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Corresponding author: Damilola Oluwaseun Ogundipe

Copyright © 2024 Author(s) retain the copyright of this article. This article is published under the terms of the Creative Commons Attribution Liscense 4.0.

Agile methodologies in digital banking: Theoretical underpinnings and implications

for customer satisfaction

Damilola Oluwaseun Ogundipe

1, *

, Opeyemi Abayomi Odejide

2

and Tolulope Esther Edunjobi

3

1

Slalom Consulting Inc, Vancouver, British Columbia. Canada.

Article DOI: https://doi.org/10.53022/oarjst.2024.10.2.0045

Abstract

This paper delves into the theoretical underpinnings of agile methodologies and investigates their potential to enhance

customer satisfaction in digital banking. Theoretical foundations of agile methodologies draw on several key theoretical

frameworks complexity theory, complex systems, like digital banking ecosystems, exhibit emergent properties.

Traditional linear approaches struggle to predict these. Agile embraces iterative development cycles and adaptability

to changing requirements, acknowledging this complexity lean thinking, derived from manufacturing, lean thinking

prioritizes eliminating waste and maximizing customer value. Agile translates this by focusing on short development

sprints, prioritizing features with the highest customer impact, and minimizing unnecessary functionalities customer

co-creation, traditional models often distance customers from the development process. Agile emphasizes customer co-

digit banking. Agile development allows banks to deliver new features and functionalities faster, keeping pace with

evolving customer demands. Customers benefit from quicker access to innovative solutions that address their financial

needs. This results in digital banking experiences that are intuitive, efficient, and cater to specific user needs. Increased

Innovation, The iterative nature of agile fosters continuous learning and experimentation. Banks can test new features,

gather customer feedback, and rapidly iterate upon them, leading to a more innovative and dynamic digital banking

experience. Improved transparency and trust, agile practices promote open communication and collaboration between

development teams and customers. Customers are kept informed of updates and have a voice in shaping the

development process, fostering trust and a sense of ownership.

Keywords: Agile Development; Customer Co-Creation; Digital Banking; Customer Satisfaction; Complexity Theory;

Lean Thinking.

waterfall development methods, which follow a linear, stage-gated approach, Agile embraces an iterative cycle of

planning, development, testing, and deployment (Abrahams et al., 2023).

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Agile prioritizes user stories, which are concise descriptions of features from the customer's perspective. This ensures

that development efforts are focused on functionalities that directly address customer needs. Short development cycles

(sprints) lead to faster delivery of desired features, keeping customers engaged and satisfied. Enhanced Responsiveness

to Customer Feedback, Agile fosters continuous communication and feedback loops between developers, product

managers, and customers (Abrahams et al., 2024).

This allows banks to gather real-time feedback on new features and iterate based on user experience. Promptly

the bank and its customers. The rise of digital banking demands continuous innovation to meet ever-evolving customer

expectations. Agile methodologies provide a framework for delivering customer-centric solutions through rapid

development cycles, responsiveness to feedback, and a focus on user experience. By embracing agile practices, banks

can create a digital banking environment that fosters customer satisfaction, loyalty, and ultimately, a competitive edge

in the ever-evolving financial landscape (Adaga et al., 2024).

1.1. Theoretical Underpinnings of Agile Methodologies

The digital banking landscape is a dynamic battle ground. Customer expectations are constantly evolving, demanding

continuous innovation and adaptation. Traditional development methodologies, often slow and rigid, struggle to keep

pace. However, offer a powerful alternative, fostering a customer-centric approach that prioritizes flexibility,

collaboration, and rapid iteration. The Agile Manifesto, a foundation for success. It outlines four core values and twelve

features and functionalities meet their evolving needs rather than relying solely on pre-defined contracts. Responding

to change over following a plan, the dynamic nature of digital banking demands adaptability (Addula et al., 2024).

Agile embraces changes in requirements and priorities, allowing for continuous improvement based on user feedback.

