Alkami Unveils Game-Changing Digital Maturity Assessment Tool for Financial Institutions

Jim Marous: Welcome to Banking Transform, the top podcast in retail banking. I'm your host, Jim Marous. In an era where digital transformation is reshaping the financial services landscape, Alchemy Technology has taken a bold step forward with a launch of their digital sales and service maturity model assessment. This groundbreaking tool empowers banks and credit unions to evaluate their digital maturity and provides actionable insights to navigate their digital journey. Today I have the pleasure of chatting with Allison Sarah, Chief Marketing Officer at Alchemy and Casey Hogarth, Senior Director of Emerald Research Group about the development and deployment of this industry first self-assessment tool, and to explore how it can revolutionize the way financial institutions approach their digital strategies. Alison and Casey emphasize the importance of understanding where financial institutions stand in their digital journey and how the assessment serves as a compass to navigate the complex landscape of digital transformation.

The groundbreaking digital sales and service maturity model assessment is the first tool that empowers financial institutions to evaluate their digital maturity and chart a course for growth. Developed based on extensive research, the assessment provides a comprehensive framework for banks and credit unions to benchmark their digital capabilities and receive actionable guidance tailored to their specific level of maturity.

So Allison, it seems like we've been working on this forever, but we started working on this back in early fall of last year with a research project to build the foundation for an assessment tool where financial institutions could actually measure themselves and find out where they stand compared to their peers. And more than that, get recommendations as to how can you leapfrog, how can you quickly move the needle as far as your digital maturity is concerned. But before we start, what actually inspired Alchemy to do research on digital maturity and to develop this assessment tool? What was the starting point and what was the vision that started you moving forward?

Allison Sarah: Well, Jim, I can't believe it was like last fall when we started working together. So back it up at least a couple of months before that, when we started looking at this at Alchemy. And like all great ideas, they typically originate from our great client community. So we were getting questions from our clients who were asking our client success organization questions like, look, there are a lot of different digital banking metrics out there, but how do I know if I'm putting my investments in the right place? How do I think about digital maturity as capital D, capital M, Not just how many digital banking customers do I have, or how many of them are using account opening offers. But really, what does digital maturity look like when you think about the combination of culture, strategy, and technology? And lo and behold, we started looking for that a couple of months before we as a group engaged here because we thought, well certainly somebody surely has answered this question before. Let's go out to the market and see if we could find it.

And much to our surprise, nobody had really answered the question. And to your point, nobody had given anyone an assessment tool at the end of it. So there were a lot of great reports out there, but nowhere did there exist an assessment tool, what I affectionately call the Cosmo test of like, am I digitally mature or am I not? And how do I even measure that on a scale and how do I benchmark that against a statistical benchmark based on where the market is right now?

Jim Marous: It's interesting because as you said, there didn't seem to be anything that allowed an organization to measure themselves. I mean, as you said, there's reports. I've done reports on digital maturity-

Allison Sarah: Likewise.

Jim Marous: On an ongoing basis, we see that organizations kind of rate themselves kind of low, but never being told, oh by the way, how do I get off this area? How do I move faster than the market or even to keep up in the marketplace? So Casey, you're a new player in my world. I did not know Emerald Research to begin with. If you can tell me a little bit about Emerald Research, but then also talk a little bit about as you built the survey to define digital maturity, what were you looking for? What were you hoping to find?

Casey Hogarth: Yeah, absolutely. Well first off, Emerald Research, we're a research agency based out in Seattle. Small group of us who does a lot of work in the tech and FinTech space. So this industry is right up my alley and I'm awfully passionate about it. And as we think about what we wanted to ask, what we wanted to accomplish, it was really... It's kind of twofold. I think kind of like you talked about, Allison, there's a lot of work that's been done on what exactly things look like from a digital experience perspective, or maybe I think what I've seen a lot of is where the future might look. But ours was more designed to really meet FIs where they're at today and really figure out where that is. We've heard a lot of articles about the future of where things may be headed, but the goal here was to get a snapshot of where things are at today.

And a lot of what we focused on and wanted to make sure we got right is, maturity is not necessarily just about what solutions you offer, what capabilities you have, how many people are on digital. But a lot of it is also related to what happens behind the scenes, kind of some of those softer things like company culture or broadly speaking, what are your priorities from an investment's perspective? And so we set out to really make sure we get a good measure on both of those sides of the coin. Because as we've learned, some of those soft things may be just as important to actually get to where you need to be digitally.

