meaning. This post is a parable on what Financial Services Companies should strive for when they make digital transformation a priority, and what customers will think of those who can’t or won’t play by the new rules of the game.

A 25-year-old friend of mine recently came to lunch exasperated at his experience trying to sign-up for a credit card. The interesting part is that the customer service rep hadn’t been rude; my friend was angry because to finish the sign-up process, he had to show his ID in-person.

My friend wasn’t just frustrated—he was furious. I thought he was overreacting until he asked a key question:

“Why are they making it hard for me to give them money?”

And then it clicked. Here was a person who wanted to purchase a product, but instead of being allowed to do that quickly and easily (say, by uploading pictures of his ID online) he was being asked to jump through hoops.

Banks and financial services companies have many regulatory hurdles to account for and they design processes to ensure compliance. But these processes often don’t always consider the customer experience that results. At best, customers accept this as the status quo. At worst, people like my friend rail against companies’ over reliance on their sway in the market and choose competitors almost out of spite.

While this was my friend’s experience with a credit card provider, we’ve previously written about how similar things happen with banks. It’s an issue because, according to a 2016 Viacom/Scratch survey, “73 percent of Millennials would be more excited about a new financial offering from leading technology firms than from a nationwide bank.”

For my friend, this plays out with his investments, which are with a robo-advisor and a peer-to-peer lending company. My friend never has to talk to someone when he uses these products. 38% of Millennials never visit a bank branch—if widespread brick-and-mortar coverage was ever an advantage for banks, it is quickly diminishing. To the generation that isn’t afraid to trust new technology if it provides a better customer experience, the one-year-old financial technology start-up and the 100-year-old bank are on the same level. With $200B in spending power, banks cannot afford to ignore how this generation does business.

Banks Have a Digital Transformation Advantage — Data

Banks do have an advantage when it comes to data. While Millennials are becoming more willing to switch banks, a majority have stayed with the institution they started with. With an abundance of data, banks have the potential to generate incredibly personalized offers to Millennials, a strategy that the Boston Consulting Group has identified as essential to banks’ digital transformation. Making these compelling offers at scale has proven to be practically impossible for most banks—they might have the data to make these offers, but the vast majority lack the capability to do so.

At the same time, as management consulting leader Peter Drucker once said, “Culture eats strategy for breakfast.” A bank cannot embark on a successful, sustainable digital customer acquisition strategy if it is still burdened with antiquated and manual internal processes. Any digital initiative launched without attempting to change a bank’s internal culture could simply be thought of as window dressing, especially when compared to start-ups whose processes and technology are built to provide a seamless experience for both the customer using the product and the employee managing it.

Banks are faced with an urgent challenge from fintech competitors and Millennial customers to change the way they do business. Banks have the data to offer Millennials a simple online experience that provides them with personalized offers but lack the capability to deliver on this potential. Banks are also challenged internally by the dissonance between digital customer processes and manual internal processes, a tension that will ultimately make the digital efforts unsustainable.

How Zafin Can Help With Digital Transformation

This is where Zafin Cloud comes into play. Zafin Cloud digitizes the way banks do business, enables more personalized offers, and replaces manual processes with AI-enabled systems that better ensure regulatory compliance.

Zafin Cloud works by sitting on top of bank core systems instead of reinventing them. Banks feed Zafin customer account and behavioral data, and the software interfaces with their core systems to tell them which customers are eligible and suitable for their offer. Banks create their personalized offers within Zafin—they can set offer conditions and make redemption contingent on multiple product actions and specific customer behaviors.

For example: XYZ Bank wants to target an offer to people aged 24-30 who are young professionals in Albany, New York. They want to offer 5% cash back to people in this demographic who maintain minimum balances of $2,000 in their checking account and $5,000 in their savings account. Once this promotion launches, Zafin monitors which targeted customers do and do not hit the offer redemption criteria and disperses rewards accordingly.

Zafin also saves money by preventing false offer redemptions by embedding governance-related conditions. Once the promotion ends, Zafin documents why certain customers did not qualify for the rewards, which is a tremendous help in terms of compliance. Zafin shares this documentation with XYZ Bank’s customer service representatives which increases transparency around fees and helps prevent unwarranted fee reversals.

According to Zafin Solutions Consultant Vishal Ramesh, “Zafin could allow banks to do in days what used to take six months and cost millions of dollars. Zafin not only protects banks’ margins from false redemptions, but also stops fees from being improperly waived, which can account for up to 15% of lost fee revenue. Both of these cost savings are independent of the net new revenue that these Zafin-enabled promotions will drive.”

There is a massive opportunity for those financial services companies who can create a customer-centric, technology-focused, personalized experience. Or, as my friend from the beginning of this blog might say, “designing a customer experience that doesn’t suck.”

My friend’s story ended with him complaining to the credit card company on Twitter. The company apologized, but said there was nothing they could do. My friend tagged every major bank in Canada in the Twitter thread and asked what they could offer. Every bank responded.

This is a final lesson to banks and financial services companies that fail to operate digitally: if you cannot provide what Millennials are looking for, they will find someone who can.

About Zafin

Zafin (@zafin) is a leading financial technology provider that enables banks to form richer, more personalized client relationships. Built from the ground up for financial services, its platform empowers banks to enhance revenue and operational efficiency. Founded in 2002, Zafin sits among North America’s top FinTech companies, and is trusted by retail and corporate units at some of the largest banks worldwide. Headquartered in Toronto with global offices, Zafin has a proven track record with a 100 percent client retention rate as validation.

Jeremy De Mello

Jeremy De Mello is an Associate Account Executive on the Zafin Growth team. He is passionate about how financial technology can create a better customer experience. In his spare time, Jeremy enjoys personal development, cooking and baking, and working towards his goal of being described as dashing. You can follow him on Twitter @JeremyDeMello or connect with him on LinkedIn.