NOVO BANCO Digital Transformation Led by Customer Centricity.
Creating a customer-centric banking culture is a priority for Joao Dias, Chief Digital Officer of Novo Banco.
One of the organisation’s newest leaders, Dias joined Novo Banco following a 17-year stint with McKinsey & Company, and has extensive management consulting and business transformation skills.
As the Chief Digital Officer, Dias has had the task of orchestrating the digital transformation of Novo Banco, and managing new core competencies required to support the effort, such as service design, agile and data science.
It’s a task that has been meteoric in terms of changes required, but Dias is quietly confident in the current trajectory. Indeed, he says, Novo Banco has seen more innovation, growth and change in 2020 than in any other recent year.
“Last year in 2020, was probably the year we have done the most in terms of digital output and innovation – and that was mostly done with remote teams and people working from home. So far we have implemented working practices that allow teams to be very good at collaborating and working together,” Dias says.
He believes that by keeping as closely to the pre-pandemic positive work practices and habits as possible, his agile teams at Novo Banco have maintained a good sense of camaraderie and working goals. It is this factor that has enabled the bank to innovate, digitally transform and grow, despite the thoroughly challenging situation posed by COVID-19 all over Europe.
He explains, “Instead of having physical meetings we are constantly on Teams meetings. The growth and innovation has been made possible through discipline – and keeping to the rhythm of the ceremonies that allow us to be agile and adapt. Those are very effective at keeping teams together at a distance with technology.”
The process hasn’t been without its challenges, and more continue to arise. But Dias is unflappable in his approach - and places a great deal of emphasis on the value of his workforce being comfortable and communicative.
“The challenge is to keep that [team camaraderie] going over the long run because at some point, people start losing the social connectivity – which is the social fabric that makes great teams great,” he emphasises. “That’s something we are working on very hard to maintain.
“The next issue is incorporating new people into teams. We now have a few new people who have joined the bank and they’ve never had any actual contact with any other team members. So the onboarding takes a lot of effort to make sure people are well integrated with the organisation.”
As a leader, Dias believes in transparency and listening to feedback from colleagues, especially those on the front line. In recent months, Novo Banco has implemented a number of changes to increase the availability of online banking services, which have been used more during the pandemic.
Novo Banco’s digital strategy is to reinvent and personalise the key customer journeys for customer excellence, transition to digital channels and automate processes for efficiency, and start exploring new business model opportunities with open banking and ecosystem plays. Core to this strategy is customer centric design.
“One of the aspects that is often talked about in digital transformation is to be really customer focussed and centric,” he explains. “And it's hard because the understanding of customer needs, jobs to be done, what makes a great experience for customers; all of that requires competencies that are not traditionally in banking. It requires a mindset shift that is at times hard for banking managers and employees.
“That is not specific to banking – I think a lot of the incumbent industries have that kind of issue. But it's something we are constantly struggling with and investing in. And we find ourselves getting completely surprised about how some customers pick up on some things.”
Nurturing a new mindset towards customer-led banking isn’t easy - but it is the future, says Dias. “Embracing curiosity about what really matters to customers is on one hand really hard – but once you have embraced it, you find it’s really interesting and fulfilling. It's about shaping the solution towards customer experience and benefits – it's one of the aspects that is talked about in a high level manner, but when you go down into the weeds it is really hard. However, it is also one aspect that we are finding particularly fulfilling.”
Secure digital services
As the world becomes more digitally connected, transformation has meant companies and organisations have had to increase their levels of security to keep customers and data secure.
Dias says that banks have invested significantly in technology and processes to prevent cyber-attacks seeking data and malicious disruption; it’s the customer and their security that concerns him the most
“We’ve been increasing investments in security to combat these issues. Even before the pandemic, there had been an increase in phishing attacks on customers. These are scams that seek to steal digital banking credentials from users in attempts to move money away from them.
“One of our key role is to support and educate our customers not to be tricked into those types of fraudulent events. We have a lot of communication with our customers and we have ramped up processes internally to deal with that.”
“The good thing though is that many new solutions that are emerging are actually making digital banking safer. For example, we are in the process of introducing new, strong customer authentication methods that are more secure than the typical SMS one-time password. This is an example of innovation that helps make it safer as well as better for user experience.
“I think the key message is that banks put a lot of emphasis on keeping customers safe. We put a lot of emphasis on helping them, and on how to deal with these kinds of incidents. This is something people should take away with them. Digital banking is remarkably secure compared to almost anything else that is in people’s lives.”