Jim Marous: It's interesting Casey, because as we were going through the process, it was intriguing because at the same time I was part of... I was a sous chef helping you out. The reality was, there was a lot of stuff that we were finding out as we are going along. So as you mentioned, how do these mix? I mean, I could give you the ingredients to a great cake, but until I know how much of this and how much of that come together to make that great cake, it's simply just ingredients. And we've always gotten to the point of the ingredients. We know the important components, but you had to actually create a methodology for determining what were the mixes that had to happen to get you to different levels. And oh, by the way, we had to define those different levels. We had to build those stopping points that said, you're here, you're here, you're here. And you couldn't do that. So how did your organization look at the research results and then assess what level of each has to be mixed together to get you to a different level of maturity?

Casey Hogarth: Yeah. Well, I think even before you can start to get into assessing what matters most, it's a pretty big undertaking to figure out exactly what those ingredients should be, right? So we worked with Allison, we worked with you to figure out what those ingredients are, what questions we want to ask people, all the things we want to measure before we start to figure out what really matters, what differentiates institutions. And that process was pretty intensive. I think we probably set up, before we got into writing anything from a survey perspective, we probably had a list of 50 or so different topics to cover. We obviously can't ask about every single one of those in as much detail as we'd love to.

So I think one really important aspect that helped was we got on the phone with a couple of FIs, we did a little bit of work as well with them just to hear their thoughts on some things, understand how they talk about different aspects of maturity and the digital process. But also figure out what they think differentiates orgs from what's mature, what's not mature, what does pretty much everybody have versus what do they think only a few organizations have. And being able to have some of those conversations and pairing that with kind of our brainstorming amongst us three, we were able to figure out, okay, we can pair this list down to a reasonable set to ask in the survey.

So I think that was really key, is just making sure first we have the right ingredients. And then second half, I guess maybe where you could say the magic happens is figuring out of maybe the 30 to 40 things we actually asked about, what few matter most and what really actually drive maturity. And so to do that, a lot of credit goes to our data science team, and that's kind of where we bring them in. We've got our results. We talked to a couple hundred FIs, and our data science team takes that data, runs some analysis and tries to find patterns in responses to separate people into four different groups that behave similarly.

And so once we came up with those four groups, we were able to start to look at each individually quite a bit more. So we can say, oh group one is pretty weak here, pretty even with everyone else here, really unique in this aspect. And so when you go through each of the four groups individually like that, you can then start to mesh them together and really figure out the broader story of what's happening across all four of them.

Jim Marous: So Allison, we started with the research and the research in and of itself was pretty enlightening. Some things came out that we didn't know would come out, and it was very clear that we are starting to see these groups formulate along the maturity model to say which ones are really the key elements and what was important, what did we think was important that really maybe was important, but not a differentiator. So in the research part, the report part that we developed together, can you share some of the findings and the research that really shaped the development of the maturity model itself?

Allison Sarah: How much time do we have, Jim? This report, I tell you, we could talk all day about this research, it's so good. And Jim, thank you because your thought partnership on this was second to none in helping us find these kernels along the way that... Okay, so I'm going to give you a couple that I found to be most interesting. First is this really does matter, because it's interesting to do a study, but if a study is just interesting, if digital maturity was just interesting but didn't necessarily correlate to business results, we'd all say, well that's interesting, but not necessarily relevant, right? Well, we found 70% or so of the FIs that took this instrument, disclosed who they were. Why is that important? That means that we could go back and check publicly reported financial data for these FIs to see things like did their revenue grow faster than their peer set year over year?

And what we found in the data is that those that are the most mature on the spectrum actually report two X the revenue growth annually than those who are least mature on the spectrum. So the least mature growing at about 10% revenue growth year on year, the most mature growing at 20%. So although we can't say correlation implies causation. I have a friend who likes to say, sometimes pepper follows salt. I think this is a case where pepper follows salt for a reason. There's definitely a strong correlation here. That would be one. The second thing I would say is because we looked at the combination of culture, strategy, and technology, we found that it's as much about their mindset as it is about their tool set to determine how digitally mature you are. So there's the adage, culture eats strategy for breakfast, I would say strategy eats technology for lunch.

These things follow each other. So we found that it's not just the tech stack that's important and the technical capabilities as Casey said earlier, but it really is around how they describe their culture is fundamentally different. How they work with their vendors in the ecosystem, the most mature that is, it's fundamentally different. The way they think of those partnerships. The way that they apply strategy and where they put their investments behind that strategy is also very different. The most mature of which are very data-driven. We call them data first for a reason, because truly when you look at the data, that is what separates them the most from their peers and why they're leading right now in digital maturity is their access to data and how they use it to inform their strategy and the decisions in their institutions every day. So that would be the second big finding is, it's about mindset as much as it is tool set, if not more. And then the third thing, Jim, I give you full credit for this. Because you know as we were-

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Allison Sarah: And then the third thing, Jim, I give you full credit for this because you know as we were doing the data wallow and looking deep into the data tables, you had a really good question. And your question was, is it essentially about the size of the dog in the fight or the size of the fight in the dog? Meaning, we had 215 institutions participate in this study. The only threshold was you had to have at least 200 million in assets to participate. There was no upper limit. So we have mega banks in this data pool. We have top 50 banks in this data pool. We have neo banks in this data pool. And of course we have regional and community financial institutions, both banks and credit unions. And your question was very sound, because your question was basically is a mega bank destined to win just because they can throw a lot of money at it? Is a big financial institution destined to win, it's their birthright because they can throw a lot of resources at a problem?