These principles elaborate on the core values, providing a practical framework for development, Deliver working

software frequently, from a few weeks to a few months, with a preference for the shorter timescale. Business people

and developers must work together daily throughout the project. Build projects around motivated individuals. Give

them the environment and support they need, and trust them to get the job done (Adefemi et al., 2024).

The most efficient and effective method of conveying information to and within a development team is face-to-face

conversation. Working software is the primary measure of progress. Sustainable development is the pace that allows

developers to continuously maintain their desired pace without burning out. Continuous attention to technical

adaptation within short timeframes. Kanban utilizes a visual Kanban board to manage work tasks. Tasks are

represented by cards that move through various stages (Alirezaie et al., 2024.

Unlike Scrum's fixed-length sprints, Kanban allows for continuous flow of work. This flexibility is ideal for tasks like

bug fixing or ongoing maintenance tasks in digital banking, where addressing issues efficiently is crucial for customer

satisfaction. Lean Startup, The Lean Startup methodology emphasizes building minimum viable products (MVPs) with

core functionalities. These MVPs are rapidly released to gather customer feedback and iterate based on user experience.

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This iterative approach is particularly valuable in digital banking, allowing banks to test new features and gauge

customer reception before investing significant resources in full-fledged development (Amoo et al., 2024).

Agile Values in Action, Benefits for Digital Banking By embracing agile values and frameworks, digital banking platforms

can reap numerous benefits, Iterative Development, Continuously delivering new features and functionalities based on

user feedback keeps customers engaged and satisfied. Customer collaboration, direct customer involvement in the

development process ensures features address real needs and enhance user experience Rapid Adaptation, Agility allows

Continuous testing and feedback loops lead to a higher quality of digital banking products and services. Streamlined

prioritizing rapid adaptation, banks can create a dynamic and user-centric digital banking experience that adapts to

ever-evolving customer demands (Anyanwu et al., 2024).

centric and efficient landscape. Product Development, Mobile Apps and Online Banking Platforms Iterative Design and

Development, The traditional waterfall method of development, with its lengthy design phase followed by coding and

testing, is ill-suited for the fast-paced digital banking environment (Aripin, 2024).

features in short sprints, gathering user feedback after each iteration. This allows for continuous refinement and

ensures the final product aligns with customer expectations. Minimum Viable Products (MVPs), Agile encourages the

development of MVPs – stripped-down versions of a product with core functionalities. These MVPs are released early

This helps avoid building features that may not resonate with customers, saving time and resources. Prioritization

based on user needs, the backlog, a prioritized list of features and tasks, plays a crucial role in agile development.

Customer feedback is used to continuously refine the backlog, ensuring development efforts are focused on features

with the highest customer value. This ensures development aligns with evolving needs and keeps customers engaged.

Feature Rollouts and Updates, Phased Rollouts and A/B Testing, Agile promotes phased rollouts, where new features

are first released to a smaller user group for testing and feedback before a wider launch (Atadoga et al., 2024).

This allows for early identification of bugs or usability issues, minimizing disruption for the majority of users. A/B

testing allows banks to compare different versions of a feature with a subset of users, providing valuable insights for

optimizing the final version before full deployment. Continuous Delivery, Agile principles enable continuous delivery

pipelines, which automate the process of building, testing, and deploying new features. This allows for frequent updates

and bug fixes, enhancing the overall user experience by ensuring the digital banking platform remains stable and up-to-

Clear Communication and Transparency, Communication plays a vital role in successful feature updates. Agile

emphasizes keeping users informed about upcoming changes, potential disruptions, and new features. This

and prioritized in the backlog (Ayorinde et al., 2024).

and Continuous Improvement, Agile fosters a culture of continuous improvement in security. Threat modeling, a process

of identifying potential security risks, is conducted regularly. Identified vulnerabilities are addressed in subsequent

sprints, ensuring the digital banking platform remains secure as new features are added. The cyber threat landscape is

constantly evolving (Ayorinde et al., 2024).

