Direct-Channel Digital Maturity Needs Another Look

CCG Catalyst Commentary

Direct-Channel Digital Maturity Needs Another Look

By: Tyler Brown

May 21, 2024

The drama of risk management gone wrong at Banking-as-a-Service (BaaS) banks is taking attention away from a key imperative in financial services: the work financial institutions (FIs) need to do on their direct channels. Many customers find FIs don’t meet the bar with their customer experience — in CCG Catalyst’s US Banking Study 2023, the top complaint bank executive respondents said retail and commercial customers had was “customer experience is lacking.” Moreover, direct channels are an area where there is well-documented guidance on compliance, making it far less risky to tinker with.

Bankers want to create a better experience. The top priority in the next 5 years that bankers have for their retail business, according to our study, is to improve the customer journey (64%). That goes for the commercial business, too (56%). Bankers’ control over relationships through their direct channels should give them both a risk cushion and a strong incentive to invest strategically in next-generation solutions for the customer journey. But that doesn’t mean such efforts will be easy — FIs need to put in the work.

Here are three key areas necessary to address for a better customer journey:

  • FIs need a model for product development that informs a modern customer experience. That includes their philosophy about creating something that’s competitive: Is the focus on keeping up with competitors? Are vendor roadmaps a crutch? Are they doing the right customer research, and is it thorough?
  • FIs need to offer the features and functions their customers demand, delivered through the right channels and straightforward to use. Those channels may include digital banking, the customer service center, the branch, and physical self-service. Employees also need the right tools to make the back office efficient.
  • A huge hurdle FIs face with implementation is the complex patchwork of vendors, platforms, and point solutions across channels that form the foundation of the customer experience. As we’ve written, it may be tempting to go with one or a few vendors to simplify the procurement of comprehensive solutions. But that strategy is unlikely to support a best-in-class product.

As we discussed in our report, “Successes in Transformation: Lessons from the Field,” customer expectations for the experience have risen thanks to tech-focused providers. Banks need to evolve and differentiate in response. To compete successfully for customers, FIs need to commit to omnichannel digital maturity — modernizing and integrating digital and physical banking.

Core to any FI’s direct strategy should be the holistic experience and smooth handoffs between channels. Fortunately, FIs are starting from a point where their management, risk departments, and regulators should feel comfortable. Third-party risk is not out of the ordinary for direct channels — today’s banking rules are written with the context of bank technology that FIs use to serve their customers directly. Vendors have historically designed their products for that use case. As such, direct channels are a safe way to do business, and they remain an important way to drive innovation, with the right commitment.