Prior to jumping into the process of designing a digital bank, let's figure out what a digital bank is. Digital bank isn’t defined by a great mobile app or a trendy online presence. Neither closing physical channels make a bank digital. Digital bank is shaped and defined by the fact that its key product and services are delivered digitally and all key interactions with customers occur digitally. And its expansion and infrastructure is geared towards catering to the digital interactions and needs. Its culture is designed to embrace and adapt changes of digital environments and trends.
Also we need to keep in mind that all digital banks are not made equal. Based on the value proposition, channel adoption, affiliation and product portfolio, we can divide digital banks into the following categories:
1. A digital only bank or challenger bank: These are native digital banks that are built around the digital technologies as its core. They can be entirely branchless or they can have some branches but the primary interactions of their customers occur mostly via digital channels.
2. A digital bank as subsidiary of a large bank: It may often be very difficult for an established bank to take the risk of going fully digital by scrapping their years of working model. So it is often a good idea to crate a subsidiary and create a digital bank under the subsidiary. This is a safer way for the parent bank to try and test a new business model as well as slowly and safely bring the cultural change to the parent brand.
3. Digital bank as a channel: Launching digital bank as a channel is also a popular strategy traditional banks often adapt. The idea behind this is that superior experiences can be delivered by creating new mobile and online platforms that can act as digital channel. This also caters to the millennials and generation z customers. Here, the digital channel takes the leverage of existing infrastructure and creates a digital layer on top of that.
4. Digital bank as a new brand: It is also a popular practice for full-service banks to create a new digital bank brand. This helps them to cater to the tech savvy younger population by creating new and trendier brand and keep their original brand separate. This also helps the new brand to ride on the safety and security factors of the parent brand. These new brands also leverage the existing infrastructure of the parent bank.
Creating a digital bank poses its own challenges. It requires discovery, ideation, planning and proper execution. Unless it is a challenger bank, these initiatives often suffer greatly from the culture and policy of the parent brands.
Designing a digital bank requires shifting the strategy, business driver and thinking process in the following areas:
1. Channel interactions
Channel interactions of digital banks occur mostly through the digital channels. It involves financial transactions, and should be at the centrepiece of the digital strategy. Product push, up-selling, customer support, cross channel interactions etc., can also be digital first if not digital only.
2. Products that are digitally optimized
Digital bank’s products and services should be designed to be radically different from traditional products and services. Digital banks should think like e-commerce retailers when it comes to designing their products and services. It is also important to think the customer journeys from the digital first perspective.
3. Processes that are digitally optimized
Digital banks must learn to be lean and agile. Being lean also brings cost saving that digital banks can pass to its consumers. Brand loyalty in digital space is relatively lower and consumers are often cost conscious and expect better products. Digital banks also need to be vigilant about transparency, adopting new technologies, constantly look for ways to save customer’s precious time and develop processes that encourages creating fully integrated ecosystem. Integration can occur with partner platforms or digital ecosystems.
4. Bringing digital culture at the core of the organization
This involves transforming the bank’s culture from traditional to digital savvy. Understanding the ever changing customer behaviours and expectations as well as being able to respond to those changes quickly is something banks should be aiming for. That’s the reason behind many bank’s effort to crate a completely new environment that is detached from its main operation and hire completely new team to work on their digital subsidiary, channel or brand.
Before moving to the discussion on how to build a digital bank, lets take a look at the holistic approach that you need to take when you are building a digital bank.
1. Rebuild and don’t try to salvage
Don’t start with a traditional banking model in terms of ‘products and services’ and simply build a digital version. It will almost certainly bring the disaster. One of the biggest mistakes made in early digital transformation efforts has been simply making existing processes and journeys digital without rethinking them from ground up.
2. Think like a customer, not a bank
Begin the thinking process around the customer and move forward with their needs and expectations. Designing a new digital bank, should start with the customer experience. That approach is very different from how banks were built in the past, from the inside out. Start by ignoring the old banking rules and engagement models, and instead think like a prospective customer.
