Make the right call.

Six strategic criteria for digital banking evaluations

Perhaps no technology decision you make will have a greater impact on the long-term relevance and competitive posture of your financial institution than your selection of a new digital banking system. You want to make the right call. Your selection team will dig into specific features, functionality, and process. As a leader, you have a responsibility to give focus to broader, critical success factors that will impact your ability to deliver expected business outcomes.

Consumer expectations for digital banking have accelerated dramatically, and you can no longer afford to settle for meeting the market where it is today. Successfully meeting your market where it will be in the next decade is what will separate winners and losers in your market. And in your C-suite. Legacy thinking and outmoded technologies aren't going to drive the depth or quality of account-holder engagement required to compete, grow deposits, and expand relationships in such a crowded market for financial experiences.

So you should ensure your selection team approaches your digital banking project with a few timely mindset shifts:?

Embrace the change.

As you approach the task of evaluating digital banking technology partners, you will spend ample time thinking about features and functionality. Remember that, no matter which partner you choose at the end of your evaluation, there will be changes to some processes for your staff and your end users. Be sure your entire selection team is clear on the broader net positives of, and reasons for, a new system, even if it may require staff and users to embrace change. On balance, you should find those changes represent an opportunity to demonstrate an overall better experience for both.

When utilizing a ‘scorecard’ to inform your decision, be sure to maintain a strategic overall view. Checking boxes is important, but be prepared to re-evaluate those boxes. And don’t forget why you started your evaluation in the first place.

Prioritize UX.

Your fiercest competition isn’t the bank or credit union down the street. And it’s not just the regional or national banks in your market. Even if you're not in a major metropolitan market, the internet-connected supercomputer in your pocket means you're not just competing locally. Your primary competitors today include Apple, PayPal, Starbucks, Amazon, Walmart (yes, Walmart) and the digital-first neo-banks and other consumer and business-focused fintechs bleeding deposits from your institution. They win the war for your consumer’s wallet with a better user experience.?

Nailing the user experience is an absolute top-tier imperative. To make a sound selection, verify that your team is of one mind on the importance of a well-crafted user experience. And you'll want to be sure your team understands the distinction between the user interface (UI) and the user experience (UX).

Think proactive. Think personal.

Your selection team should reflect on the purpose of your digital experience, and seek alignment with user expectations. The legacy view of digital banking as merely a service channel is in direct contrast to the expectations of consumers, who expect digital to be a personalized sales channel. Consumers expect you to know them. To proactively serve them on a one-to-one basis. Mobile engagement across social media and other algorithmic experiences have conditioned them to expect a personalized experience with your institution. Achieving a personal approach to digital banking will depend upon your ability to gain insights from your data and proactively market the right services to the right individuals at the right time.

With those perspectives in mind, here are six critical evaluation criteria that should be heavily-weighted aspects of a well-run digital banking selection:

1. Culture

Company culture defines your long-term experience with a technology partner. Chances are, many, if not most, of the major reasons you have chosen to consider alternatives to your current digital banking provider can be directly linked to whether or not they demonstrate a candid, responsive, collaborative culture. A culture of genuine partnership derives from an open and responsive approach to problem-solving, client ideas, and feedback. Anything less than that means no matter what you decide today, you’ll be searching for a new digital provider once more in a few years’ time.

A genuinely concerned partner seeks first to understand you, your market, and your objectives. That approach takes more time up front, and it definitely requires more engagement on your part. But it’s the hallmark of serious professionals, and you’ll do your team and your digital banking users a disservice if you short-change that engagement.

PRO-TIP: Make time and space for key executives involved with a technology selection to genuinely engage with each player throughout your evaluation. Those touch-points will be a great way for everyone to get a solid feel for the way a potential business partner operates, and will provide executives with opportunities to ask hard questions some of your team may be uncomfortable asking.

Collaborative transparency is make or break. A partner with a culture of candor and collaboration will empower its client community to provide honest feedback, and to participate in idea-sharing amongst themselves and with product leaders. To speak candidly with their executive leadership team. A digital banking partner with a culture of candor will share its live, trusted roadmap openly with clients, so no one on your team ever needs to ask for an update.