And so that was the question that Casey and team went out to look at the data to see, do we see institutions punching above their weight? And lo and behold, we did. And what we found is that a quarter of the most digitally mature institutions have less than $500 million in assets. So think about that for a second. They are basically performing in the top quartile of the model, competing against behemoths many times their size. And they're not doing it by outspending them. They're doing it by outsmarting them. And again, it's back to these things of how they view their culture, their strategy, and the way that they then apply technology to meet their goals. And likewise, we saw behemoths over $5 billion in assets, 16% of the least mature institutions in the study have more than 5 billion in assets. So they unfortunately are defined gravity in a negative way by not performing nearly as well as those much bigger than them, or at least in their size class.

And again, we find that there's a resistance to cultural change. There's a resistance to applying data. There's this wait and see approach. There's this, we'll wait for our vendors to push us in the ecosystem. We won't push our vendors forward. So you really started to see some interesting things that suggest that it really is about the size of the fight in the dog, not necessarily that size rules all. Which was a really remarkable finding in the study.

Jim Marous: You really captured the three things that were in my mind and have gotten it from different surveys before this that seemed to be relevant. Number one, that technology is not everything, culture really matters and leadership really matters. I've been saying that longer than I've known it for sure, and it was great to get that reinforced.

Secondly, the fact that the revenues of the organization are really better for those of the most digitally mature, that reinforced research that we've seen from Harvard Business Review, from McKinsey, from Bain, from other companies. But I had never seen it in something that I was involved in myself. And that was like, yes, we're hitting it.

And then the third one as you mentioned was, jeez, do we see that small organizations can do what big organizations can do? And reverse, are there big organizations that aren't really hitting their stride as much as you think they would? And those all three came together in a very exciting way for me because it showed that we have work to be done, but we can make an impact fast, which is where that fight in the dog comes in. That the research that we have can actually make it so that we can tell people what they can do to move the needle fairly quickly, which is really what Alchemy does. They work with partners to say, how can we work with organizations of all sides to move the needle quickly to make you digitally mature?

So Casey, the key part of the research was to find differentiating factors that could define the upper maturity levels as well as those who have more work in progress, but to find out those characteristics of the segments and how they differ from each other. So when you looked at finally putting these into buckets, for lack of a better word, and for determining what differentiated those, what did you find? And then we had to go and say, how do we build an assessment tool to easily let organizations self-assess that I'm not a research expert, as much as I do research. You really are the research organization that made this all happen. How do you take those differentiating factors and then determine what do we need to assess to find out where people lie? How can they do it themselves? How did you do that?

Casey Hogarth: Yeah, so when we built this model, it's definitely an iterative process, it's not like we found a set of questions and said, these are the ones, go for it, we know these predict maturity. It's definitely an iterative process. So we have a pool of, what? 30 to 40 different questions we could potentially use a lot of data to work with. But ultimately we need to pare down and figure out what really matters so that we can ask those fewer questions and figure out what predicts maturity.

And so that process, we probably created seven or eight different versions of the model initially before we landed on this final version. And a lot of those different versions had strengths and weaknesses. Maybe one, our first look gives us some crystal clear differences and real clarity on what matters from a culture perspective or from a financial perspective, but isn't giving us quite as clear of an answer on what seems to drive maturity from a capabilities perspective.

Maybe the second version was vice versa. Version two may have been crystal clear on certain aspects of what capabilities you offer or different tools you might have in place or things you're doing digitally, but not a lot of clarity on what really matters and pushes maturity from a culture perspective. So we were able to, as you build multiple different versions, you understand the questions that really clearly drive maturity from a capabilities perspective, and then others, you start to understand what really drive maturity from more of the softer things perspective.

So by the time you get through eight or different trials of different combinations, we landed on this latest version where it's really just five pretty simple questions. And what ultimately gives us confidence in those five questions is once we landed on them, we see a lot of correlation across other questions as well. So we asked 30 or 40 questions, overall, we only have these five that are part of that final assessment, but we found that those are the five questions that seem to correlate with maturity on other things. So maybe we don't ask about certain specifics within those five questions, but those five do consistently predict whether you mature on other things we may not necessarily be asking about. And that's ultimately how we get to where we are today and being able to use this little five question assessment tool rather than the full 40 question survey.

