Design Thinking is at the core of UXDA’s methodology, and our custom solutions help clients evaluate its advantages. It is clear that digital solutions based on empathy and user psychology achieve better results. That's why a customer-centered design approach should be an integral part of any financial company's corporate culture.
What is the definition of Design Thinking in banking
Design Thinking in banking is a powerful process used to architect digital financial products in 5 steps: Empathize, Define, Ideate, Prototype, Test. But it's not that easy, let's explain it through the Double Diamond model. The first diamond is known as Problem. It collects data through divergence and prioritizes key insights through convergence. The second diamond is about Solution and starts from diverging all possible solutions based on extracted insights and converging all into a prototype, which, at the end, is tested and delivered according to previously defined criteria.
What is the process of Design Thinking in banking
Let’s explore each stage of design thinking in banking:
Empathize digital banking users
At the Empathize stage, we collect a large amount of data about business goals, customer needs and pain points, and product features, thus researching the wire context around the product. Our aim is to feel and emphasize with the problem we are trying to solve. To achieve this, we need to step into the shoes of the customer and business owner.
Define core user problems and value
At the Define stage, we analyze and synthesize collected data to define the core problems and prioritize key data. The main purpose is to understand what value we could bring to customers and why they would prefer it over other solutions. To achieve this, we need to approach data analysis from these different angles: business, psychology, user behavior, competitors, marketing, technology, etc.
Ideate digital banking solution
At the Ideate stage, we start to generate multiple hypotheses about what our solution could be. Our main goal is to uncover the best way to solve the previously defined problems. To achieve this, we need to step out of the box and create dozens of potential solutions.
Prototype digital banking product
At the Prototype stage, we take dozens of previously generated ideas about how our end solution could look and work, moving toward designing the final version. We check all the solutions based on previously generated user scenarios, business goals, etc. at the Synthesis stage. In this way, we narrow down multiple solutions into one or more that are delivered as visual prototypes and could be tested by users and business owners.
Test banking prototype
The final Test stage is needed to ensure that our visual prototype provides the needed solution according to the previously defined problem. If it is not, we then return to the first stage and repeat the process.
Design Thinking in finance determines success in digital age
Design and Design Thinking have never before played a more influential role in determining the success of any business in any industry. This fact is well supported by the Design Value Index (DVI), a summary of the market performance of 15 design-driven companies including Apple, IBM, Nike, and SAP. Those companies share a high level of design strategy implementation across their organizations. Their executives practice design in everyday work, and they have design positions at the management levels. In the period from 2005 to 2015, design-driven companies outperformed the S&P 500 by 211%.
The finance industry has experienced a turbulent period of Fintech disruption in recent years. In fact, 75% of the finance sector companies surveyed by KPMG stated that changing customer needs is the key area where disruptive Fintech companies have been challenging the traditional finance businesses. Although customers' needs are the basis for any business, in today’s competitive and customer-centric landscape, businesses must understand the customer on a much deeper level to come up with more innovative solutions. It is at this point that Design Thinking in finance comes in.
In its essence, Design Thinking is a customer-centered process for solving problems. It includes understanding people’s needs, defining their challenges, brainstorming solutions, and then prototyping and testing the solutions. Through Design Thinking, teams and individuals combine what is desired and needed by the user with what is technologically feasible under the circumstances and viable for the business.
Banks acknowledge the importance of Design Thinking in financial services and look for ways to transform their organizations. BBVA has trained 1,000 Design Thinking experts to educate their employees to apply this approach on a daily basis. Capital One has developed “Capital One 360 Café”, a hybrid bank/coffee shop branch where the bank’s employees can freely speak with their customers to understand customer banking experiences. In addition, many banks worldwide have acquired Fintech companies, creating accelerators to attract them.
Yet, Fintech companies are becoming more popular among customers who are switching their current accounts from banks to Fintech organizations. In only a 3-year period, Revolut has acquired more than 1 million users, from which 250 thousand are active users; the company aims to reach 100 million users by 2022. Other Fintech companies are following a similar trend, with Design Thinking characteristics as a means to understand users, and continuously testing of products emerging as core advantages.
How to implement Design Thinking in banking
To identify the core obstacles for successful implementation of Design Thinking in finance, we talked with experts from leading banks and Fintech companies in Northern Europe. We chose representatives from various fields including UX, product development, innovation management, and process development. In addition, our UXDA consultants added their opinions on how these obstacles could be overcome.
1. Get ready that declaring "customer-centricity" is not enough
Experts from banks and Fintech companies agree that understanding the customer is the core of every business. In fact, customer-centricity is well-communicated among employees in banks. Yet, differences exist in how people in both types of organizations perceive customer-centricity. Fintech companies “step into customer shoes” and examine the customer on a deeper level to find new ways to disrupt existing financial services. Banks concentrate on how to maintain current services for their large base of customers.
Design-driven organizations are engaging with their customers to find out what they really think and what values they hold. For example, by approaching customers in a local bank branch and having a talk with them about their banking experience.
Yet, it is the management which usually sets the tone defining how deeply the company needs to understand the customer. Instead, bringing the customer in at all levels of the company can be an advantage. For instance, Jeff Bezos leaves one seat free at the boardroom and encourages the meeting attendees to imagine that it is taken by their customer - “the most important person in the room”. Another common practice for raising customer-centricity in company is field experience - have top/middle management spend a day per month working with people who work with customers on a daily basis. That's a way for management to truly understand their customer.
Moreover, a company can involve all employees to understand the customer on a deeper level. Every day, companies receive complaints and feedback from their customers. Why involve only customer support to answer them? Create a support deck where each employee receives one complaint to which a reply needs to be given. That way all employees become more aware of their customer, and feel responsible in their daily routines. Remember, customer-centricity is a special way to think and act, not just talk.
