The advent of open banking combined with emerging technology is threatening the dominance of traditional banks. Challenger banks are entering the market at a faster pace and are introducing new levels of convenience. This trend may just prove to be a new and compelling strategy to attract and retain customers.
Traditional banks have inherent advantages over challengers; but these advantages can only remain so if the banks properly leverage them by completely re-thinking their operating model.
Today’s Customer Expectations
Would you take the time to swipe and enter a PIN if you could instead simply tap and go? Would you redeem your reward points for a plastic gift card if you could just pay with points at the point-of-sale? Likely not. Per CustomerCX.com, the 7 attributes of the modern-day consumer are:
The Changing Landscape
According to a 2017 Accenture Research report, there needs to be a redefinition of the banks’ interaction model with their customers. The report explains that:
Most recently, tech giants such as Google, Apple, Facebook, Amazon and Alibaba are also encroaching into the bank value chain. Amazon is reportedly in talks with several financial institutions about creating a new bank product not dissimilar to a chequing account, but one that appeals to a young, digitally active market.
Facebook has created its own crypto-currency, known as Libra, which is “backed by assets and supported by more than two dozen companies ranging from Visa and MasterCard to Lyft and Spotify, bringing the heft of the world’s largest social network to efforts to transform financial services.”
The tech giants’ mastery at delivering seamless customer experiences and addressing consumer needs combined with their ubiquity across geographical and digital boundaries give them an unfair advantage over most industries that they choose to infiltrate. If these tech giants successfully enter the financial industry, they will be able to overlay years of customer interactions with purchases; giving them the lead to gain a truly holistic customer view.
A well-known example is Apple’s widely known foray into the credit card space with the launch of the Apple Card in the US. The Apple brand through the years has become synonymous with superior customer experience. Let’s have a closer look at what features Apple have incorporated into their card product to win over today’s consumer.
Challenger Bank CX
Challenger banks are building their products and solutions on virtually the same “blueprint” – one that focuses on seamless user experiences and technology-driven features that add levels of convenience that were simply non-existent in the not too-distant past. A scan of the emerging challenger bank features across the globe highlights what customers can expect in the near future.
It’s not over yet – traditional banks still hold the advantage (for now)!
Traditional banks currently hold an inherent advantage with the size of their customer bases, the level of customer data they possess and the breadth of their products and services. To protect their position and avoid market share erosion, traditional banks need to rethink their operating model.
Which parts of the operating model need to be re-imagined for the traditional banks to stem the tide?
Streamline Business Processes
Traditional banks have typically operated in siloed environments. This makes it challenging to provide seamless customer experiences; further increasing their vulnerability to challenger banks. Traditional banks must re-engineer their structure to create an integrated view of their processes, systems, data and products. Partnering and integrating with a digital banking hub is one way to address this, and one that is increasing in popularity.
Addressing the challenge of siloed data will allow traditional banks to leverage the significant amounts of customer data they possess to personalise their engagement strategies. The fact that higher levels of personalisation increases customer engagement levels holds true in the Banking industry. Not only are customers’ financial situations and needs unique, they also evolve over time as their circumstances change. Real-time behavioural analytics and predictive modelling can inform customer lifecycle and engagement strategies that personalise customer offers and experiences; however, a well-structured data model is a prerequisite to this.
Digital banks offer simple product portfolios to counter complex product ranges of traditional banks. Complex portfolios are not necessarily a bad thing – but what is important is the ability to be able to provide targeted products that resonate with the customer. This can mean having more product variation in the arsenal but recommending only the most relevant to each customer. Taking that up a level is empowering the customer to design their own banking suite based on their individual needs.
In retail and commercial banking, between 40-60% of operating costs are made up of their branch network, call centre and monthly paper statements. These banks need to optimise their distribution and service channels to drive high value traffic to branches whilst driving non value-add traffic to various self-service channels. Leveraging new technologies to deliver more seamless product applications, security checks and customer support are tactics that some traditional banks are deploying.
In a 2019 Kognitiv-commissioned consumer research study of reward cardholders in Australia, it was determined that the number one reason cardholders had for selecting their card product was its rewards program.1
So, is convenience really “the new loyalty” in banking? Signs are certainly pointing towards that trend; however, banks that learn to properly leverage their inherent advantage – market ubiquity, breadth of product/services and relative trust (at least from a security standpoint) – and use that leverage towards enriching their loyalty offering and lifting their CX standards stand a good chance of turning the tide. A healthy dose of re-imagining the way they work and a conscious effort to pivot to the customer is what’s required.
1 2019 Kognitiv-commissioned research on the Australian credit card industry with over 1,000 respondents