Jim Marous: This is the most exciting part of this whole project. I mean, the research was great. The research was very enlightening because it enforced some things, but it also brought some things to light that we weren't expecting. So when you read the research, you're going to say, okay, I got some things to take away that really helped me. Geez, I got to work on this. I got to work on that. I got my own idea of what we're not good at organizationally.

But I know from working with both of you that moving it from the research to the assessment tool was no clear process as much as you think, oh, we simply asked them the same question we asked them in the survey and we put them together and it comes out perfect. Well, it doesn't because each one impacts the other one. So Allison, as I mentioned, the key was really to move from the foundation upon which we were building everything to the point where we could build an assessment tool, which is really the vision in the first place, which certainly helped in building the research to begin with. But the industry has never had a way for organizations to rather simply determine where are they on the spectrum, but most importantly, the so what. I mean that's really key.

For me to find out that, oh, by the way, you have this problem, this problem in your life, good luck and not be able to determine what's next. This is really where it got exciting. And it was stuff that was done behind the scenes from my perspective because I knew what the research said, I knew what we were trying to figure out. I knew what made a digitally mature organization, but I didn't really know, until it happened, what were the five questions that really could help us define where an organization is, and more importantly, what does this mean and what do they have to work on?

So can you talk a little bit about how you and your team as well as Casey's team work together to fine-tune this to a five question survey, but most importantly, say, once an organization defines where they are and oh by the way, what levels of maturity they were in, the different levels of the five questions, what you want to offer them? How did you get there?

Allison Sarah: Yeah. This is where truly the magic happens because it takes this from being an academic approach. And I love research. Casey knows I love research. But research can be very academic and clinical and actually makes this very practical and pragmatic and actionable. And that was the goal with this assessment.

So the first thing I'll tell you, Jim, is when we looked at the data set and anybody downloading the report, which a well done report, Jim, you're amazing at what you pulled together in gleaning all these insights is you find that the demarcation points across the curve are pretty straightforward. One is, do you prioritize digital banking? I mean, it's pretty obvious. But there's actual real evidence to say it's one thing to say you prioritize digital banking, it's another, say, you put your investments there behind digital technologies. And how do you get there, right?

Jim Marous: How do you determine if you really believe in it or you're faking it?

Allison Sarah: Correct. Correct. So that's kind of the first demarcation.

The second demarcation now starts to get into more advanced digital capabilities like digital account opening and especially mobile account opening for new accounts, which is kind of more elusive as an industry. And certainly when we start looking at the time to open an account, which was something else we found as kind of you start to see some departure there. And then finally, the real advanced institutions really apply data, and it's a data first mindset. It's a data first tool set. It's the way they think about not just how they make decisions, but how they describe themselves in their culture.

So when you think about those three things, how do we find the right five questions that kind of get to the answers of that? So the five question assessment, which anybody can take on alchemy.com, any institution can take this assessment and get your answers immediately.

Jim Marous: For free.

Allison Sarah: For free. It's totally free. Is kind of to that extent, do you prioritize digital banking more or less than you do branches and call centers? When you think about the new customer experience or cross-selling versus servicing customers and members. Do you have a data footprint? What is the extent of your modernized data architecture? What does that look like? Are you using proactive marketing efforts for personalization at scale? What does that look like and what are your capabilities there? And then to what extent do you offer digital and mobile account opening either through your online site or obviously through your mobile app?

Those are pretty much the five questions. Those seem pretty straightforward, right, Jim? I mean, you look at that and you go, okay, anybody be able to answer those questions? And in fact, anybody can answer the questions that are connected to the retail digital banking experience in their institution. Anybody can answer. That being said. I will tell you from doing this assessment with a couple of clients, great Alchemy clients, we do this kind of with a lot of them in the room at one time, a lot of their C-levels in the room at one time. And we say, let me ask you these questions. Let me just see if you can answer these questions for me and then I'll give you your results.

Jim and Casey, you would be shocked at how spirited the debate gets over these five simple questions. Where, if nothing else, what I will assure listeners to this is if you take this assessment into your institution and ask people to come around a conference room table and answer the questions, just look at how much the debate happens between what you think your priorities are and are those really your priorities. Even the digital banking more or less important than and call centers and to what extent are they more or less important? I am always pleasantly surprised at the debate it triggers because it forces you to have maybe conversations that you think are understood and aligned on, but actually you may not have as much alignment as you-

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Allison Sarah: ... understood and aligned on, but actually you may not have as much alignment as you think, and it triggers more conversation in the boardroom, which is really what we wanted.