2. Don't miss out on specific goals
Setting common goals and visions is easier in smaller organizations such as Fintech companies. Banks have many departments and teams which concentrate on various targets. In fact, lack of focus on defined problems and poor definition of challenges are the key obstacles of integrating Design Thinking process in international banks.
Defining goals is a crucial part in tackling any challenge. It is important to get them right to create a focus on the given problem. From a Design thinking perspective, the goal can be defined as a problem statement which summarises ‘who is the customer’ and ‘what are the customer’s needs’ - in other words “the challenge”.
For example, Mark is a 25-year old Millennial who doesn't like to follow his daily finances. He needs a way to save up money from daily spending, while not taking too much attention from his routine. The first part describes the customer, and the second part elaborates on the need the customer is facing.
However, the goal formulation is not the problem, but the way it is communicated across departments and teams. In larger organizations, it is common to set goals with a top-bottom approach, excluding the opinion of regular employees.
Make a point of setting united goals by hearing the opinion of your employees. Traditional culture should learn from Fintech how to “hear” customers, employees and partners. This critical step can make the employees more engaged in the company by involving them in the goal-setting process. Encourage bottom-top and lateral as well as top-bottom communication across your organization.
3. Ensure customers' presence in daily routine
While large organizations such as banks spend a considerable amount of time organizing work between their departments, Fintech companies have budgetary and time constraints which motivate them to act quickly. Quick action includes brainstorming ideas and testing them as soon as possible to learn from mistakes. But there’s more to it than that.
The majority of specialists from various organizations have stated that only some customer-oriented departments, such as R&D and marketing, use Design Thinking. Fintech companies practice ideation more than traditional organizations, as they need to be flexible about what customers truly need to disrupt existing financial products. Due to the presence of extensive legacy systems, a large portion of bank employee time must be devoted to operational functions which are not related to the customer. Therefore, customer-centricity is more common in Fintech companies where the roles of the employees are more customer-centred.
Although banks encourage employees to participate in product brainstorming and testing sessions, the participation is low as it is not relevant to people who perform operational roles. Therefore, it is important to find a way to relate the work of all employees to customer-related challenges.
The example and attitude shown by management towards employees results in employees adopting a similar approach in their interaction with customers and customers’ challenges. If management doesn't listen and respect other people’s opinions and feelings, the employees do the same.
As discussed in the first obstacle, it is important to bring all employees in to solve customer complaints and raise the customer's presence in the organization. Yet, it is even more crucial to involve all employees in developing solutions to those complaints.
A good practice is to involve employees in a project-based activity that contributes to meeting a certain challenge. Create a team of 5-7 people from various departments (including operational departments) and hand them a customer-related challenge. Not only will employees sense a higher level of the customer's presence in their work, they will also have a more interesting, and more rewarding, work experience that complements their daily routine. That can help to develop change-orientated culture in any organization.
4. Encourage experimentation culture
As discussed above, ideation and rapid prototyping is practiced early on in design-driven companies. The rapid process helps validate ideas quickly, then move on with new ones and those with high chance of success. Yet, prototyping is not practiced actively in banks. While the obvious explanation is the lack of customer-centricity among employees performing operational roles, another important aspect is concern over experimentation.
As banks want to maintain the trust of their large customer base, experimenting with new ideas is not as common as in Fintech companies. Startups see that discrepancy as a market advantage that allows them to deliver new products, updates, and customer satisfaction faster and more consistently.
Employees in banks are accustomed to a routine which excludes time for additional activities, such as working on new ideas that will improve results of their core work. Management failing to find time for employee participation in design activities is one of the key obstacles various international banks faced when attempting Design Thinking implementation.
It is a common practice to build up a strong business case to initiate a project in banks and other large organizations. Therefore, testing is practiced only in the later stages of the project, increasing chances that the work invested might be for nothing. Many Fintech companies use short iterations and cycle times, and companies test ideas frequently to understand whether there is value in pursuing further development.
Yet, it is important to remember that the prototype of an idea does not need to be a perfect solution. Create simple prototypes of your ideas and test them among a subset of your customers to get rapid feedback. For example, if you want to develop a new concept for your mobile application, create three of your most important scenarios in a clickable prototype, then go in to the streets and perform "Guerilla testing" with people that you meet. In a matter of days, you will have tested an idea without risking your existing customer base.
Another question that arises is how to encourage customer-centric and innovative Design Thinking behavior from employees across a large and diverse organization. One of the best ways is to continue the work that many banks worldwide have already begun - innovation hubs. Retain the innovation hubs and encourage your employees to test their ideas there. Have representatives from innovation hubs in each department of your organization to provide guidance on experimenting with new ideas.
Alternatively, adopt another practice that is common among many international banks - develop independent units which focus on specific goals by embracing their own working culture. For example, Citibank launched its Fintech unit to work as an independent startup of 40 people tasked with developing mobile-first solutions for improved customer banking experiences.
Successful implementation of any innovative methodology depends on the culture of the organization. Most banks have been established for decades. Fintech companies have been founded just recently, allowing them to build their organizations from zero. Out of necessity, Fintech companies have been required to implement processes which reliably lead to the most effective solutions in the shortest time span, in order to survive in the market.
Although Fintech companies appear to be more aware of using Design Thinking in banking, banks have started many initiatives to transform their organizations. Innovation hubs, internal UX workshops, design support teams, and independent design units are only some of the initiatives taken to change the way how they think. But whether that will transform the established culture of their organizations is a question of time.