Successful digital banks begin by looking at what will attract new customers and how to make the bank ‘sticky’ so that customers are never tempted away, and go on to expand their use of its services.
3. Validate everything through usability testing
Build usability testing as part of your core process and design thinking. Make sure to prototype and create proper test scripts and matrices and implement the findings towards refinement and iterations.
4. Create the rock solid infrastructure
Digital banking customers often have high expectations and often that include fast performance, smooth workflows, availability, feeling secured, latest technology implementation, instant support etc. The rock solid infrastructure is where rapidly changing product catalogs, flexible decision engines, integration to new services, uptime guarantee, extra security and the ability to start, save and resume an onboarding transaction are managed.
5. Leverage the existing
A 2018 Forrester study tells us that the most successful digital banking initiatives are those that applied a ‘buy, extend, assemble and build’ approach. For basic infrastructure and core functionalities, banks should stick to the proven commercial platforms and third party solutions. Banks can also leverage the third party solutions for fraud detection, risk assessment, identity verification, international transfer etc., when appropriate. This will help digital banks to avoid spending precious time and money re-building what is readily available and will allow them to build world class user experience and create differentiator products and services on top of the commercial platforms.
Analyzing the popular digital banks, going through the published market researches and following the market trend, I have come up with the following key principles that an ideal digital bank need to be based on:
Mobile first
Customer centric
Self-serve
Simple
Personalized
Reliable & Fast
Experience driven
Differentiator
Forward thinking
These key principles can be taken into account during ideation, strategy development and design of the next digital bank.
You can also read my previous article on baking of the future to get an idea of the technology trends that can be brought into your digital banking design thinking.
Now let’s talk about what could be an ideal Business and UX process of building a digital bank.
When it comes to the business process, following steps can be taken.
1. Define your MVP and product roadmap: Assuming that agile methodology will be followed, we can begin with defining the MVP and based on the customer feedback and market demand, features can be added or updated. For example, an MVP may have the following features:
A full digital onboarding
A Saving and current account
Digital wallet
One or two Credit cards
Payments and Transfers feature
Transaction history
A differentiator product or service. E.g., Social payment
2. Fulfil the regulatory obligations: Next thing is to get the new bank registered and regulated through the proper licensing authority.
3. Choose a right business and revenue model: Digital banks are known for their low or zero fee model. However, it may not be sustainable. Banks will have to find innovative ways to make money. Following ideas may be considered:
Fremium model: Keeping the basic services free and charging for premium services is a proven business model that several internet companies are following for decades. Example could be Amazon prime. Digital banks can also adopt this revenue model.
Marketplace: Banks can partner with third party vendors and allow their platform to act as marketplace and collect a fee for advertising their services and when customers available those services.
Credit card, loan and financing charges: Digital banks can aggressively push innovative credit products and can make money through interest and processing charges.
Value added services: Value added services such as international money transfer, digital wallet, loyalty program, financial advising etc., can also be a good revenue driver.
4. Calculate the cost and do cost benefit analysis: Not paying attention to the cost per customer and cost of providing services can be fatal. For example, many banks use SMS services as a mode of sending notifications. But it comes with a price tag. Banks must calculate all the costs of providing certain services and do a cost benefit analysis for long term sustainability. Major areas where costs may incur can be as follows:
Platform licensing and customization cost
Cost of building the middle tier and API integration and licensing.
Customer on-boarding.
Account opening and management.
Transaction processing and display.
Credit card and debit card offering and management cost.
Support and notifications related costs.
Value added service integration and operating costs.
5. Create platform architecture and build the back end and middle-ware platform:
The back end platform is the product and data layer where the core banking system, transactional and customer data resides. Back end system can be the existing back end system of the parent bank or a new out of the box system for a new or challenger bank. Back end system selection should be done wisely by keeping the flexibility, future development, evolving market demand and product road map in mind.