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Agile's emphasis on rapid adaptation allows security teams to quickly respond to new threats and implement necessary

security measures in short sprints, minimizing potential risks. Internal Communication and Collaboration, Cross-

functional Teams, Breaking down silos and fostering collaboration across departments is crucial for successful agile

adoption in digital banking. Cross-functional teams consisting of developers, product managers, security experts, and

user experience (UX) designers work together throughout the development cycle. This facilitates open communication,

environment. By embracing agile principles across all facets of digital banking, banks can unlock a world of benefits.

From delivering customer-centric products and features to ensuring a secure and adaptable platform, Agile empowers

banks to thrive in the ever-evolving digital landscape. Continuous innovation, rapid adaptation, and a focus on customer

needs form the cornerstone of successful Agile adoption in digital banking, leading to a more secure, efficient, and

ultimately, customer-centric banking experience (Egieya et al., 2023).

1.3. Implications for Customer Satisfaction

The digital banking landscape is fiercely competitive, with customer experience (UX) reigning supreme. Traditional

development methodologies often struggle to keep pace with evolving customer needs. Agile methodologies, with their

emphasis on iterative development, user feedback, and rapid adaptation, offer a compelling solution. Let's explore how

agile practices can lead to significant improvements in digital banking, Enhanced User Experience through Iterative

testing is conducted throughout the development process, allowing for early identification of usability issues (Hassan

et al., 2024).

Feedback from user testing is readily incorporated into subsequent iterations, leading to a more refined and user-

centric final product. Prioritizing User Needs, Agile methodologies put users at the center of development. The backlog,

a prioritized list of features and tasks, reflects user needs and pain points. This ensures development efforts are focused

on features that deliver the most value to customers, leading to a more fulfilling user experience. Faster Delivery of New

Features and Functionalities, Short Development Sprints, Agile utilizes short development cycles called sprints

This allows for faster delivery of new features and functionalities, keeping customers engaged and ensuring the platform

remains up-to-date with the latest trends and technologies. Flexibility to Adapt to Changing Needs, Agile embraces

communication with customers. Banks can leverage various channels to keep users informed about upcoming features,

development progress, and potential roadblocks. This transparency fosters trust and a sense of partnership between

development process (McLaughlin, 2024).

User testing sessions and feedback surveys gather valuable insights that directly influence the platform's design and

functionality. This sense of ownership and engagement strengthens customer loyalty towards the bank. Faster

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Response to Customer Feedback, Agile facilitates a faster response to customer feedback. Issues and complaints are

identified and addressed within the short sprint cycles (Bougrine et al., 2024). This responsiveness demonstrates that

customer voices are heard and valued, building trust and loyalty. Challenges of Implementing Agile in Banking While

Agile offers significant benefits, implementing it in a banking environment come with its own set of challenges,

regulatory compliance, the banking industry operates under strict regulations (Morris and Brubaker, 2024).

Agile's emphasis on rapid iteration and adaptation needs to be balanced with the need to comply with regulatory

fostering a user-centric approach, accelerating delivery of new features, and prioritizing customer feedback, Agile

empowers banks to create a more engaging and satisfying digital banking experience. While challenges exist, especially

within the highly regulated banking environment, the potential benefits of Agile make it a compelling path towards a

competitive and customer-centric future for digital banking (Ochuba et al., 2024).

1.4. Case Studies Empirical Evidence

loyalty. Traditional, waterfall development methodologies struggle to keep pace with evolving customer needs and

expectations. Enter agile methodologies is a breath of fresh air that prioritizes user-centricity, collaboration, and rapid

iteration. This paper explores how agile practices enhance customer satisfaction in digital banking, drawing from real-

world examples and research findings (Ochuba et al., 2024).

Prototypes are created early and tested with users throughout the process. This continuous feedback loop ensures the

final product aligns with real customer needs and delivers a superior user experience (UX). Faster Delivery of Features

and Functionalities, Agile facilitates faster feature rollouts by breaking down development into manageable chunks.

