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Challenger banks aren’t immune to the challenge of rapid consumer change

(Image credit: Image Credit: MK photograp55 / Shutterstock)

More now than ever, customers need their banks to innovate quickly to meet their rapidly changing needs. The industry has witnessed a sharp increase in digital banking, while cash, ATM and branch usage has decreased dramatically.

And so it’s particularly disconcerting to find that, despite significant investment in digital transformation in the banking sector, 41 percent of consumers in the UK, Germany, Netherlands, Belgium and the Nordics have been unable to access some aspect of their banking or financial services during lockdown.

Since the dawn of the smartphone, we have been living in “the Now economy”. Consumers have come to expect that what they want from a service provider will always be at their fingertips, even in times of great disruption.

Now, one could be forgiven for assuming that while conventional banks might struggle to transform their services, digital-first ‘challenger’ banks would be well positioned to capitalize on these seismic shifts in consumer banking.

It’s a surprise then to learn that many challenger banks are in fact suffering significant growing pains as they scale. Data integrations that once worked no longer do. The speed of delivery is slowing while customer demand is increasing. And all these changes are happening at a time of unprecedented changes in consumer behavior in response to the global pandemic.

Many ‘digital first’ banks are finding that they are getting bogged down by the need to manage their systems, with their focus increasingly dominated by infrastructure rather than innovation. Their view of the customer - and consequently the customer experience on which their brand is based - is slipping. Just at the point when customers are turning to them for new and innovative solutions.

Linking with the system

At Jitterbit, we work with many banks and financial service providers. One such client is a challenger bank that offers pocket money solutions to children. During our initial discovery phase, we were surprised by how disconnected and disordered this challenger bank’s data was. One of the key issues we uncovered was that the bank’s customers (parents) and the end users (their children) weren’t properly linked within their systems. Manual processes had been developed to bridge the gap, but over the last year and during a period of sustained growth for the bank, it became apparent that these fixes could not in fact scale as they weren’t automated.

And then, before the team had formulated a way to address the problem, the lockdown happened. With their customer service team now working remote and at the same time dealing with a massive increase in customer enquiries, the problem was suddenly exacerbated.   

Fundamentally, the bank had all the right cloud-based software platforms and tools in place - to use an analogy, all the right pipes were under the floorboard, they just weren’t properly connected. Of their millions of customer records, it transpired during our discovery phase that almost 50 percent were now incorrect. Since the problem had remained unaddressed, the technical debt had grown… and grown.

Now, despite their best efforts, the bank’s heroic customer service team could no longer rely on their customer data or, as a consequence, fulfil their service objectives. The company was now in near-constant firefighting mode, and consequently their ability to innovate diminished rapidly. 

As a result, the bank saw more customer churn and a significant uptick in negative customer reviews. Reviews impact these challenger banks more than traditional banks precisely because the customer experience is one of the main ways they differentiate themselves from the more traditional banking brands. They also tend to attract more digitally-native customers, and they are more inclined to leave critical reviews online and switch if the service isn’t up to par.

Looking forward

Within a matter of months, what was previously perceived internally as a small technical debt within the organization - a few missing integrations, a manual process here and there to fill the gaps - had spiraled into a business-critical risk which now required boardroom-level attention.

The solution for this bank was thankfully painless. In just a couple of weeks and with almost no code required, their systems were fully integrated and automated, ready to deal with any increase in customer demand. Their millions of customer records were migrated, cleaned and aligned, their customer service team are able to delight customers once again and their engineering team have been able to refocus on innovating new features and services.

Reporting across different platforms and solutions was brought together so the board now has a 360-degree real-time view of the company’s vital signs, which bodes well for the future of the bank and its ability to anticipate and meet even the most seismic changes in consumer demand and behavior.  

Looking forward, we still don’t know what the full impact of Covid-19 will be or when consumer behavior will return to what we previously thought of as ‘normal’, if indeed it ever will. One thing we do know however is that the imperative for challenger banks won’t change; they must deliver an exceptional customer experience and continue to innovate, otherwise they’re no longer challenger banks.

What’s required for challenger banks then - and for many other digital-first B2C businesses - is a fresh look at data integration and API management whenever this kind of technical debt becomes apparent - however small it may at first seem to be. Ensuring that systems are fully integrated allows technical teams to stop focusing on infrastructure challenges and instead focus on delivering innovation.

The key to achieving this change is setting a culture where technical debt is dealt with whenever it becomes apparent. This kind of technical debt can often be uncovered by looking within the business for manual processes that ought by rights to be automated. By deploying a low-code data integration platform and API management solution with data cleansing and migration capabilities, businesses can ensure they never lose sight of the customer again. The pandemic has shown businesses across pretty much every industry vertical that it’s no longer enough to say you’re “digital-first”. To survive and thrive, businesses need to be digital-first, not just in their promised customer experience, but behind the scenes - and under the floorboards - too.

Tom Ainsworth, Account Executive, Jitterbit