Banks to move from digital to invisible services

EY, RBS and The London Institute of Banking & Finance say the future of banking will revolve around financial wellbeing

By Leanna Reeves | 7 September 2020

As the new generation of customers increasingly relies on tech, expectations from the services that banks offer are also expected to change – particularly as Gen-Z and millennials focus in on financial wellbeing.

“Gen Z and new consumers in the marketplace want to put so much trust and faith in [artificial intelligence] (AI). We are so used to curated services in all aspects of our lives – from Amazon to Netflix – in which they all know what I want before I do. Banking right now is spray and pray,” said Jamie Broadbent, head of digital and innovation at RBS, at MoneyNext summit in August.

“People expect that their bank is a curator of content in the same way – that we’ll be able to service the decisions that customers need to make and keep all the noise in the background. As much as we’ve gone from physical to digital in the last ten years, the next ten years will go from digital to invisible banking.”

While most banks now offer categorisation of spending, the next move will be the categorisation of novelty to enable customers to start saving whilst analysing their behaviour, according to Broadbent.

Niall Corrigan, head of digital and CX at EY Financial Services, believes the future of banking for the new generation will revolve around financial goals and wellbeing.

“It’s around goals, it’s around behaviours, it’s around long-term financial wellbeing. The next wave that we will see is the connection of the data into mass-market tools that enable customers to start forecasting further and setting goals and objectives – and understanding their behaviour into their spending that affect those goals.

“We’ve retrenched from advice and we’ve gone into transactional banking. We need to find a way to get the advisory tools – whether they are digitally augmented or humanly assisted – out in the mass market,” he added.

The new generation of consumers and the digitisation of banking services have created a disconnect from the spend, according to Helene Panzarino, associate director, Centre for Digital Banking and Finance at The London Institute of Banking & Finance.

“There is a physical disconnect of what money is and we owe it to this generation to give them the education that we had previously,” she said on the panel.

Above all, the 2007-2008 financial crisis triggered a change in customer expectations as customers looked to preserve further cash while trust in banks declined.

“The perfect storm was created that brought us to this more demanding, more usage-based, less loyalty based, more personal desire to have financial products and services. When you add to that Open Banking, the [Second Payment Services Directive] (PSD2) and then you add another layer of coronavirus – all of that has combined to make people aware of the fact that they are personally owning their data and they can get access to that data,” said Panzarino.

“In 2008, expectations for banks at the time weren’t high. Banks were amongst the world’s biggest companies and they were expected to turn out money and to keep people’s money safe.

“And then there was that period where keeping people’s money safe was in jeopardy for a little while. We’ve now had this shift where banks need to serve a societal purpose. People have looked at banks and said, ‘you need to have a reason for being here and it’s not just to make a profit’,” added Broadbent.

The coronavirus pandemic has also strengthened the need for consumers – both individuals and corporates – to rely on their bank for their financial wellbeing.

A study conducted by the Association of Chartered Certified Accountants (ACCA) and the Corporate Finance Network (CFN) that closed in July revealed that 29 percent of SMEs made their credit terms more favourable to boost their cash flow while 5.4 percent of SMEs have decided to liquidate.

With customers rendered financially vulnerable from the pandemic, providing them with a better understanding of their finances should be the next move for banks.

“Customers aren’t crying for customer experience; it’s meeting the customer expectation. The role of the bank is not just to empower a customer through digital and self-serve, it’s to empower a customer to be able to manage their finances and improve their financial literacy,” said Corrigan.

Corrigan also believes new products should emerge combining both the physical services that traditional banks offer and the digital.

“The consumer base that banks have today isn’t the consumer base that banks will have tomorrow. Most people are multi-banks. There has to be a shake-up of what the products are and how do they respond to the ecosystem,” he said.

 

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