Design Thinking for Digital Banking
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The document discusses how traditional banks are facing disruption from fintech and neobanks, emphasizing the need for design thinking to adapt to changing customer behaviors and preferences. Design thinking is presented as a human-centric approach that helps banks innovate and create more engaging customer experiences. The paper includes case studies of various banks that successfully implemented design thinking principles to enhance their services and maintain competitiveness in the digital banking landscape.
Design Thinking for Digital Banking
- 1. DESIGN THINKING for DIGITAL BANKING How banks leverage Design Thinking to restructure their DNA
- 2. It’s clear how Incumbent banks are met with unprecedented market forces. Fintech and neobanks—new financial players that offer more and more exciting financial products—are eating up banking market shares. Meanwhile, the growing use of alternative payments such as PayPal, Samsung Pay, Apple Pay, and so on points to the fact that customers are finding traditional banks inconvenient and untrustworthy. At the same time, people are walking away from physical branches; instead preferring mobile banking for ease and convenience, according to a recent report by Backbase. On top of that, the government continues to encourage Digital Banking, made apparent by the government’s recent directives. These factors may sound like twists and turns that took traditional banks by surprise, yet they point to the refusal to change and innovate in the face of digital disruption. Now that change becomes a matter of life and death for banks, there’s an evident need for a shift in mindset and principle called Design Thinking. This paper looks over the relevance and application of Design Thinking in the banking sector. You will also get to explore how some current banks are applying this method. The promise of Design Thinking for banks proves beyond doubt. Now let’s dive in. If Digital Banking is a journey, Design Thinking is the compass. 01
- 3. Even now, there’s no standard definition for Design Thinking as it’s a relatively new phenomenon. But Design Thinking can confuse people by its mere look: one can be mistaken that it is all about UX/UI - a principle employed by such creative people as graphic designers. True, an app’s intuitive interface or service’s seamless experience might be the products every business strives for. But Design Thinking offers more potential than that. As Steve Jobs put it: “Design is not just what it looks like and feels like. Design is how it works”, hence the beautifully designed and intuitively functional iPhone that a billion love. Tim Brown, the chair of IDEO and an advocate of Design Thinking, refers to it as a methodology that activates all innovation-related activities with human-centric design principles. In the business context, Design Thinking can be thought of as a principle for creating commercial innovations and ideas that revolve around humans’ underlying needs. It’s a combination of Analytical and Intuitive mindsets to create a product that’s both reliable by business and valid by customers. Design Thinking helps to understand customers, challenge the status quo, and frame problems in a way that generates breakthrough solutions that have never existed before. It gives you a lens to explore people’ hidden needs, establish empathy with them, and develop products that bring you happy customers. ANALYTICAL THINKING INTUITIVE THINKING Design Thinking is a combination of both Analytical and Intuitive mindsets THE CONCEPT OF DESIGN THINKING DESIGN THINKING 02
- 4. THE PROCESS OF DESIGN THINKING STEP 1 - EMPATHIZE: First and foremost, you seek to understand what interests and bothers your customers. Through different techniques, you get in their shoes and empathize with them. “Day in the Life of” (DILO), a tool that helps to recreate a certain experience of customers during a specific activity, is very useful in placing customers at the center of the design process. For example, to empathize with customers during the lending process, you apply DILO to simulate the entire lending process from the perspective of your customers. STEP 2 - DEFINE: By ways of in-depth analysis, you can now understand the actual needs that people are trying to fulfill when participating in certain activities. One way to do that is to underline the verbs or activities that people mentioned when talking about their problems: like looking for a simpler and less time-consuming lending process, preferring such options when lending, or preferring not to visit physical branches. STEP 3 - IDEATE: Now that you have understood customers’ needs and identified their problems, it’s time to come up with ideas for solutions. The point is not to get a perfect idea, but to come up with as many ideas as possible. After not being able to brainstorm any more idea, you choose some that work the best. For example, an application for mobile banking should be: • Simple: the app can be accessed anytime and anywhere. The application must have as few steps as possible (three, for example) to reduce complexity and increase convenience for users, which means a complete redesign to the process. • Frictionless: once the app has asked users for a piece of data, it must not ask again. This model requires banks to build a database for available data. • Rapid: the app must be designed in a way that prospects can be converted as rapidly as possible, without much thinking. STEP 4 - PROTOTYPE: now you are ready to develop the first prototype of the product or service, and test it with a group of users. Based on the feedback, you conduct continuous iterations to refine the product or service. STEP 5 - TEST: Now test your ideas with real users for their thoughts. Don’t defend your idea in case people don’t like it, the point is to learn what works and what doesn't, so any feedback is great. Then go back to ideation or prototyping, and apply your learning. Repeat the process until you have a prototype that works and solves the real problem. 03 Empathize 1 2 3 4 5 Define Ideate Prototype Test The iterative 5-step Design Thinking process