We wanted something accessible and interpretable by the boardroom, but we wanted it accessible and also interpretable in the lunchroom. We wanted anybody to be able to take this and have a conversation about it, measure their institution on the curve against a benchmark, snapping the chalk lines, to Casey's point, on where we are today in 2024 on digital maturity for FI specifically, have that conversation.

And then more importantly, Jim, to your point, talk about what would be next. So if you are innovation ready on the curve, what does it look like for you to move from innovation ready to digital forward, which is the next point in the curve? What separates that cohort from the one next to it? And what are the steps you can take, whether again, it's culture, strategy, or technology, to focus your energy and your investments. Because that's what FIs were asking us for. How do I know that my strategy and my investments are going in the right places to actually make me progress on a digital maturity spectrum of some sorts to be competitive? That's what this assessment does.

So we love it. We're so excited.

Jim Marous: I tell you what, Allison, it's interesting because it's not a yes or no answer. I mean, you've referenced it. But the reality is, even the digital account opening, it's a spectrum. So those five questions have 5, 6, 4 different levels in that.

And a person in an organization at the highest level is not going to completely misread their organization, but they may not have it exactly right because it may not be... They may think they're much better at something, but then as you get deeper, you realize, well, maybe not.

And the working together of all those elements to say, "Okay, what do we have to then do?" Because again, to get that assessment, to get your rating, is like getting your satisfaction score or something like that. Okay, that's really good, but where do I go to move up the level, to get the next best level of what I'm trying to achieve when there's so many moving parts?

So Allison, how can finance institutions... When I did the survey and pretended I was a financial institution, and I said, okay, I had one in mind and I knew how they should have answered. And it came back with where I was. It nailed it. It was really exciting. I called you because I said, "Oh my God, I did the test, and it came out the way it should have based on the way I answered the questions." But I didn't know I'd end up there, but I did end up there.

But then what was really, I guess, surprising to me a little bit, was the level of depth that you had with regard to what do you do next? What area? Because for instance, you can have a five-minute new account opening process, but you could still be at the beginning stage of digital maturity if the other components aren't right.

So this whole model had to work in such a way that said, "I'm going to take your answers and I'm going to find out where the weakness is based on the surveys we've done with others to say, which will move the needle the furthest the fastest."

Allison Sarah: That's right.

Jim Marous: How did you come up with those? But even more importantly, how do you then help these people that sign up for this and do the assessment, how do you provide them the solutions that can get to the next stage when some of them may not be incumbent within Alkami?

Allison Sarah: Yeah, absolutely. Well, first of all, I got to tip my hat off to Casey and the Emerald Research Group, because the data tells the story. So what I love about this whole study is it's the statistical models that reveal where the segments are. So when you understand where the segments are and where they're similar and where they're different, giving prescriptive advice as to what will move you from one segment to the next becomes very reasonable and actionable because we've got data that supports this is what makes these segments similar and how they behave similarly to each other. So thank you, Casey and Emerald team, because that really was the key input to making this actionable.

And then Jim, to your point around, okay, so now how does Alkami serve our clients, how do we serve the broader FI community with this data? I want to be very clear. This research project, there are a lot of things in here that Alkami has nothing to do with. And things like back office technologies and automation of certain things that if we wanted to be very self-serving, we would've said, "No, exclude that, Casey and team, because we really don't want to look at that stuff because Alkami doesn't have a product there."

But that would've undermined the spirit of the study, which is how do we get to capital D, capital M, digital maturity? What does that look like? Again, we've talked about culture, strategy and technology, but also people and processes as part of that. And certainly back office is part of the processes. So we really wanted to understand that.

So I will affectionately tell even our own clients when they look at the results in the white paper, Jim, that you published, and they go, "Well, does Alkami offer this?" And I go, "No, actually we don't. But you know what? We want to give you this insight because that's something important for you to understand as you think about your total tech stack, what might be important and what might be ingredients that are missing for you. Whether or not Alkami directly provides that or not is not material to us."

And then there are a lot of things candidly that we do offer. We do offer a digital banking platform. We do offer a data architecture and a marketing kind of CRM tool that clients can use. And that's important to also understand because if we do have products in our portfolio that we believe are in service to helping an FI graduate to the next level, then it's on us and the onus is on us to let them know that information and then let them be the educated buyers that they are to determine, now once you've decided you have the need and you're problem aware that you have a problem and that there's a solution that exists, please put Alkami and any other vendor for that matter up to the test, and push your vendor community forward to be even better in service to you.

Because that is also what the most advanced institutions do. They push the broader ecosystem forward. They don't sit on their laurels and wait for the ecosystem to come to them to push them forward. So that would kind of be my guidance.

