by Mike Wood
‘European Digital Banking Forecast’ by Forrester Research (*) suggests that technology has transformed financial services, that online and mobile banking are widespread, and will continue to grow over the next few years. Digital banking is far more comprehensive than simply automating and optimising processes – it’s a case of business transformation to shake up existing ways of operating and thinking in order to better support customer demand.
Organisations across many other sectors are already doing this and being disrupted by start-ups with new business models and innovative ways to engage with their customers. Take Uber as an example – it is simply an app company that provides a taxi service without owning its own vehicles or directly hiring drivers. Yet it is disrupting the entire taxi industry one country at a time. Banks too are starting to follow the digital path with the likes of Axis, Starling, Fidor and Atom Bank all planning to bring disruptive business models and innovation into the UK market this year, and with companies like Venmo bypassing financial services firms in the payments space.
Give customers what they want
Today’s digitally savvy customer doesn’t have long relationships with one particular bank, they want frictionless, efficient banking. With the seven-day switching regulation now in force, banks need to step up to the new digital revolution or risk obsolescence. For most businesses, this has a significant impact, calling for continuous improvement and innovation to drive the digital agenda that their customers crave.
This means that banks need to create greater customer value by utilising the information they have at their fingertips to offer greater intelligence and bespoke services to customers. This could include intelligent budgeting, frictionless authentication, near real-time loan applications, omni-channel customer services, simplification of complex processes such as mortgages, or even secure document storage in digital vaults.
Be digital or get left behind
With evidence all pointing to the world going digital, it’s more important than ever for banks to keep up – and get ahead. As we are already starting to see, the future bank might not have cashiers. In fact there might not even be physical stores at all. Banks need to plan now to transform their business model to ensure they are better equipped for these monumental shifts when they happen.
Through gradually transitioning into a digital environment through offering services via apps, providing services via tablets in branches, and interacting with customers via social media, banks will be better prepared for the future. However, if a digital first approach is poorly planned and executed, and does not provide a seamless, connected user experience across all platforms, it is highly likely that it will do more harm than good. Customers will become annoyed, unengaged and will ultimately take their business elsewhere. That is why digital really is a case of sink or swim for the banking industry.
Frictionless banking without jeopardising security
Many of us are now fully accustomed to the contactless world and the joy of ‘tapping’ our bank cards on a reader to enable a simple, low value transaction. Despite these improvements to card and mobile transactions, digital banking is not keeping up.
In most cases, when trying to access your bank account from a digital device, you still need a PIN number, a password or answers that you submitted to memorable questions, such as your favourite food or your first pet’s name. These are the traditional two factors of ‘something you have’ and ‘something you know’ and from a customer experience perspective in an ever-connected world, it’s less than ideal.
Multi-factor authentication – including the use of biometrics to allow customers to access and manage their accounts and engage with their bank – offers a huge opportunity to reduce the friction of modern banking, and therefore provide the smooth experience that customers increasingly expect.
The future of data-led banking is here
Today’s customers will continue to become more and more discerning. We’re dealing with tech savvy individuals that have no loyalty, want choice and expect 24/7 service. In order to ready themselves for the future, banks need to think about what customers want, using the vast amounts of data they hold to turn it into actionable insights, and evolve how they operate accordingly.
Continuing to target only the traditional customer isn’t going to be enough anymore. They can’t forget about the older generation of customers, but they must adapt to ensure that their customers’ needs are met across all personas. This includes the digitally savvy generation Y who want digital interaction, and the traditional customer preferring to speak to an assistant in a physical branch environment. Let’s not forget that there are also combinations of both customer needs at different stages of the sales cycle, who demand a true omni-channel experience.
Banks have an overwhelming amount of data at their fingertips so why not use it to their advantage to address this challenge? Cross referencing data held about customer spending habits, for example, can be used to offer services such as intelligent budgeting – offering advice, tools and assistance to individuals to manage money and avoid the increasingly popular pay day loans, as well as providing benchmark comparison. Banks could look to release money to a customer on a weekly basis to ensure their spending is managed throughout an entire month.
Banks should also look to simplify services for customers by using data to research typically complex items such as mortgages. Mortgages are inherently stressful, complex and a huge expense – they’re an unknown entity for many and so by providing greater visibility and document exchange through digital self-service for example, consumers will receive a much improved and less stressful experience.
It is clear banks are still falling behind other industries when it comes to service and innovation, but by taking steps now to use the data they have at their fingertips, really thinking about what the digitally savvy discerning customer wants, and being brave in offering new services, banks can get ahead of the curve. The future of banking is here.
(*) https://www.forrester.com/European+Digital+Banking+Forecast+2014+To+2018/fulltext/-/E-RES115988?docid=115988
The author Mike Wood is Business Development Director at Unisys.
