CHAPTER TWO

DESIGN THINKING IN FINANCIAL SERVICES

“Most banks and credit unions don't usually take 'the human factor' into
consideration when developing their products and services. But several
financial institutions are starting to do just that, using proven business
management strategies to foster greater creativity and innovation. It's
called 'design thinking'”.

Source: The Financial Brand

2.1 Introduction to Design Thinking

Every problem in this world is an opportunity in itself and the reason why individuals
struggle to solve their problems is because 95% of them are thinking of solutions rather than
thinking about the problem.

It is expedient therefore that enduring results is obtained where works are designed on this
same fundamental principle. If we focus less on the outcome and more on design thinking
as an approach, that can result in a larger impact.

Design thinking is a creative problem-solving approach with specific tools, methods, and
mindset. Designers use it to create new values that are different and to create a positive
impact. By practicing it correctly, it leads to innovation.

Many who hear the expression “design thinking” mistakenly believe that it is all about
aesthetics — something limited to “creative types” who specialize in graphic design. But that
is not the case. It does not mean that aesthetics is not important, but a good-looking design

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that does not meet consumer needs or solve consumers’ problems has no chance at
success.

Rather than focusing solely on style, design thinking is about applying the principles of
design to the way people interact with the world. It is an iterative process in which you seek
to understand the user, challenge your assumptions, and redefine problems in an attempt to
identify alternative solutions that might not be instantly apparent using more conventional
methods. Design thinking revolves around a deep interest in developing an understanding
of the people for whom you are designing products and services. It helps you observe and
develop empathy with the target user.

This is the reverse of how banks traditionally design products and services. Instead of
focusing on the consumer experience, financial institutions tend to develop products to meet
their own internal processes and operational efficiencies. They then tend to put a pretty
wrapper on the product and call it a day.

Financial institutions then wonder why so many consumers get frustrated — e.g., they
abandon the online account opening half-way through the process. The online account
opening does not meet the user’s need or address their problem; they want to open an
account without having to go to a branch. Design thinking, in theory, would solve that
problem.

Growing in Popularity, But Not a New Phenomenon

Design thinking isn’t a new concept. It’s been around in some form since the 1960s. In fact,
today you’d hard pressed to find a Fortune 100 company that does not incorporate at least
some aspects of design thinking in how they bring products and services to the market.

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2.1.1 Mindsets behind Design Thinking

● Show, do not tell: Communicate what you are thinking by visuals. It is more

effective than words. This can be done by creating experiences, using illustrative
visuals, and telling good stories.
● Focus on human values: Empathy for the people we design for and feedback from

them is fundamental to good design

● Craft clarity: Create a clear vision about the design out of many problems. Frame

the vision and put it in a way to fuel ideation and to inspire others
● Embrace experimentation: Prototype is not simply a way to validate our idea but it

is an integral part of the innovation process. Think outside the box, prototype, iterate.
We think, make and learn from it
● Be mindful of the process: Know the design process, where you are right now in

the process, what methods to use in which phase and how to apply it to reach the
goals
● Bias towards action: Good design is achieved when it' is actually made. Many

times, we spend so much time thinking and we create only one thing. We should
strive more towards doing and making things, iterating again and again after
thinking. Doing can also result in innovation
● Radical collaboration: Bringing together designers and innovators from different

backgrounds, varied interests, and viewpoints. When people from different fields
come together, breakthrough insights can come up

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Design thinking encompasses processes such as context analysis, problem finding and
framing, ideation and solution generating, creative thinking, sketching and drawing,
modelling and prototyping, testing and evaluating. Core features of design thinking include
the abilities to:

● resolve ill-defined problems

● adopt solution-focused strategies

● use abductive and productive reasoning

● employ non-verbal, graphic/spatial modelling media, for example, sketching and

prototyping.

How Design Thinking Works

Design thinking has four or five phases, depending on who you ask. Global design firm
IDEO uses a four-phase model. Many others, however, expand the process to encompass a
stage for testing.

1. Empathize. Conduct research in order to develop knowledge about what your users
do, say, think and feel. Imagine your goal is to improve an onboarding experience for
new users. In this phase, you talk to a range of actual users. Directly observe what
they do, how they think, and what they want. What motivates or discourages them?
Where do they experience frustration? The goal is to gather enough observations
that you can truly begin to empathize with your users and their perspectives.

2. Define. Combine all your research and observe where users’ problems exist. In
pinpointing your users’ needs, highlight opportunities for innovation. Use data
gathered in the “Empathize” phase to glean insights. Organize all your observations

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 and draw parallels across your users’ current experiences. Is there a common pain
point across many different users? Identify unmet user needs.

3. Ideate. Brainstorm a range of crazy, creative ideas that addresses the unmet user
needs. Give yourself and your team total freedom. No idea is too far-fetched, and
quantity supersedes quality. Bring your team members together and share ideas with
one another, mixing and remixing as you build on each others’ ideas.