Jim Marous: Oh, yeah. And it's interesting because that was one of these things, I remember where I was when we discussed the fact that, "Jeez, if this comes up, you don't really offer that, do you?2 And you said, "No, we don't. But we're going to be logical and say, guys, here's some companies you may want to look at because you need this, whether or not we're involved or not." But it also, I would imagine, would guide your product development team, your strategy team, to say, "You know what? We probably have to get this under our roof, because this is an area that nine-tenths of the organizations that we're asking this assessment tool for through are not mature in this area. If we want to help them-

Allison Sarah: Or we need to find a partner in the ecosystem that can help so that we can help these institutions. And even within things that are in our roof, Jim you know this, the five-minute account opening experience is the most elusive thing still in this study. Even the most progressive institutions, the most mature, very few of them have achieved the five-minute digital account opening experience.

And Jim, you've talked about this for ages, about how we live in a world of Google and Amazon and I can have a drone deliver something to my door this afternoon. I expect things in an instant always on kind of on-demand world. Most institutions, even the most mature, are not achieving five minutes.

So what does Alkami do with that as a vendor in this community? We go, "Okay. Well, that actually should be the target that we aspire to deliver. How do we now rethink about that user experience? How do we think about the frictionless experience, both in the front office and the back office, to automate as much of that as possible to make that five-minute account opening experience realistic, while also mitigating fraud risk?" Because we know digital account opening is also a very fraught use case with fraud.

So how do we balance those scales in a highly regulated industry that isn't necessarily an Amazon-esque kind of industry in a lot of ways. There's a lot of fraud in this industry, regulation in this industry. How do you balance the scales while also pushing forward to improve that user experience so that all of us get better? That's also something that the study can help.

Jim Marous: It's interesting also, because I remember Casey saying there was a correlation between those organizations that said they can open them digitally, and those who couldn't do it very fast, and where their culture was. So you see these intertwining elements that say, "Okay, you may say you can do that, but if you're not really doing it, there's still a culture shift that has to take place that says, I'm going to embrace the change that's needed to do things differently than I've done in the past, and I've got to find a way to get there."

So again, it gets back to this whole thing comes together in a really nice way, if you follow the assessment tool, the research and what the findings found.

So Casey, I know that you, we, do not see this research, or even the assessment tool, being a static process. As digital transformation continues to evolve with ChatGPT and generative AI, how do you and Alkami plan to update and refine the maturity model and the assessment tool to keep pace with industry changes?

Casey Hogarth: Yeah. I mean, it's essential. Innovation happens so darn fast and it's exponential. It's only getting faster. So for all we know, the results we're putting out today could look awfully different in a year or two from now, maybe less. So we get the importance.

And I think there's twofold. One is just making sure we keep a pulse on where institutions are at with the current tool that we have. We've learned what matters, we've learned what drives maturity, and so we've been able to refine the survey tool that we have to really just ask about what matters most. And continuing to take a pulse on where people are at as time progresses is really important to do in that if you don't, pretty soon things that we call cutting edge today in this study are going to be become the norm. And if that's the case, how to get to that next step if everyone's there, there's not a whole lot more you can do and act on.

So I think that's part one is just understanding how responses and results with this specific model change and develop and how quickly or fastly people shift towards the top.

But I think the other thing is making sure we include and explore new experiences and capabilities. You mentioned GenAI. We've done some other work, and that seems like it's telling us that's just starting to catch hold, but there's a ways to go. But that could happen awfully fast. So when things like that start to become more a part of the fold, what's cutting edge becomes different. What's cutting edge a year from now may not necessarily be in our survey. We may not know what that is. We may not even been talking about that.

So it's going to be really important to also bring some of those new capabilities in, things that are very new to the market, into future questions that we ask to understand whether or not those are actually in fact starting to take hold with FIs, or if it's just a lot of buzz but isn't ultimately in anyone's actual infrastructures yet.

Jim Marous: Yeah. So Allison, as we look at all this and we look at the evolution and what's possible down the line, obviously the more organizations that take this assessment tool, the more powerful the assessment tool becomes because we get a benchmark for every category, every organization. And if something big comes out in the XYZ category, we know exactly who to target and say, "By the way, this could move your needle faster based on what we've seen from other organizations like yours."

Being able to measure these against each other is an extraordinarily powerful tool. They got us all excited saying, at the end of the day, if we have 5,000 organizations that have measured themselves and we know how they move and we see what's going on, then, as Casey mentioned, the ability to update, to evolve over time. I know that one thing we already know we have budgeted for next year is the reassessment, the reevaluation of what we're doing. Because this can't stay still. This has got to be a living, breathing entity.

Allison Sarah: That's right.

Jim Marous: So how do you anticipate this assessment to impact the banking community as a whole and the ability to determine what organizations need to do next? I mean, chain sucks. I mean, I've said this more than a few times with you and in many cases. And as a result, it's hard for organizations to know what should I do next?