Culture directly informs your provider’s ability to problem-solve when improvements to service delivery need to be made. One of your peers perhaps said it best:

“I’d much rather a company say, ‘Here’s what we're doing wrong and here’s what we’re doing to fix it,’ versus a company that says, ‘Here’s why we’re great,’ and dances around the hard truths.”

Culture eats strategy. Every time.

A technology provider can have well-crafted product and go-to-market strategies, and even dazzle prospective clients with them. But, without the right people with the right attitudes and a shared commitment to the right values, very little of that strategy will be delivered as promised. Or on time.?

You’re not just buying a digital banking platform. You’re choosing a partner for the long-term, so it’s important for you to understand a potential partner’s ideals and how they live them, since those are the beliefs that will drive the success or failure of their strategy, and your go-to-market.

2. UX [User Experience]?

Legacy digital banking systems were developed to check feature and functionality boxes, adding features as user expectations expanded over time. Those systems were designed with a primary focus on what users can do without deliberate focus on the overall experience of how they want to do it. This gave rise to slow, incremental improvements in the UI (user interface) of digital systems, with recent efforts largely directed toward beautification and ‘modern’ look and feel. But making an aging UI look pretty by modern standards doesn’t address the underlying UX (user experience) that drives user satisfaction.

Here’s why that matters.

Research demonstrates that digital banking experiences influence product trial and adoption. In fact, 40% of digital banking users would be more willing to try other banking products if they’re completely satisfied with the digital banking experience. And nearly three quarters (73%) of digital banking users say relevant, timely product recommendations would make them more likely to trust, try new products from, and recommend their financial institution.

Consumer expectations can shift rapidly, and an increasingly broad range of non-traditional competitors are analyzing and responding to those expectations with a user interface (UI) and user experience (UX) combination that is simple, intuitive, and bold. Those competitors are draining deposits from the traditional banking system as a result.

Pay close attention to the overall UX of a potential new digital banking system. Ask prospective partners about their design philosophy. Ask them to demonstrate the principles and best practices that inform their design. Look for a visually clear and appealing UI that distills user intent and related actions down to the most intuitive UX you can buy.

Your users expect a research-backed, scientific approach to building out a modern, bold UI, as well as an intuitive UX. While the industry has made great strides in delivering a similar look and feel to the UI, where you will see separation and competitive advantage in your market is with demonstrably superior UX. The primacy of UX in an environment of intense competition for core deposits is no longer debatable.?

3. Open for business

Digital banking should catalyze your digital transformation. Any new digital banking platform you select should be purpose-built for extensibility. A mature SDK and native API support across the platform empowers you with the flexibility to integrate existing systems with new capabilities and experiences to meet your market not only where it is today, but where it will be.

Even if you don’t have development resources in-house, you should still be empowered to take advantage of your technology partner’s integration ecosystem. Be sure to give attention to how a potential provider empowers its clients, technology partners, and trusted third-party system integrators to create meaningful extended experiences on its platform. ?

PRO-TIP: It’s worth investigating trends and potential growth opportunities in your market to develop potential use-cases for specific integrations that will deliver new relationships and expanded revenue streams. That time will be well spent, as it will also help you discern whether or not a particular integration will actually move the needle for your business. That will also help you put into proper perspective and to prioritize the real-world value of various approaches to 3rd-party integrations.

Look for broad support for a range of integrations to the back-office systems you need to run your institution along with a robust array of user-facing 3rd-party integrations to deliver high-value experiences across a user’s financial journey.?

It’s also important to inquire about providers’ approaches to integration. It's not uncommon to find a bias toward single sign-on (SSO). It's cheaper and faster to deploy. While SSO integrations can achieve the goal of connecting systems with minimal friction, they can limit your ability to maximize the economic value possible from those systems.

API-level integrations can offer better access to data and offer your users a more consistent digital banking experience. If a 3rd-party API-level integration is available to replace an existing legacy system integrated via SSO, it’s worth exploring what additional value can be created there. This is one area where the re-evaluation of those 'boxes' can come into play.