Middle tier is the layer where back end system interacts with third party APIs like security layer, payment processing layer etc., and also where the transactional data and customer data is being prepared to be fetched based on front end interactions. This layer is used to integrate with all the third party APIs with the back end. Having a robust middle tier architecture is extremely important for the stability, security and responsiveness of the platform.
Front end is where customers interact with the platform. Here experience, design and interactions meet the programming platform of the presentation layer. UX and design takes the front seat in this layer and programming platform needs to be able to support the experience and design requirements.
Next thing I would like to talk about is the experience thinking and process. If you don’t have the chance to participate into the business model ideation and strategy, then you should go about understanding it and figure out how to maximize the value to the users. You can also go over the existing user data, analytics data and do your own research to find the target users and segments.
I will not go into too much of detail of UX and Design process and will mention the key steps instead. The purpose of this article is to cover the key aspects of building the digital bank. I will rather publish another article detailing the financial experience and design process in detail. Please make sure to come back to my blog for that.
Step 1: Develop Archetypes and Key Personas
Step 2: Develop Empathy Map
Step 3: Competitor analysis and benchmarking
Step 4: Map User Journeys
Step 5: Create Information Architecture
Step 6: Create User Flows
Step 7: Wireframing
Step 8: Create Mood Boards
Step 9: Create Design and Interaction System
Step 10: Visual Designs
Step 11: Prototypes
Step 12: Usability Testing (preferably after each sprint)
Step 13: Iterate and Improve
Digital banks should build experience that is extraordinary, intelligent, engaging, delightful, innovative yet super simple and easy to use and progressively disclose the additional features as required and learn from the user behaviours.
Lastly I am putting together a list of features that you can consider to include in your next digital bank. It may not be possible to include everything; but you can pick the ones that are best suited to your value propositions.
A. Landing screen of an app or online platform:
Intro section
Featured products
Sign in
Onboarding
Contact
Branches & ATMs locator on interactive map and possibly AR enabled
Promotions
Calculators and convertors
View balance without signing in
Social media feeds
Deals and offers
B. Post login / dashboard:
Account summary with balances
Account info card
Latest transactions
Upcoming payments/ transfers
Income and expenses breakdown
Quick links to key menu items
Recommended products
C. Payments and transfers:
Upcoming payments and transfers alerts
Payments and transfer history
Suggested payments based on smart prediction
List of key billers and favourite recipients
Option for social pay and transfer
Contextual Help & FAQ
Add biller and recipients by category
Domestic and international transfers
Top up mobile, pre-paid or loyalty cards
Dispute payment or transfer
D. Accounts View and Life Management tools:
View accounts and switch between accounts
Switch between Accounts, Cards, Personal Loans and Finances
Ability to add business and trading accounts
Quick payment options for key payment types
Transaction history with smart feed
Transaction detail
Account detail card with IBAN, Routing No etc., mentioned
One click account opening or card or loan application
Set life style goals
Monitor life style goals
Get AI driven advise to life style and spending/ saving goals
Smart recommendation to savings products based on customer profile
Visual breakdown of spending, income, saving etc.
Personalize accounts view
Favourite accounts
E. Additional features, Support and Fun stuff:
Smart search with advanced search. Optional hashtag search
Smart Offers and promotions based on user’s needs
Social feeds of transactions and social banking options
Social financial advise and discussion
Marketplace for popular services with special pricing, offers and promotions
Vacation packages
Loyalty points and ability to convert loyalty points to cash or gifts etc.
Scavenger hunt
Robo advisor
Video chat
AI driven financial assistant
Intelligent help
Wearable extension
Health management integration
Contactless/ Card less withdrawal
Creating a digital bank takes lot more than just the design thinking. It starts with a unique value proposition and then cascades into the other aspects of the business and then gets into the design and execution phase. To summarize I would say that following points should be kept in mind.
Real value proposition.
Focus on creating simple yet extraordinary user experience and always test to refine.
Create an environment that is agile, flexible, and adaptive.
Keep cost to the customers relatively low.
Create an ecosystem of partnerships.
Build a robust back end infrastructure.
Be creative with marketing.
Comments