I mean, if you're doing a body transformation, if you're doing a personal transformation, if you're doing an organizational transformation, getting to know what to do next and be successful at it, is so...

PART 3 OF 4 ENDS [00:39:04]

Jim Marous: Do next and be successful at it. It is so important. How do you see this tool? Again, you're going to be a little biased, but how do you see this tool and the dialogue that's going to go on between organizations? How do you see that taking place over time and how important is it going to be?

Allison Sarah: Well, I hope, given that to our knowledge, this is the first of its kind in this industry, and we looked pretty extensively to find a comparable online assessment that you could take that was frictionless, easy and instant that you could understand. And by the way, based on a statistical model that benchmarked 215 institutions of all sizes to get the real landscape of where digital maturity is today, didn't exist. So at a minimum, Jim, I hope that people take the assessment and really the point of it was to start these conversations that you're speaking of because the original idea behind this was from our clients coming to us saying, how do we know if we're mature? How do we know if we are meeting, meeting or lagging the competition? Where should we put our investments? And we knew that to answer that, we had to look at culture, strategy, and technology.

We could not just take a technology lens on this, and in fact, if we had, it would've been to the detriment because we talked about technology follows strategy and strategy follows culture. So we had to look at the trinity of those three. So if nothing else, Jim, we're hoping that it gives people practical prescription. It kind of reduces the obfuscation in the industry of a lot of metrics and a lot of numbers and a lot of things of what should I be doing and how do I do that? Here's a metric here and here's a metric there, but none of these metrics have been brought together in this way to say, here's a curve, here's a maturity model. It's based on a statistical set of models behind the scenes that the data tells the story, and here's an assessment you can take to understand where you are on that curve today and what it is you need to do tomorrow if you wanted to graduate to the next cohort in the curve on the tree.

And even by the way, for the most mature in the curve, we give you guidance on where even the most mature or not seeing certain things, whether it's even more back office automation needed, or again, that five minute account opening experience that few are right now hitting and seems to be the next frontier of where others could go behind them. So we really want to start the conversation and you mentioned you gave the analogy of personal health, right? And we all know this, you can get on a scale and a scale can tell you your weight, but a scale doesn't go so far as to tell you, unless you have a smart scale, which I just invested in, what is it they recommend that you do, looking holistically at your body, how much water is in your body, how much proteins in your body, how much muscle mass. Are you losing weight?

Are you losing muscle? Are you losing fat? What should you do with your nutrition? Think of this as kind of that guide to say that not every segment has the same prescription. If you're on one set of the curve, we're not going to give you the same set of recommendations as others on another segment of the curve. So it really is custom-made for where you are in your digital journey, meeting you where you are right now, and then giving you not go boil the ocean and try to do 50 things that you can't possibly do overnight. But what are the two to three things you could take action on across culture, strategy, and or technology to graduate you to the next level so that we start the incremental improvements that become much more reasonable to take for FIs, become much more appropriate to bring into a boardroom conversation and not scare FIs into this, oh my gosh, it's overwhelming. But no, this is actually very actionable and there are real things you can do to tomorrow to actually change where you are on this curve in a few months from now.

Jim Marous: Wow, that's a lot. And it's kind of funny because it gets into my last question for both of you, which is what advice do you give financial institutions looking to get better in their digital transformation process? But also, yeah, I'll say to increase revenue, because we know now that the digital transformation journey, the ability to become digitally mature has an impact on your financials, and at the end of the day, that's key. But I'll start with you, Allison. What would you say is the one thing you think organizations need to do today?

Allison Sarah: Easy, go take the assessment because you're going to find out exactly where you are and what you need to do differently. That was in my cheeky response. Slightly more, slightly less cheeky response. One thing I would say is your perspective of where you are as an institution. The danger we all run into is we measure ourselves against ourselves and we don't measure ourselves against the market. So this instrument really measures you against the market and so that you're not lured into the false narrative of what we're doing better than we were last year.

That's great, but that doesn't tell you are you keeping pace and are you doing enough to keep pace with where the market is today? So I say that to say, look, take the assessment because it's going to give you the perspective that maybe you do or don't have today, at least not in a model like this, to tell you this is how we've improved year over year and look at your internal metrics and benchmarks, but now compare yourself honestly to where the market is right now at this point in time to say, what else could we and should we be doing to even leapfrog others in the market and do better than our competition is doing?

Jim Marous: Casey, from your perspective and knowing what you got into and how deep you got into the assessment and the research itself, what area is almost universally that says, here's where the focus has to be?