One of the most challenging aspects of managing Novo Banco’s digital transformation, has been rooted in some cultural traits of the Portuguese society. As Dias explains, in terms of payment solutions and the adoption of online banking, Portugal is behind northern Europe for two reasons.
“You have two things that are different from most other countries – specifically with northern European countries,” says Dias.
“One is the level of e-commerce in Portugal, which is much lower compared to adoption in the UK, for instance. The pandemic is changing that. E-commerce has increased significantly over the past few months. But whilst people are used to using the internet – and use it as much as in any other European country, when it comes to more sensitive areas like online shopping, people don’t have the tradition or the habit.”
Dias believes there is a natural suspicion regarding online shopping, because the e-commerce infrastructure is not as developed as it is in other European nations.
“For example, if you purchase something online, there is always the risk that it won’t go well, and you’ll have to return it – it’s a hassle.
“I used to live in Germany, and it was super easy – you could buy everything online with free delivery and you could return things for free if they were not good. It was easy – and completely normal and most people feel very comfortable with that.
“But in Portugal, because the e-commerce market isn’t so developed, it’s a bit more clunky and expensive, and therefore people feel it’s a bit more hazardous. This mindset has translated into the way people do their banking. Most customers are fine doing basic stuff with their banking apps like transferring money and making small deposits. But when it comes to more complicated features, people shy away from that because they prefer to interact with a human being.”
Dias believes that banks can overcome these barriers by creating slick, personalized customer journeys that make complex needs easier to fulfil in an omnichannel way.
“At Novo Banco we are working through a roadmap to transform the top customer journeys – from home buying to financing small businesses and SMEs. These journeys are being transformed by cross-functional teams that start with the customer needs and have capabilities to change processes and develop technology.”
Dias also points out that the current ATM network in Portugal is a force to be reckoned with. It’s so convenient for customers, he says, that has turned out to be digital banking’s biggest rival.
“We have by far the best ATM network in Europe. It was historically built by a cooperative company that is owned by the banks. It has a lot of functionality. You don’t have to pay anything to use it, you can transfer money, you pay your taxes through it – you can even buy tickets to the opera via the ATM. It does everything – it’s very impressive.
“These are things that can be done in any corner of any city in Portugal for free because there is always an ATM available. We segment our customers around their behaviour regarding digital services. The ATM lovers will go to a terminal eight or nine times a month to carry out basic services. And you talk to them and they say – ‘hey, you know, I was on the way to the coffee shop so I just stopped at the ATM to do my banking, so why do I need an app?’”
Dias says that to overcome this bias Novo Banco is heavily investing in its mobile app, so that the convenience of the smart phone can surpass the convenience of ATMs.
“Our strategy is to have a great mobile-centric, omnichannel banking experience. For this we have just launched a new version of our app – NB smarter, that is extremely intuitive, personalized through extensive use of data science, commercial and co-created with users. We are confident that the increased convenience of this experience will persuade more customers to migrate to digital channels.
Cash versus digital
But what does this mean for the future of online banking in Portugal, which is at a different stage in online servicing compared to other countries?
“Of course it’s changing,” says Dias. “With the pandemic, people prefer not to step out of the house these days. But it's still very prevalent. If you talk to a Portuguese digital banking expert, they will tell you that their biggest competitor is the ATM network.”
The result is that cold, hard cash has a wider circulation and use within Portugal, another aspect that sets it apart from other nations. So what does the future look like?
“The long-term strategy is similar to other European countries in making digital payment methods more accessible,” says Dias.
“We have a very successful peer-to-peer in-store payment acceptance scheme called MB Way and it's very widespread. A lot of people use it and it is helping to reduce levels of cash. Because of digital banking, making payments and doing bank transfers has become so much easier, this has also reduced peer-to-peer cash transactions. The EU regulations around interchange fees made the usage of cards much more economical for stores and merchants – so that is helping too.”
Dias says that although Portugal offers a unique banking climate, the strategy to transition payments to digital, is the same as it would be for other countries.
“Novo Banco’s strategy is to make payments convenient and rewarding for people. We have a large small business and SME franchise and we also are giving them lots of options to accept digital payments,” he explains.
The rolling out of new services requires strong partnership support, he points out.
“As with all companies, we work with a lot of providers. Strands has a personal finance management and business financial management product that can be white labeled and can be used as a plug and play into our apps and websites. So we’ve been working with them to develop our Personal Finance Management (PFM) and our Business Finance Management (BFM) offerings. And they have been quite important for us on that journey.
“Deloitte is another big partner and has been our overarching business partner in terms of digital transformation. There is also a Portuguese fintech/regtech – called LOQR – that has been very important for us.”