‘Open’ means more than just platform extensibility. The spectrum of delivery models in digital banking ranges from rigid, inflexible systems that force buyers into a well-defined box, to toolkits that require you to build your system from scratch over the course of many months (or years), often with a significant project management or third-party development expense.?

A better path forward favors a highly-configurable digital banking platform that offers robust out-of-the-box capability.

PRO-TIP: "Configurable" can have multiple connotations, and you'll want to understand what that means to your prospective technology providers. Look for a platform that can be deployed as standard while offering your staff meaningful control over the system’s look and feel and user navigation. When you want to make a change or create custom experiences, you don't want to have to submit a ticket and wait for support to implement. You shouldn't have to pay a project fee and wait weeks to change a logo or a navigation experience.

Look for a platform that balances the maturity, modernity, and control you need to stay in front of evolving market demands.

4. Deployment strategy

Imagine if you had to deliver separately managed, distinct versions of your services to each and every one of your digital users. Once you reach even minimal scale, consistent delivery of new features and capabilities across such a fractured deployment model becomes challenging to say the least.

The digital banking industry has traditionally deployed system architecture that puts every client on its own instance of code. This is called ‘single-tenant’ or ‘snowflake’ system architecture. While there are legitimate reasons in some industries to deploy certain types of systems in this mode, it’s not ideal for modern, scalable digital banking applications that must evolve rapidly.

Legacy digital banking providers experiencing the technical debt associated with it acknowledge that reality with investors. This quote from a legacy provider’s earnings call, makes the point clear:

“Our solutions are customized and deployed on a customer-by-customer basis, rather than through a multi-tenant SaaS method of distribution. Applying bug fixes, upgrades or other maintenance services requires updating each instance of our software, which is time consuming and causes us to incur significant expense.”

This deployment mode and its financial impact constrain client service and innovation. It also hinders basic updates, forcing some institutions to endure full conversions to new versions of the same system in order to take advantage of new capabilities. And, even if they do that now, there’s simply no way for them to have confidence that version won’t be outmoded in the next few years.

Even some newer entrants to the space have chosen to deploy this way, despite the fact that most large-scale, highly successful SaaS companies either started with a multi-tenant system architecture or have migrated to it over time.??

This ‘snowflake’ deployment mode inevitably creates a much more challenging environment to manage as a technology provider. And it’s one that you and your team can no longer afford to be subject to as buyers of digital banking technology.

The modern, best practice is to deploy a multi-tenant system architecture with a single, global?code-base. Probably the best example of this that we can all relate to is the way Apple approaches delivery and enhancements to iOS. A multi-tenant system architecture allows the same version to be released to all clients simultaneously. This approach enables higher quality releases, easier updates, and consistent delivery of innovation at scale.

How a platform is deployed matters. Where it's deployed is equally important.

If you're considering a provider who hosts the application on their own hardware, make sure you are comfortable with the geographic distribution of their data centers and their track record with system availability, maintenance windows, and disaster recovery.

PRO-TIP: There are meaningful differences in the way providers measure system uptime & availability, and you should ask about that.

The alternative you're most likely to encounter is deployment 'in the cloud.' Cloud-based systems can offer serious advantages to system availability and business continuity. Cloud deployment also offers significant advantages for scalability as your user base grows or you experience spikes in activity.

PRO-TIP: Not all cloud deployments are equal. Even systems lifted wholesale and dropped into a cloud environment, with all their overhead and outmoded processes, can be called 'cloud-based'. 'Cloud native' systems are built utilizing modern cloud development methodologies. Any nascent player in the industry should have developed their systems with the latest technologies. That's a good thing, but technology evolves. What matters most is demonstrated technical wherewithal and track-record of modernization.

Ideally, you want a partner with an established track record of deliberate, strategic investments in platform modernization and augmentation that anticipate and stay in sync with evolving technology.

5. Corporate & financial stability

Your evaluation will be incomplete without some focus on your potential partners’ corporate and financial stability. This aspect of your evaluation can demonstrate support for a technology partner’s ability to deliver, but may also expose limiting factors & legitimate concerns.?It will be one of the best ways you can properly evaluate a provider's ability to keep their promises.

