Steve Crowell

Default management as a path to digital banking, part 2

As banks continue to invest in digitalization to address fast-evolving competitive pressures, the best path forward is not always clear. Fortunately, however, for today’s financial institutions seeking the fast track to digital banking, there are real options. In this two-part blog series, we’re discussing one option that has proven to be effective in driving successful digitalization—the implementation of a single, integrated technology platform, beginning first in the area of default management.

In my first blog, Default management as a path to digital banking, part 1, I shared why default management is a great place to begin a digital transformation journey. Tech savvy banks don’t try to transform all of their applications at once, but instead move application by application into the digital future. Beginning with default management yields many advantages, which the first blog covers.

In this second blog, I write about key implementation issues and challenges for banks interested in digitalizing default management as a first step on the path to digital banking.

Customer data, staff and channel considerations

Implementing a customer-centric default management maturity model requires a series of business, process and organizational issues to be resolved. The first recommended step is to come to terms with customer data and develop a cogent, consistent strategy for linking accounts. For many banks, defining “the customer” is a challenge. For example, should certain types of accounts, such as retail and small business or secondary and co-signer, be combined?

Other critical steps to be addressed include:

  • Filling holes in business processes and developing matching algorithms
  • Cleaning customer data
  • Developing a unified customer identifier to allow accounts from across product lines to be linked together

Managing the human equation is equally important. Building an effective maturity model depends on having digital banking champions on hand with the vision to see across organizational fiefdoms and product silos to advocate for a bigger picture of success. “All digital, all the time” is rapidly becoming a basic consumer expectation. Yet change is hard, and bank professionals vested in a certain way of doing business are sometimes prone to resist the unknown. Champions not only change business processes and designs, they also change culture and behavior.

Much of this culture and behavior is realized at the point of customer contact. The success of a default management maturity model depends on collection agents having the requisite talent and skills to get the job done right, including the ability to:

  • Speak with customers across multiple product lines, as necessary
  • Make meaningful recommendations on payment allocations
  • Devise appropriate treatment strategies
  • Avoid collection miscues

To quickly deploy the required operational skills, banks can group similar products together, cross train agents in these product groups, develop the underlying workflows, and build the necessary staff negotiation skills.

Other challenges in adopting a maturity model include developing a thorough understanding of the contact channels involved and the regulations that may limit or restrict their use. Certain channels may have limited customer interest or appeal and not justify the bank’s additional investment. Some channels may be more effective than others. Consumers may have designated a contact channel preference or must give their affirmative permission to be contacted. Certain consumer contacts may work better when treatments combine products or align with other enterprise strategies for customer centricity.

Finally, business intelligence needs to be gathered to inform customer interactions. By monitoring and analyzing treatments, workflows and channels, banks gain the insights they need to assess and adjust performance to optimize default management practices.

Moving to a customer-centric default management maturity model can be an effective first-step approach to successful enterprise-wide transformation. Keeping these issues and challenges in mind will help to ensure a smooth transition. For further discussion, or to share any comments or questions, feel free to reach out to me.

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