How digital is your institution?

Diagnosing digital maturity for financial service providers

Most people in India own a cellphone. The UPI will allow easy mobile transactions.

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Over the past few years, I’ve read countless blogs and articles stressing the need for financial service providers — including those that lend to underserved customers in emerging markets — to ‘go digital.’ This process is often presented as a miracle cure, that will help institutions to be more efficient, achieve scale, offer a better customer experience, and remain relevant in a rapidly evolving and innovative marketplace. However, these pieces often skip or gloss over what ‘digital’ actually means and what digital lending looks like on the ground. Readers are left with a vague sense of urgency but lingering questions: what makes a lender ‘digital’? Can all providers be digital lenders? How ‘digital’ is my institution today — and where do we want (or need) to go?

We set out to tackle these questions head-on in our recent publication, aptly named: Demystifying Digital Lending. In this paper, we define the scope of digital lending (it’s more than just nano-loans offered by fintechs!) and showcase the evolving and growing landscape of different digital lenders. We argue that financial service providers can (and should!) look to strategically digitize their product offering, while also leveraging their distribution network to provide much-needed customer education and support.

Most importantly, the paper introduces a framework to help lenders better understand how digital their lending products are today, and what steps they can take to improve their digital maturity. The Digital Maturity Matrix outlines specific activities and functionality financial service providers should have in place at each stage of the lending process (from acquisition to customer engagement) for three different levels of digital maturity — early, base, and digital plus.

Each level implies a different strategic objective for digital lending:

  • Lenders at early digital maturity are working to increase customer’s access to and usage of financial services by providing existing products and services over digital channels. They focus on introducing digital acquisition, disbursement, and repayment. These digital services offer convenience for current customers and facilitate access to new customers. They also allow customers to digitally manage core components of their account — for example, checking their outstanding repayment — while still providing in-person support through loan officers or agents.
  • Lenders at ‘base’ digital maturity move beyond access to customization of financial services. Increased use of digitized customer information informs the development of new, more personalized digital products, offered to both new and existing customers. At this level, the sophisticated analysis of data is key to design these personalized products for customers.
  • Digital plus lenders not only offer customized products, but they also create a customized experience based on an intimate understanding of specific customer needs and preferences. Interactions are fully digital, with physical touchpoints only where required for regulation or cultural preference. What sets digital plus lenders apart from the competition is their understanding that digitization goes far beyond simply implementing new technology — they focus on aligning the company’s strategy, workforce, culture, and technology to meet the digital expectations of customers and employees.

The digital maturity-level for each financial service provider is based on existing products and processes, current capacity and strategic objectives. Some, who are just getting started with digitizing their product offering, will likely be pre-early stage.

So how digital is your institution? We’ve created a short 9 question quiz to give financial service providers an initial sense of where they may fall on the maturity matrix. Please keep in mind that results are intended to provide high-level guidance — not all lenders will fit neatly into one level of maturity. A full categorization will require a more thorough, customized assessment.

Click here to take the Digital Maturity Quiz and find out where you fall on the digital maturity matrix.

You’ve taken the quiz and identified where you likely are on the Digital Maturity Matrix today. Great, what’s next? Look out for the next post in our digital lending series to learn how the digital maturity matrix can be applied and some practical lessons for financial service providers digitizing their product offerings.

If you are interested in learning more about how to diagnose digital maturity and build digital roadmaps at your institution, watch our webinar on Demystifying Digital Lending. Paul Lamont, the Director of Digital-Africa with Accion’s Global Advisory Solutions and lead author, discussed the gap between the vision of fully-integrated digital lending and the realities that traditional lenders must effectively navigate to complete an institutional transformation.

You can access the full Digital Maturity Matrix in our most recent publication, Demystifying Digital Lending. Accion’s Global Advisory Solutions leverages innovations to increase the quality and lower the cost of financial services, and thus help to build sustainable and scalable institutions focused on serving the financial needs of underserved individuals and small businesses. Contact us for more information on implementing digital lending at your institution.

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