The impact of the financial crash of 2007 on pensions, mortgages, savings, investments and jobs is still being felt by millions of people around the world. The traditional banks which they had trusted for generations to look after their hard earned money had let them down. While they had previously been made to feel valued, many realised that their banks were actually placing shareholder profits above the needs of the customer.
For years, customers of traditional banks had to put up with a relatively poor experience. It isn’t that long ago that most High Street branches were only open on weekdays during office hours, and closed for lunch, meaning it was very difficult for most ordinary people to visit them. Online and mobile banking services developed slowly compared to digital trailblazers in the e-commerce, entertainment and transportation industries.
By the early part of the 21st Century, many traditional banks had become complacent in their treatment of customers. After all, customer churn rates were relatively low and an individual’s choice of bank was generally dictated by their proximity to a branch, so options were limited. But the aftermath of the credit crunch and the rise of APIs has been the biggest wake-up call that the retail banking industry has ever had.
So-called ‘challenger’ banks and other innovative financial service companies began to spring up, giving digitally engaged consumers many more options than they had had before. These customer-centric services and products promised transparency, fairness and better integration into our daily lives.
In a world where the traditional banks can take nothing for granted and competition is fierce - helped by the updated Payment Services Directive (PSD2) regulations due to come into force in January 2018 - there’s a need to create cutting-edge banking experiences that delight customers. This will drive innovation in retail banking at a pace we have never seen before. Here are five changes to the way that we will be using banks in the near future:
While banks in the past have taken something of a one-size-fits-all approach, expect services to become much more tailored to your individual needs in the future. Behind this development will be data - or, rather, the more intelligent use of data - by banks. From the way we spend our money to the things we actually buy and the devices we use to log in to our account, banks can use data to build unique profiles of their customers. There are also external data points that can be used, from social media profiles for example.
Of course, no bank should be using any of this data without the customer’s explicit consent, but the potential for highly personalised banking services should be a strong draw for many people. For instance, who wouldn’t appreciate discount offers on items you buy regularly sent directly to - and redeemable through - their smartphone? Another good example could be of a customer who had just purchased a car, whose bank could then source the best insurance deals without even being asked.
As well as using data, banks forging relevant partnerships with other financial service providers in order to offer any type of product - overseas money transfers, mortgages, credit cards, budgeting apps, accountancy software and so on - that a customer may require will be common practice. Whatever we need, our bank will be able to seamlessly connect us with it - whether it is a product that the bank offers in-house or through a third party. As far as banking customers are concerned, the future is optimised - not standardised.
As well as being able to anticipate and service our needs through the intelligent use of data and relevant partnerships, the bank of the future will also be able to make things happen a lot faster. If, for example, we want to apply for a new product such as a loan or credit card, the whole process will be as near instant as possible. The bank already has your data, so there is no need to fill out a form by hand - the digital form will be pre-populated. Your identity can be verified by using your smartphone to scan a document such as your passport, and using facial recognition through the smartphone camera. The bank can get your credit score by using APIs provided by the likes of Experian, and approvals can be granted straight away.
Banks that are undergoing the costly but necessary process of digital transformation will be able to serve customers in a much better and more coherent way. Whereas banks’ organisational structures have been somewhat disorganised in the past - with branch services, telephone banking, ATM services, online and mobile banking existing in separate siloes - the bank of the future will be different. It will be able to link customer data much more logically, access it instantly and use it intelligently to create a consistent service across all of its channels.
3. AI & chatbots
There are a number of banks already using chatbots to service customers, using them largely to answer simple, standard queries. However, these chatbots will improve with time, learning how to deal with more complex issues and requiring less human intervention on the bank’s side. This is good news for customers, as they will be able to get round-the-clock help and support, and good for the bank as it allows it to streamline its operations.
However, the robots aren’t going to be taking over just yet. Artificial Intelligence (AI) will also be used by human customer service representatives too, and it will help to create a perfect blend of efficiency with a human touch. While the interaction can be led by the customer service rep, AI systems will listen to or read the customer’s question and prompt the rep to respond in a certain way, leading to a faster and - crucially - a more consistent level of customer service.
4. Connected objects & biometrics
Speech recognition systems have come a long way in recent years, driven by the voice assistants in iOS and Android smartphones as well as Alexa, Amazon’s personal assistant. There is also potential in these devices for banking and financial services too, and we could find ourselves operating some functions - such as checking balances and product research, perhaps even initiating payments - through Alexa or Siri. After all, it’s already possible to order pizza this way.
Voice recognition systems are also improving in security terms and will increasingly be used as part of smooth, fast security systems that will let customers quickly access their account and authorise transactions. Other biometric methods such as iris scanning and fingerprints - again, in many cases already being used - will become more common too.
5. Fewer branches, more ATMs
The ATM might be 50 years old now, but it still has a future. While we’re making slow but steady progress toward a cashless society, some might say that the ATM’s days are numbered. But in reality, it’s more likely that the ATM will remain, but with an increased number of features and functions.
Some ATMs already let you pay in cheques, or make charitable donations or even top up as Pay-As-You-Go mobile phone. In future, we could be open accounts or applying for new products and services through the ATM too. It’ll become a one-stop shop. However, it’s likely that branches will continue to close down at their current rate, with many of their existing functions replaced by the ATMs.
Sophie Guibaud, Vice President of European Expansion, Fidor Bank
Image Credit: Centtrip