Like all industries, technology is changing the face of banking. And just like the fields of publishing, music, travel, entertainment and many others, it’s from completely new expectations of customers - expectations that are turning the competitive playing field upside down and radically altering the way business is done.
The digital tsunami is forcing banking to both advance existing sources of revenue and also generate new ones. But how to grow and flourish in the fast-moving digital age? To expand in this increasingly globalised and tightly-regulated environment, players need to start to fully utilise their digital assets and skills to create innovative value propositions for their customers.
The good news is banks have a real opportunity here to preserve and enlarge their privileged position in the value chain line-up by instigating pro-active, cross-business offers and services in real time. But the smart move here is to not just focus on life events as we always have - such as getting married or buying a first home, but also customers’ daily lives. Think of it as an act of looking to piggyback off the smallest opportunity at multiple entry points to maximise opportunity - something that can only happen if we start to use customer data in innovative new ways.
Technology it seems, can literally change the way people behave and interact in daily life. Huge amounts of information, previously unavailable, has opened up new channels - from Big Data to new public sources of open Data. Analysis and processing capabilities have also made remarkable leaps forward, with cloud-based algorithms disseminated via digital networks. The rapid adoption of smart, powerful mobile devices has in turn made this information accessible to users around the globe.
Using a mix of existing tools and technologies such as Personal Finance Management (PFM), data analytics, biometrics, APIs, social collaboration, or geo-location, banks must now seize this opportunity and exploit this data explosion. That has to be by enhancing customers’ everyday life moments by offering pro-active offers and services that boost, simplify or extend them.
Here are some initial ideas; a scenario that could be only five years out. You get a Facebook message from a friend reminding you he paid for dinner last night because you forgot your e-wallet. No problem, one click at the bottom of the message authorises and executes a payment to reimburse Tim without even leaving your social media app.
You enter a shopping centre a little later; having opted in for a service with your bank, you get discounts for all the stores you have visited previously, plus extra-discounts at selected stores if you pay using its new promoted credit card. All this information is available to you as you walk the halls, popping up unobtrusively on your smartphone or wearable, helping you shop in the smartest way possible, getting the right stream of customised, relevant promotions that works best for you.
Back to the future
The customers of today, just like those of tomorrow, however, are already looking for immediacy, agility and service from a financial service provider they know they can trust. Living in a 24/7 connected world as they do, they expect their bank to fit into this paradigm. The information age has truly created informed customers who actively compare offers across different platforms, including social media and collaborative tools. They now see nothing novel in personalised services on demand, transparent and easy to use products and services that can be mixed and matched to what works for their busy life – not your rigid service structure. Banks must take on board the fact that external forces are changing the way things are done, and sometimes even why they are done.
New regulations are underpinning these trends by improving transparency of fees and prices and making it easier to switch between banks, of course. Indeed, customers today are often multi-banked, highly attuned to new alternatives such as crowd-funding and Peer2Peer lending, led by such players as Kickstarter or Funding Circle, today supporting projects and communities they believe are important and can make a change, replacing the bulk of existing, static banks – if we are not careful.
To survive against this new face of competition, banking must integrate seamlessly into the life experience to exploit the opportunities the digital age is sowing. Transactions and interactions need to be straightforward and invisible – more ‘Touch Through Processing’ than ‘Straight Through Processing’.
At the same time core banking products must be developed that are simple, modular and transparent; products that customers can easily understand, products that do not involve complex penalties in the small print, paving the way for innovative value added services such as peer advisory and wallet solutions.
Another key factor is pro-active advice. Customers expect banks to sleeplessly manage and optimise their cash and investments; the winner in the race will be those institutions that never stop raising the customer service bar, with advice delivered in real-time and sensitive to both location and context. The key to this future will be understanding each individual’s banking profile - and servicing it accordingly.
To keep on top of all this and deliver the kind of experience the non-traditional competition will try to offer as well, banks need to adopt cutting edge tools, including multi-channel customer experience platforms, advanced CRM analytics and data-based marketing plus truly open platforms for app stores and APIs to form (and exploit) an ever-extending ecosystem.
But in all truth, all this is just the beginning. Over the long term, banks will actually need much deeper transformation, in terms of both organisation and culture, to really achieve the full potential digitalisation has to offer. Main focus areas here are likely to include talent acquisition, culture and a commitment to technological excellence as a fundamental of doing business.
Banking must continuously work to advance at higher velocities to meet the challenge of the digital age. The promise is that those that do will prosper. The danger is that those who ignore Tomorrow will soon belong to Yesterday.
By Ahmed Michla, Head of Content Strategy, Sopra Banking Software