Most of us will agree that, to achieve growth in a rapidly globalised, increasingly regulated world, banks need to turn to digital to create a whole new wave of value propositions for their customers.
The challenge; how to do this? Our take is to stop what we have been doing since retail banking was invented in the 19th century and focus on not just milestone customer events (marriage, buying a home, having a child) but incidental moments in their daily lives. And in so doing, seek to add banking value in many micro-stages in every 24 hours.
What’s more, this can only be done by using customer data in a truly new and innovative fashion.
To make this concrete, let’s visualise a customer’s daily interactions in one typical day in 2019. Meet Mary Jones, who’s just got a Facebook message from a friend reminding her she paid for her taxi home last night as Mary had left her e-wallet at home. Mary clicks on the button at the bottom of the message, paying back the money without even leaving the social media app she’s in.
Twenty minutes later, Mary’s in a shop, looking at the latest discounts on her new immersive wearable headset. Loyalty coupons and rewards pop up on her phone, throwing a last minute extra incentive of an extra 5 per cent discount if she pays with the bank’s new branded credit card tied to highly personalised promotions.
An update is flashed on Mary smartglasses; according to agreed e-recorded and agreed budget plans, she has 100 New Euros left to spend on personal items this month. Her attention is attracted to a new second generation smartwatch, at 40 per cent off. Unfortunately, that’s over budget plus the discount only lasts until tomorrow. Unprompted, a short-term consumer loan is offered at a 3.75 per cent rate – as bank and retailer instantly collaborate at the back end to generate the best offer. Mary accepts the e-offer, and everything is recorded and e-signatured into action straight away.
Banking needs to change – or customers will find new banks to work with
This is not science fiction. Customers are looking for this proximity, agility and speed from a financial service provider that they can trust – an important facet in the wake of the financial crisis. They are also more connected than ever, expecting this connectivity in all aspects of their daily lives, including their finances. Better availability of information equals better-informed customers that look to compare offers across different platforms, including social media and collaborative tools central to the modern-day customer experience – and as soon as someone develops an app to do it for them, off they’ll go. At the same time, customers are increasingly multi-banked, ever-more interested in new alternatives like crowdfunding and P2P lending to support projects and communities they value. And there’s no question that customers don’t like new technology; according to Barclays, while it took 13 years to get two million customers using Internet banking, it took just two months to reach that number for mobile.
In other words, all this is already starting to happen – perhaps not as seamlessly integrated as in our thought-experiment, but it’s really not that far off at all. New regulations are also, of course, definitely supporting these trends by improving the transparency of fees and prices, the ability to easily switch between banks, and so forth.
That’s why our customers are already sure the next battleground in banking is these brief, everyday moments in time when business opportunities pop up that need to be exploited, as in our brief example in Mary’s day. Banking activities will be increasingly integrated together, with customers moving from payments to lending to PFM in an instant, with behaviour always seen as goal-driven (e.g. buying a smartwatch) from their side, rather than banking process-driven.
But of course, it’s not just banks that have spotted this opportunity – which means while they definitely have the opportunity to retain and expand their privileged position in the value chain by providing proactive offers and services, new competition is waiting on the sidelines to take advantage, too.
To win, banks must integrate seamlessly into the life experience; transactions and interactions must become smooth and invisible and be as simple as possible, moving from the ‘Straight Through Processing’ of today to the ‘Touch-Through Processing’ of tomorrow. Integrated platforms also facilitate access to products and services beyond financial services, as well as to peer-to-peer advice and activities, constantly engaging and creating value for the customers.
Core banking products must also become simpler, modular, and transparent. Customers are looking for products they understand and they can change easily, without penalty, as their personal situation evolves. New value-added services such as wallet solutions or peer advisory can then uplift those products and should be among your first priorities, incidentally.
Another crucial element is proactive help. Customers expect banks to help them manage and optimise their cash and investments. As a minimum, should money become dormant in a low-interest rate account, banks should spontaneously suggest transferring it to a higher yield account; the value will be in retaining the customer instead of passively holding on to dead money like this as we move forward. Suggestions should be accompanied by a clear simulation of expected gains and based on the customer profile.
Similarly, customers expect to be informed of unnecessary fees or redundant product combinations – which should be fully automated; think a kind of ‘Google Now’ in banking. Again, everything needs to be offered in real-time and take account of context and location.
How can banks evolve to meet these new challenges and expand their role beyond pure financial activities?
To achieve the agility and openness necessary to do all this, banks need truly modern tools, including multi-channel customer experience platforms, advanced analytics for CRM and marketing and open platforms for app stores and APIs.
Such a platform will be the best way for banks to start building new business models, co-operate with new players, and adapt to new customer expectations and behaviour. This is going to be the best way for banks to win significant results in securing market shares and growing their business.
Over the longer term, though, a far deeper transformation of culture and organisation will probably be required to achieve the full potential of digital and connectivity. In particular, success will be achieved by those who make full use of data to drive their business and marketing strategies and who pursue innovation beyond today’s milestone-based banking practices.
Ahmed Michla, Head of Content Strategy at Sopra Banking Software