Can The Established Bank Fight Off The New Tech Contender?

By Paul Sweeney | 17 December 2015

Is it too strong to say that the retail banking industry is under siege? Look at the evidence: today’s modern, wired-up multi-channel customer expects a consistent and seamless experience from their bank, whether in the branch, on a mobile device, or online.

If the bank fails to satisfy those expectations, the chances are that incoming “challenger banks” – or perhaps more likely rivals, tech firms with no legacy to support and who are connected to the consumer in multiple other ways – will be the ones the consumer turns to.

What are the drivers encouraging digital innovation? We hear the same thing over and over; the velocity of market change, the sheer speed at which an offer ages and customer expectation shifts. Banks feel great pressure to be able to respond to the market on all fronts. The brands that are properly data-driven are the ones that are really getting behind the move to digital, because the data shows them the rate of change that they are really facing.

The acid test of the agile pilot?

It’s a fight made even more complicated by the fact that banks are wrestling with several challenges constraining their abilities to become more digitally innovative. The question clearly arises, can the banking sector weather the storm or not?

Let’s look at the evidence. Clearly, in the vast majority of cases, the UK financial services firms are at the very start of their digital transformation journey. They’re trying to figure out the right balance between offering ease of use and building innovative, customer journey-based products based on context. On the other, they have the problem of delivering distinctive and compelling customer experiences in a space where most products and services are broadly perceived by customers to be the same. 

We know about these issues as we work with a lot of banking companies walking that very tightrope. We find that our banking and financial services customers tend to be addressing all this in a number of ways. There are those that are very aggressive in their pursuit of change, while there are others leaning more to actions that scale safely. (A great acid test, by the way, to work out where you are on the scale is the ability to run quick effective pilots.)

The devil is in the silo

But really all the different digital postures on that spectrum are more a reflection of their existing internal structure and culture than anything else. Some banks are super innovators, looking to try every promising idea, whereas others are far more cautious. It’s instructive to compare this sector with retail, by the way; if a customer in retail pilots a new technology or approach and it doesn't work (by which we mean it doesn't drive sales or stop churn in any significant way), then it's dropped very quickly. Banks on the right path look the same – they’re trying to think like retailers, and that makes a lot of sense, we think. Top management have made it plain that this is a truly digital transformation initiative, and that if the programme you are designing or promoting does not further the digital agenda, it's not getting airtime.

What really are the obstacles hampering innovation? Lack of focus is the short, perhaps a bit brutal, answer. There is great value to be gained by focusing on the many simple things you need to do in order to address the big challenges. Unfortunately the changes and actions required often cross-organisational boundaries, resulting in endless negotiations, politics and delays. Many are really siloed data problems, which always ends up bedeviling the progress of your digital and mobile strategy.

In fact the way change is managed is turning out to be the biggest obstacle to digital innovation in many companies. We appreciate that companies have systems, processes, standards that they must work within, of course. But unfortunately that locks them into slower innovation cycles. Doing things better and faster is going to require much more effective collaboration strategies.

Never stop moving

Here are our recommendations to help you start doing just that. First always ensure everything you do is evaluated from the perspective of the customer’s experience – whether it's trying to find out what their bank balance is right now, or what it might be by Friday. In other words look to build in as much predictive capability into your systems as possible, always grounding them in the reality of a customer experience framework.

Second without a shadow of a doubt, mobile accelerates the real-time aspects of digital while simultaneously redoubling the need for simplicity in design. Doing something on mobile is not the same as on a desktop. If it was, Hailo would be an app with just one number which you press for a cab – which is also a prompt to remind you, lest you had forgotten, that your banking app experience will always be compared to simple consumer apps like Hailo.

Finally never stop actively looking for ways in which asynchronous communications can be used in conjunction with real-time data. This has tremendous potential; for instance, we are seeing 100% year-on-year growth in customer take up of products that leverage real time data linked to ‘right-time’ contact.

Put it all together and your bank doesn’t just have a fighting chance of beating off the contender challenge: you’re going to end up with an even stronger market share.

By Paul Sweeney, Chief Product Officer at VoiceSage.

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