- 5. THE SHIFT TO CUSTOMER FOCUS Customer’s trust in the banking sector is eroding. “Unsafe”, “greedy”, “untrustworthy”, and “putting profit before people” are used to describe banks, according to the survey Public Trust in Banking. Another study by Economic and Business Review associated this negative perception with the lack of empathy and customer focus. It’s evident that modern customers expect banks to be trustful, empathetic, and engaging. Quite the contrary to traditional banks, new financial players such as fintechs succeed as they focus on understanding customers and design offerings that are relevant. Therefore, banks need a mechanism to make customers open and honest about what they need, in turn creating products and services that make up for the lost trust. DIGITAL REVOLUTION Progresses in mobile and digital technologies have paved the way for new financial innovations. Many countries such as Vietnam have been encouraging a cashless society. In response, banks and financial services are increasingly accepting and applying radio frequency identification, near field communication, and Quick Response (QR). While they raced to roll out eWallets applications, non-banking giants have also introduced their payment services such as Google Pay, Apple Pay, or Samsung Pay. These trends indicate that banking and financial services providers are shifting from the traditional brick-and-mortar branch system to the digital environment. CUSTOMER EXPECTATIONS The more digital banking services become, the higher customers expect. EY predicted that customer expectations will continue to soar as banking and non-banking businesses alike continue to apply high technologies such as artificial intelligence (AI), Machine Learning (ML), real-time transaction,... As a result, customers will ask for more in terms of user-friendliness and convenience. The other factor worth considering is the demographic. Millennials and the so-called digital natives are largely driving financial services providers to rethink their strategies and focus more on innovative applications and customer-centric design. This new generation of customers also places more trust in Fintech businesses than traditional banks, shown in a study named The Business Models and Economics of Peer-to-Peer Lending. CHANGING MARKET STRUCTURE The banking market has forever changed, due to rapid Digital Transformation and changing customer preferences, according to the study Digital banking and market disruption: a sense of deja vu? by Financial Stability Review. As a matter of course, digital disruptors such as fintech businesses and neobanks are winning customers and taking away market shares. With agility and innovation as core characteristics, these new players offer a higher level of convenience and user experience that traditionals lack. The consulting company Bain predicted that the future of banking is determined by how well banks “leverage the power of customer insight, advanced analytics and digital technology. It’s a must to enhance personalization of banking and design services that cater to customers’ every need, rather than focus on cost reduction and efficiency. 04
- 6. CASE STUDIES
- 7. DBS BANK DSB Bank and OCBC Bank are the two financial pioneers in Singapore, both of which allegedly applied Design Thinking to achieve excellence in customer experience and service. For DBS, it has been named as the world’s best digital bank with their project “DBS Home Connect” in 2013, which leveraged Design Thinking. As its leaders and employees are enthusiastic about Design Thinking, DBS successfully adopts AI, Big Data, and biometrics to design new offerings. The DBS Home Connect is a mobile app that lets customers check transaction information and calculate mortgage payments for home buys. As a paper pointed out, the principles DBS used centered on humans and their underlying needs for an exceptional customer experience. OCBC BANK OCBC also sees Design Thinking as the guiding light for its Digital Banking Journey. When designing its new product, OCBC leveraged customer insight, co-creation, community engagement, stakeholder involvement and experimentation, much of which are adapted from Design Thinking. OCBC Full Service Sunday Banking, a bank policy friendly to family and kids, is undergirded by Design Thinking. The techniques involve “outside-in” perspective, focus group discussions, moment mapping for prototype and testing, and learning labs for learning. NATIONAL AUSTRALIAN BANK By partnering with the consulting group Oliver Wyman, the National Australian Bank (NAB) designed a solution for the small and medium enterprise (SMEs) clients, focusing on customer experience. Thanks to Design Thinking, NAB can simulate how people feel when they use the lending process. The team then realized that the process was complex and time-consuming. They also concluded that their customers prefer services delivered through mobile devices, rather than brick-and-mortar. As a result, a plan for an online application NAB was created. With this app, NAB’s SME clients can secure close to $50,000 of loans, 60-second decision making process, and 3-day funds disbursement. DEUTSCHE BANK Deutsche Bank of Germany started to apply Design Thinking to its IT department first, before propagating it across the organization. Deutsche Bank first built a small design thinking team and partnered with design thinking experts that are dedicated to successful projects. There are three phases to Design Thinking at Deutsche Bank: (1) Learning, (2) Adapting, and (3)Diffusing. After the IT team has adopted Design Thinking, the principle progressively spreaded across the organization. In the end, Deutsche Bank completed the first prototype in less than 12 months, and the second prototype in less than 18 months. After five years, they have rolled out eight customer-centric products. When Design Thinking is accepted as adequate, Deutsche Bank went so far as to employ a Vice President for Design thinking. ACB BANK With a history of 27 years and as one of the largest banks in Vietnam, ACB knew it was pressurized by new market entrants such as start-ups and neobanks. The recent directives, where the government encouraged Digital Banking and cashless society, also prompted ACB to change. That’s why ACB decided that it has to change, in a customer-centric way. By partnering with KMS Solutions, ACB was consulted on Design Thinking and Mobile-first Development. After only 4 months of partnership, the two team has released the minimum viable product (MVP) of ACB Business App, a mobile application that allows ACB’s business clients to manage their financial health on-the-go. 06
- 8. Since it has a laser focus on user experience, Design Thinking helps banks to attract and retain the so-called digital natives. By continuously developing new products and refining them to meet the continuously changing customer needs, banks can promote a more sustainable growth. Furthermore, Design Thinking also aids in regulatory compliance, now that the government has introduced decrees encouraging Digital Banking. As Design Thinking supports the end-to-end development process, Design Thinking has become a foundation for Digital Transformation in the banking sector. While the banking landscape is threatened by numerous disruptive forces: digitization, new regulations, changing customer behaviors, and heightened competition, this is not the end. Instead, this marks a revolution for banking businesses, where they change their DNA to adapt, with a change in strategy and technology. To read our latest thoughts on Digital Banking, access: https://info.kms-solutions.asia/six-imperatives-for-digital-banking
- 9. KMS Solutions works closely with leading software companies across the globe to bring the most advanced and innovative technologies to Asia Pacific. The focus is to help organizations achieve their business goals through world-class fit-for-purpose solutions and proven industry best practices. KMS Solutions’ success is ultimately measured by the positive impact that it makes to the client’s business. To learn more about KMS Solutions, visit kms-solutions.asia