After rapidly adjusting operations at the start of the pandemic and accelerating their digital transformation roadmaps, banks are left wondering: What happens next? And what did the acceleration mean for banks’ digital strategy?
Banks need to shift their mindsets from emergency response toward using digital technologies to boost their relevance to their customer’s lives. Blended banking will become the norm. Although Covid-19 will be with us for the foreseeable future, people have returned to shops, restaurants and theatres. Similarly, customers are returning to bank branches, but in lower volumes and for different reasons. The proliferation of digital banking means customers no longer need to visit a branch for a transaction. But many retail and business customers will still visit a branch to receive advice or to buy a financial product. And although most banking journeys start online, many are still completed in branch.
Banks must recognize this and provide a consistent customer experience across channels, with human support for digital interaction and digital tools that augment human interaction. In practice, this means empowering customers with an engaging digital experience that can continue in branch. Many banks already acknowledge this evolution: They are repurposing branches as advice centers, with less emphasis on over-the-counter transactions. In addition, banks can harness modern tech devices, like tablets, to support the in-person experience. But to truly elevate the customer experience and increase engagement, banks must also harness the power of data.
For many banks, data and analytics have great untapped potential to drive the next wave of innovation to increase customer engagement. With a wealth of customer data at their disposal, banks can gain a deep understanding of customers behavior, goals and financial aspirations, and deliver personalized experiences in a way that was never before possible.
In practice, big life events have financial consequences — buying a car, getting married or having children — but the reality is that small transactions and spending habits can also provide valuable clues to a customer’s behavior. Careful use of data and analytics allows banks to help customers align their financial services closely with real-life events. They can also use data to help their customers gain a deeper understanding of their own financial standing, providing recommendations to optimize the use of cash. For example, a customer with surplus funds may be advised to pay down a mortgage or increase pension contributions rather the leave money on deposit.
Banks can also do more for commercial customers to evolve beyond transactional banking to helping them run their business more effectively. Once again, data and integration are key. Providing commercial customers with up-to-the-minute aggregated cash positions and forecasts gives them a deeper understanding of their cash use, liabilities and commitments. As banking becomes more open and connected, commercial banks can become the heart of an ecosystem with many participants. Banks must embrace modern technologies, boost automation and integration and ultimately adopt a fintech approach to finance.
A Fintech-First Approach to Finance
The pandemic has accelerated banking’s shift to a technology business. Banks that ignore this will be left behind. To attract and retain consumers and business customers, banks need to eliminate guesswork by harnessing technology and data and offering customers what they want, when they need it.
Banks have much to learn from big technology: Amazon.com generates around 35% of sales from recommendations, while 75% of what’s streamed on Netflix is because of its suggestion algorithm. In the digital age, consumers welcome recommendations, nudges and insights — and are usually happy for trusted suppliers to use their data to personalize their digital experience. Banks must adopt a more entrepreneurial approach to customer engagement.
Retail banking: For a long time, bankers have designed banking experiences based on customer journeys. Now is the time to support customer life journeys by proactively supporting customers throughout their entire lifecycle — from large, life-changing decisions as well as everyday spending and budgeting.
Commercial banking: Banks must acknowledge that millennials are more digital savvy and entrepreneurial than any previous generation. Many current retail customers will start businesses and become the commercial customers of tomorrow. Many will need financial advice, and all will need banking.
With fintechs and challenger banks growing in scope and number, now is the time for incumbent banks to act. The digital age is here to stay.