If a prospective partner is publicly traded, you can independently review their financials, listen to earnings calls, and hear what executives are telling investors about their business. That’ll help you assess whether what the company says to investors is aligned with what you’re hearing from their client-facing teams in your meetings. A provider struggling with debt, slowing growth, or profitability may need to make staffing decisions or initiate strategic corporate actions that could directly impact delivery on their commitments to you.

Building out a mature, scalable, modern digital banking platform requires years of development and hundreds of millions of dollars in investment. For newer entrants to digital banking, the risk to early adopters is that financial & human capital constraints may hinder delivery of finished product or planned innovation. Their non-public nature limits your ability to independently assess their health. Long delays and failed deliveries can, and do, happen when technology providers aren't quite ready for prime time. While there’s nothing inherently wrong with forging ahead as an early adopter with such a provider, it’s critical to ensure that you go into such a relationship with clear eyes.?

PRO-TIP: Nascent players will still have a significant amount of work left to do in order to deliver a full-featured, finished product. In effect, early-adopters become early-stage investors. The success or failure of such a platform will, in some measure, depend upon other financial institutions choosing that same system. That's especially relevant when investment capital isn't readily available. If nascent players are part of your evaluation, that's a risk you'll need to weigh.

Ideally, look for a stable, growing partner who can demonstrate an ability to remain independent. You need them to keep their promises to you, so you can keep your promises.

6. Real ROI from the data you already have

Your digital channel can, and should be, a revenue center. Integrated creation of actionable data insights for digital sales and service is priority number one. If you do it well, this part of your digital transformation can pay for your entire digital banking system.?

That’s not hyperbole. Your peers are doing it:

“[We’ve] generated enough revenue in the first three months of 2023 to pay for an entire year of digital banking platform costs.”

As you evaluate options, look for a partner who fully understands the business value of your data and knows how to unlock it. Here’s the problem you face: There exists a broad range of 'data insights' solutions across all of fintech. When you dig in, you'll find a range of systems with beautiful data visualizations that require you to become a combination of data scientist and expert marketer to glean anything actionable beyond the basics. The ‘action’ part is usually left up to you and your marketing team.

Many financial institutions lack the internal expertise, organizational focus, or bandwidth to predictably deliver measurable business results from such incomplete solutions.?

An ideal solution will effectively analyze all of your relevant data from your core and your digital banking platform. It will also intelligently automate the marketing efforts from it, so you can monetize your data and create actual, hard-dollar economic value that you can report in the boardroom. Look for a data analytics and marketing automation solution that does both predictably, and with a repeatable, proven ROI.?

Additionally, you’ll need to verify that your selected solution will be proactively supported by subject matter experts who are tasked with maximizing the economic value you can achieve with the data you already have. That will be especially important for financial institutions who don’t have in-house subject matter expertise.

In this current environment, unlocking the economic value in your data can mean the difference between growth or slow decline. With the right tools and support, you can discover the gold in your data and deliver real results. Ask prospective partners to demonstrate how they'll accomplish that for you.

Bonus criteria: Market momentum

The market momentum of a potential digital banking partner can tell you a lot about them. Their ability to compete and grow in such a fast-moving industry will directly impact their ability to deliver on their promises to you. Whether they are growing active users on their platform, or seeing net losses, will impact the financial and human capital they are able to apply to development and client-facing support as well as their overall strategy in-market. That will absolutely have an impact on your ability to differentiate and deliver on your promise to your users.

It’s worth asking potential digital banking technology partners to share independently verifiable?data that demonstrates their scale and positive market momentum.

Choose wisely. Choose with confidence.

Selecting a new digital banking partner is one of the most impactful decisions you will make. Keep these strategic evaluation criteria front and center in your evaluation. Make sure your selected partner demonstrates strong alignment with your business objectives across each of them. If you deliver a thoughtful assessment of these for your selected partner, you will feel legitimately confident in your decision, and your C-suite and your board will know that you made the right call.