Incumbent retail banks are struggling to properly utilise their customer data and provide better experiences for users compared to challengers entering the market with strong data management capabilities. That’s according to Andrew Beatty, senior vice president of global banking solutions at FIS, who believes “conversational banking” is the future.
“You need data to make all those [customer] decisions, insights, and recommendations. That’s where banks struggle today,” says Beatty. “Traditional core banking platforms are not open and significant investment is required to open up these old systems so that all of the new technologies now sat on top [of the core] can get access.
“[Banks] have to invest in technology. They have to invest in something which allows them to talk across their organisation via an omnichannel framework, or with an API enablement layer across all their channels,” says Beatty. “A really good example: online account opening is a big thing right now, being able to open an account quickly. There is always the possibility that you could fail because there’s some legitimate reason why you as a consumer need to be referred to someone else. That needs to be transitioned smoothly to someone, so that you’re not being asked ‘tell me about all the data that you just entered’.”
A “frictionless transition” between engagements points – providing customers with a proper omnichannel banking experience – will be important in the future, he adds. “Creating a new channel and being able to plug it into an existing ecosystem, where it will allow a user to move between interactions without having to re-input data or answer the same questions will be crucial. If you don’t implement that properly then you’ve just created another monolithic silo in which a customer can get stuck.”
According to a February 2019 study from Censuswide and Five Degrees, 40% of challenger bank personal customers reported an instant bank account setup, compared to 37% of traditional bank users. 95% of respondents said that they still hold an account with a high street bank, while only 11% said they would look to take out a mortgage with a challenger.
While challenger banks have positioned themselves as the kings of customer experience, there is still a chance for incumbent banks to gain ground, says Beatty. “You can walk down the high street and ask someone if they have an account with Monzo and they will say ‘yes’, and then if you ask them if they still have an account with an incumbent bank they’ll say ‘yes’. If you speak to some of the challenger banks they will say there is still a need [for customers] to have both, as they often have broader needs than the challengers can provide. Traditional banks have a great opportunity right now, but they need to modernise their systems and their customer interaction strategies to personalise them more.”
In February, UK consumer group Which? called on the UK government to appoint a new regulator aimed at protecting consumers’ access to cash and bank branches. The group claimed having access to both is “still a necessity” for 25 million people in the UK. It warned that the UK “risks drifting into a cashless society” that could “shut people out of paying for local goods and services”.
“Banks need to educate their customers on the digital experience, and they’re doing that,” says Beatty. “I don’t think any of them are shutting down branches and telling customers to fend for themselves. We’re seeing a transformation in interaction, especially with branch networks. There’s investment in slimming it down and making it something different, perhaps revolved around digital experiences. Yet, banks who exclude one segment of their customer base to drive towards a younger, more digitally-enabled one are making a foolish mistake.”