Banking and personal finance used to be about long-term, face-to-face relationships where trust was earned over years of interaction. Digital is changing that forever.
While face-to-face contact is still important for some functions, online technology has allowed customers to run their financial lives from a computer or mobile device. Even selecting new products and planning for the future can now be arranged through online intermediaries with little regard for brand loyalty.
What is more, E.U. financial institutions are having to open up customer data to one another next year to allow customers to take more control over their finances so several providers can be accessed through a single website or app.
We talked to opinion leaders within the personal finance industry to discover where digital trends are taking the sector.
Paul Riseborough, Chief Commercial Officer, Metro Bank:
The digital trend is to allow a challenger bank, like us, to grow, where a traditional high street bank is cutting back. The difference is, we’re not held back by the huge costs of legacy software platforms and branch footprints. We’re building to where we need to be, not cutting back.
The digital winners will be those who can focus on customer experience. Our app, for example, is streamlined and never tries to sell a customer anything. Huge traditional banks will struggle because they are cutting back on branches, where they used to sell products, and so now try to sell them through their apps, but that just leads to a cluttered, confusing experience.
The great thing about digital is it allows our branches to be more productive, so we can set up accounts and produce cards and cheque books on the spot. For us, digital isn’t just about a hangar full of telesales and admin support staff, it’s about getting that technology into the high street to improve the customer journey. It’s all about modern technology but with quite an old-fashioned dedication to service.
Peter Wannemacher, Senior Analyst, Forrester:
As of today, digital’s impact has primarily been how customers behave and how they interact with financial providers. But we are approaching a breaking point where digital transformation will actually transform banking and financial services.
As such, digital capabilities and services will begin to reshape banks’ business models, unique value propositions, brand positioning, and their place in customers’ ecosystems.
The huge challenge bank CMOs are facing is disintermediation, a dark potential future where bank brands are no longer relevant in customers’ day-to-day lives. Disintermediation, in turn, leads to commoditisation. Already, a third of customers think “all banks are basically the same”—which will make it impossible for a bank to see sustained, long-term growth.
This is where mobile is a big opportunity. Banks are doing a good job of using mobile to serve customers, but they’re not actually differentiating through mobile experiences. Banks and bank CMOs have done a solid job extending their products and services on mobile devices, but extending existing products and services is no longer sufficient—leading digital companies are going beyond this by using digital to evolve their businesses.
Adam Oldfield, Vice-President Financial Services EMEA, Unisys:
Banks are facing up to the challenges of next year, in which they are facing ultimate double whammy of a new regulatory landscape and changing customer behaviour.
In terms of regulation, they need to be prepared for the General Data Protection Regulation (GDPR), which, from May 2018, brings in huge fines in the E.U. for security breaches. Plus, they’ve also got to revolutionise their IT to support open banking. PSD2 (Revised Payment Service Directive) means they will have to open up their customers’ information, so they no longer have complete control over their account data and payment services.
These are both major challenges because they’re often dealing with legacy systems, whereas the new challenger banks are not. That becomes an issue when you note how people don’t see financial services as a loyalty product any more. They’re happy to go on an aggregator service and pick the best deal, they won’t automatically stick with what their existing bank offers.
Security is going to be a massive priority—not just in securing systems, but also not placing too many barriers in the way of customers. Banks are going to need to adapt to providing quick access, maybe a thumb print, for balance checks and then require an extra level of security to make account changes and payments.
Fiona Blades, President And Chief Experience Officer, MESH Experiences:
We’ve been conducting a lot of research into customer experiences, and they expect a seamless experience. The problem with the banks is they can’t always provide it. They still work in siloes, so not all customers’ information is available on the app, or they can’t do everything they want to. Customers often have to go in to a branch or call in for a more complicated request.
The big challenge for financial services is to improve the customer journey so they are always in control of an easy-to-use app because an improved customer journey is what will now differentiate banks.
One of the ways of improving experience is speeding up transactions. We’ve been finding that British customers get concerned if it takes longer than an hour for a payment to go through, while, in the States, it can take a couple of days. Clearly, digital is raising expectations among customers that banking should happen in real time, and that’s a serious challenge for traditional providers.
Luke Griffiths, Vice-President And General Manager, Klarna:
Digital technology has given rise to the fintech sector, which is all about providing greater consumer choice and simplifying processes. Letting the customer pay and bank under their own terms is a huge benefit, and provides a flexible and modern alternative to more traditional models dictated by banks and credit card companies.
Within a couple of years, banking will develop into a platform on which specialised third-party players will operate. Through co-operation, not competition, fintechs can give banks a great competitive edge, securing their long-term market position and enabling them to offer their customers the very best experience, products, and services.
But there are potential barriers to this collaboration, and big questions still need to be answered. Who owns customer data? Who should control the customer’s access to financial services?
It’s only when fintechs and banks work together to share expertise and solve problems for consumers, can we create a real revolution in customer experience in banking.