Casey Hogarth: I think one really clear distinction of the difference between some of the least mature folks and some of the most mature folks are how they view relationships with their digital providers. The less mature folks are kind of in that mindset of said it and forget it, and the most mature folks pretty much all still work with digital providers, but it's more of a partnership and less of a transaction. It's a two-way street. They're getting just as much from their providers as they are pushing them forward and bringing providers forward into the future to help their FI step up. So I think making sure you view that relationship in the right way as more of a partnership and less of a check the box, said it and forget it is really important because... If you can learn from the study where do we want to go next.

It's another thing to actually make that happen. So being able to communicate with your providers and say, hey, we want to go here next, or hey, we heard about this thing. What can you do for us to explore that? Maybe something's already in development that y'all just don't know about, or maybe your providers have other partners that consistently work hand in hand with them to play nice in your platform. So I think making sure you've got the right mindset there is a really great way to help you propel forward without having to do too much internally and reposition too many priorities.

Jim Marous: Those are both key. I would also add to that because that really looks at the culture issue. The ability to say, I'm actually going to accept the fact that things have to change and I'm going to let my partners help me push that needle as opposed to I'm going to buy X from Y and hope it works. We've learned. I mean, I use this analogy quite often and I love Salesforce, but there almost every organization has Salesforce somewhere on their back shelves. Some use it, some don't, but everybody's paying for it. It doesn't do you any good to pay for a service that you don't actually believe in and apply and deploy.

And I would say as far as preparation, everything points to the fact that you better really have your data and your analytics game honed because nothing going forward is not going to start there for any account opening process, any new transactional process, any digital maturity process, anything you're doing, anything with Gen AI, you better get your data and analytics shop in order with partners, by the way, because you can do that as well. But you better get that in order because you won't be able to move forward into the future continually trying to hope that you're going to get this together. I will tell you, this has been the most exciting research project I've done in my career. It is also the end point, the assessment tool.

I believe is the most exciting deployment I've seen in the marketplace possibly forever because it has the ability if people do it to make it more powerful through numbers. If we have 50 organizations that do it, it's going to be great for those 50, but it's not going to move the needle in the industry. And oh, by the way, you can take this assessment tool and you can work with your core provider and say, I need to work on this and this. You're going to be my partner. It does not force you into a corner, but at the end of the day, it gives you not only where you are, it gives you what you need to do to get to the next stage, and it also provides you an idea as to who to partner with to get there, and it's going to be speed.

This speeds up your entire process and makes it so you can go to your senior management, your board and say, "it's no longer a matter of if, it's a matter of now, not even when", because if we don't get this right, this assessment tool shows me I will not get to where I want to go no matter who's playing the politics in the organization. As far as how to sign up for the assessment, how to do the assessment, it's alchemy.com but we'll give you specific if you've, however you've accessed this podcast, either through YouTube or through a podcast channel, the host notes will provide you the link so you can just push a button and get it to work. So both of you, I thank you so much for your partnership. You've taught me so much. We're going to continue the teaching because Allison, maybe this is a good time to talk about what's coming up in the fall.

Allison Sarah: We've got a little study called the Commercial Digital Maturity Assessment coming up, Jim and Casey, as you both know, because as we were working on this one, we were like, look, there's very few people in an FI that can speak intelligently about both their retail and their commercial capabilities. So let's do this right. There's probably a retail digital maturity curve, and then there's a different set of characteristics that define commercial digital maturity for commercial accounts, business accounts. So we are starting that process as both of you know and by the fall we hope to unveil that instrument to the market as well. So yeah, it's exciting.

And Jim, I honestly can't thank you enough. When we thought of this study, the thought partner we knew had to do this with us was you, and you came in with just Vim and Vigor as always, and help make this study so much better. So thank you for being such an outstanding thought partner with us and just a partner in this whole endeavor. We could not have made it here without your instruction, guidance, advice, and just wisdom in looking at the data and looking at how we can frame it.

Jim Marous: I appreciate that. But I will tell you that between you and Casey and both of your teams, I learned more than I taught. And in the end of the day, this is my wheelhouse. I cannot learn enough about what's going on in this industry. And this was one of these events that you go, you know what? This one's going to last for a long time and going to make a difference, which is really what we're trying to do. So thank you both for being on the show. Thank you very much for the partnership, and I'm really looking forward to seeing where this all goes.

Allison Sarah: Thank you, Jim. Thanks Casey.

Casey Hogarth: Thank you.

Jim Marous: Thanks for listening to Banking Transformed, the top podcast in retail banking, is the winner of three international awards for podcast excellence. We appreciate the support we have received to makes this endeavor a success. If you enjoy what we're doing, please take some time to show some love in the form of review. Finally, be sure to catch my recent articles in The Financial Brand and check out the research we're doing for the digital bank report. There's been a production of Evergreen podcast. A special thank you to our senior producer, Leah Haslage, audio engineer, Chris Fafalios and video producer Will Prince.