4. Prototype. The goal is to understand what components of your ideas work, and
which do not as you begin to weigh the impact vs. feasibility of your ideas through
feedback on your prototypes. Make your ideas as real and tactile as possible (not
always easy in a service industry like banking). Adapt your concept based on
feedback, then prototype it again quickly.

5. Test. Return to your users for feedback. Ask yourself ‘Does this solution meet users’
needs?’ and ‘Has it improved how they feel, think, or do their tasks?’ Put your
prototype in front of real people and verify that it achieves everyone’s goals. As you
begin to execute your vision, you should try to continue testing along the way.

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Empathy is the Critical Factor

One of the central concepts in design thinking is empathy. Without it, design thinking might
sound just like any other creative process.

The dictionary says empathy is about understanding, being aware of, being sensitive to, and
vicariously experiencing the feelings, thoughts, and experience of another. It means putting
aside your own ideas to understand why consumers think and behave the way they do.

In design thinking, you investigate what issues upset consumers rather than assume you
know the answer. It is about identifying pain points. You go to the branch and talk to
consumers. You watch them interact with the tellers. You invite them to focus groups and let
them play around with your mobile banking app. You listen to their feedback, but you also
observe their body language and facial expressions. You try — as close as you can — to
feel what they feel.

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Design thinking has nothing to do with facts such as demographics. It is about uncovering
thoughts, feelings and motivations. Why are consumers visiting the branch? Why didn’t they
use the mobile app?

Uncovering raw consumer sentiment will often yield a product or service that consumers
love. The Bank of Ireland’s team of design thinkers met with people who had recently
experienced a bereavement. Based on what they learned, the bank designed a bespoke
concierge service to handle the administrative tasks and paperwork that grieving customers
may be too upset to deal with.

When you cannot use design thinking, you risk creating a product that — by all measures —
may look great and might be technologically advanced… but ultimately fails. Consider
Google Glass. The wearable product, released in 2013, was received with much fanfare.
People thought it was “cool,” but failed to gain favor with consumers. Why? Because the
product solved what engineers thought people needed, not what consumers actually
wanted.

Quick Iterations

When you understand the consumer problem you are trying to solve, you do not waste time
creating something like Google Glass that won’t work for consumers. You prototype, test to
make sure it’s the right design, change it if it is not. Rinse and repeat.

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Another key to design thinking success is that ideas can come from anywhere in the bank.
But, some traditional financial institutions only allow innovation ideas to originate from top
executives. Those projects not only took longer to bring to market, but employee confidence
in the project and overall moral was markedly lower.

If you think that your organization supports an ideas-can-come-from-anywhere approach,

here is a test. Identify ten innovations you are interested in, and poll employees about
where these ideas came from. If only a few of these ideas came from employees who
actually work with consumers, products or technology, you’ve got a disconnect and a
problem.

And those employees generating ideas don’t have to be subject experts. I i’s best to have
diverse employees come up with ideas since they will bring different ways of thinking to the
problem.

2.1.2 Approach to implementing Design Thinking in Financial Services (Traditional &

Fintech Perspective)

To overcome the core obstacles for successful implementation of Design Thinking in

finance. 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.

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 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 is 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
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 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 does not 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 faced with.
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

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motivate them to act quickly. Quick action includes brainstorming ideas and testing
them as soon as possible to learn from mistakes. But there is more to it than that.

The majority of specialists from various organizations have stated that only some
customer-oriented departments, such as Research and Development (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.
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 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.

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 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.

2.1.3 Differences between Design Thinking and Traditional Business Thinking

Traditional Business
Design Thinking
Thinking

Goal Management Innovation

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 Importance of ● The customer is another ● The end user is at the center
end user important factor to take into of everything
account in the process ● The objective is to understand
● Customer needs and the underlying customer needs
behaviors come from and behaviors and the
customer research (what rationale behind them
the customer says)

Ideating ● Innovation is limited to ● Innovation is at the core of

Environment digital or technology teams the whole organization
and specific innovation ● Prototypes are built and
centers launched to the market
● Product launches are whenever an idea is
carried out at a late stage of conceived
the process, after several ● Working environment is
iterations, and after having designed to foster
had them checked by innovation and generation
internal divisions and of new ideas (lower
performing market research hierarchical standards,
● Working environment is brainstorming sessions)
designed to promote ● Feedback from customers
efficiency is constantly incorporated
● Products are only subject to into the prototypes
minor upgrades ● Relies on data plus
● Validates a problem that experimentation in order to
exists in order to assess assess future possibilities
current states analytically imaginatively

Team ● Team members tend to ● Teams are specifically made

Composition have similar backgrounds up of people with radically
and/or experiences different profiles and
● Similar individuals working experiences
in silos ● Diverse thinkers working
together

2.1.4 Process Of Design Thinking In Banking

1. 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
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 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.

2. 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 proceed with data
analysis from these different angles: business, psychology, user behavior,
competitors, marketing, technology, etc.

3. 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.

4. 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.

5. 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.

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