Banks can leverage various channels to keep users informed about upcoming features, development progress, and

potential roadblocks. This transparency builds trust and fosters a sense of partnership between the bank and its

customers. Responsiveness to Customer Feedback, Agile empowers banks to respond to customer feedback and

complaints promptly. Issues are identified and addressed within short sprint cycles. This responsiveness demonstrates

that customer voices are heard and valued, leading to higher satisfaction and loyalty (Okoli et al., 2024).

Real-World Success Stories, Agile in Action Several banks have successfully leveraged Agile methodologies to create a

more customer-centric digital banking experience, Barclays, Barclays, a multinational banking giant, adopted Agile to

streamline mobile banking development. By focusing on user stories and iterative design, they were able to deliver a

more user-friendly mobile app with features that directly addressed customer needs (Weng et al., 2024). This resulted

in a significant increase in mobile banking adoption and customer satisfaction

USAA, a leading financial institution serving the military community, implemented Agile to accelerate online account

opening processes. By focusing on rapid iteration based on user feedback, they were able to streamline the process,

reduce application abandonment rates, and enhance customer satisfaction. A study conducted by Accenture, found a

Banks that embraced agile methodologies reported higher customer satisfaction scores compared to those using

traditional development methods (Zhou, 2024). The study also highlighted that Agile practices led to faster time-to-

market for new features, increased innovation, and improved operational efficiency. The highly regulated nature of

Testing and documentation procedures need to be adapted to fit within an agile framework (Chen et al., 2024).

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1.5. Case study

This case study delves into the success story of ING, a global financial institution, and its transformative journey towards

customer-centricity through agile methodologies. Prior to embracing Agile, ING's digital banking platform development

process was slow and cumbersome. Waterfall methodologies led to lengthy development cycles and features that didn't

needs and pain points, became the cornerstone for prioritizing development efforts (Orieno et al., 2024).

This collaboration fostered a more holistic approach to development and ensured all aspects were considered from the

customer's perspective. ING prioritized open communication with customers (Hassija et al., 2024). Regular updates

were provided through various channels, keeping users informed about upcoming features, development progress, and

potential roadblocks. This transparency built trust and a sense of partnership with the bank. The adoption of agile has

yielded significant benefits for ING, translating into a more customer-centric and competitive digital banking platform

(Patel, 2024).

of Agile is its rapid delivery capabilities. By breaking down development into smaller chunks, ING was able to deliver

new features and functionalities to customers much faster. This agility allowed them to stay ahead of the curve and

respond to evolving market demands promptly. Enhanced Innovation and Efficiency, Agile fosters a culture of

continuous improvement and collaboration (Osasona et al., 2024).

This empowered cross-functional teams to experiment and test new ideas, leading to increased innovation within the

digital banking platform (Matcov, 2024). Additionally, streamlined workflows and communication within agile teams

led to significant efficiency gains throughout the development process. While the transformation was a success, ING

This required extensive employee training and change management initiatives. Legacy Systems, Integrating these

systems with agile workflows posed some initial hurdles. However, ING adopted a phased approach and invested in

modernization efforts to create a more Agile-friendly environment. Looking Forward, The Future of Agile Banking at

INGING's success story is a testament to the transformative power of agile methodologies in digital banking. By

prioritizing user needs, accelerating development, and fostering responsiveness, ING has created a digital banking

experience that keeps customers engaged and satisfied (Shi et al., 2024).

1.6. Recommendation

Establishing Agile Practices and Workflows Agile Framework Selection, Several Agile frameworks exist, such as Scrum,

Kanban, and Lean Startup. Each offers its own strengths and weaknesses. Evaluate your bank's specific needs and

choose the framework that best suits your context. Develop a backlog of user stories, each representing a desired

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strategy that includes employee training, workshops, and clear communication about the benefits of agile adoption.

Integrating legacy systems with agile workflows can be challenging. Consider a phased approach, focusing on

modernizing core systems in conjunction with agile implementation. Agile Measurement and Continuous Improvement,

Establish key performance indicators (KPIs) aligned with your agile goals. These KPIs can measure customer

satisfaction, time-to-market, and development efficiency. Regularly review these metrics to identify areas for

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