In today’s financial sector, where margins are tight, it might seem wise for institutions to consolidate digital investments with a single vendor to save costs. However, this approach could not only diminish the long-term advantages of advanced digital solutions but also risk non-compliance with upcoming regulations.
The White House and the CFPB have recently signaled their intention to address the growing concern over financial institutions' reliance on ineffective chatbots. Their objective is straightforward: to ensure that customers and members can access human assistance whenever needed.
As these new regulations loom, financial institutions are already grappling with issues like declining deposits, rising customer attrition, and increasing operational costs. Now more than ever, it’s essential to confront these challenges directly. By embracing digital transformation, your institution can not only navigate these obstacles but also secure a foundation for long-term success. Here's how:
1. Retention of deposits:
Today, customers have more choices than ever when it comes to where they keep their money. If a bank’s digital tools are outdated or insufficient, customers are more likely to move their deposits to competitors offering better digital experiences and enhanced customer service. This loss of deposits not only erodes the institution’s financial base but also increases the costs associated with acquiring new customers to replace those who have left.
Investing in best-in-class digital solutions can help institutions increase and retain deposits by offering a seamless, efficient, and user-friendly experience that meets and exceeds customer expectations. When customers feel that their financial institution is responsive to their needs and offers top-tier digital services, they are far more likely to remain loyal, reducing churn and ensuring a steady flow of deposits. This retention directly impacts the institution’s bottom line by maintaining a stable financial base and lowering customer acquisition costs.
For example, our client BMO saw a remarkable 288% increase in applications being funded on account opening pages after upgrading their digital tools. This significant improvement highlights how investing in digital transformation can directly impact deposit retention and contribute to a stronger, more stable financial foundation.
2. Lower operational costs:
Operational costs, particularly those associated with high-volume call centers, can quickly add up for financial institutions. Routine customer and member inquiries that could be automated often require significant staff time, driving up costs and reducing overall efficiency. The average cost per minute at a typical call center is $1.00, this adds up. Without modern digital tools, institutions may also experience inefficiencies in processing transactions, managing customer data, and delivering services.
By investing in AI-driven solutions and other advanced digital tools, financial institutions can automate routine processes, such as answering common customer questions or managing simple transactions. This not only reduces the need for a large, expensive call center workforce but also improves operational efficiency across the board. For example, our client Stanford FCU successfully lowered their overnight call center volume by 70% after implementing these advanced tools, dramatically reducing their operational costs.
With these tools in place, institutions can lower operating costs, reallocate resources to higher-value activities, and ultimately increase profitability.
3. Increased ROI through personal engagement
Personalization is key to driving engagement and loyalty. Financial institutions that leverage advanced digital tools to gather and analyze customer data can create highly personalized experiences that resonate with individual customers and members. Without these tools, opportunities for targeted cross-selling, upselling, and relationship-building are often missed, stunting growth potential.
Investing in digital transformation allows institutions to deliver personalized content, offers, and services that align with customers’ specific needs and preferences. This targeted approach not only enhances the customer and member experience but also creates more opportunities for cross-selling and upselling. As a result, financial institutions can generate higher revenue per customer, improve overall customer lifetime value, and significantly boost ROI. This strategy ensures that the institution is not just maintaining its customer and member base but actively growing its profitability through enhanced customer relationships.
While it might be tempting to cut costs by consolidating digital investments with a single vendor, the long-term advantages of investing in advanced digital solutions are far more impactful. By focusing on deposit retention, reducing operational costs, and increasing ROI through personalized engagement, financial institutions can not only navigate the challenges of today’s financial landscape but also position themselves for sustained growth and profitability. In a market where customer expectations are constantly evolving, investing in digital transformation is not just a strategic choice—it’s essential for success.
