As the world becomes more digital, consumers are getting accustomed to instant communication, one click service and real-time contextuality. While bank branches may not vanish instantly due to changing consumer expectations, banking can no longer follow branch-centric models. Instead, the ‘Bank of the Future’ has to represent an omni-channel, client-centric, self-directed digital model.
The foundation of these changes is caused by changing consumer demographics and expectations. Oracle reported that the world’s largest demographic are now millennials. Born after 1980, these customers have grown up in the era of Facebook and Amazon; an era of instant communication, one-click purchases and 24-hour delivery. If a supplier or business can’t provide a service, they don’t wait – they find someone else who can.
Most organisations recognise that digital customer engagement is the way to respond to the changes in the industry. Key services that are among the most important to adopt, as noted by the respondents in the Oracle report, include mobile payments and real time data synchronisation, spend analytics and even digital advisory services. Source: Oracle, 2015. Banking is changing…with or without the banks.
Why then are there so many banks who are yet to develop a real-time, digital customer engagement offering when there is an acknowledgment of the importance of this capability? Oracle states that the banking industry’s defensive mindsets and the old legacy systems are barriers to omni-channel engagement.
Is Delivering The ‘Bank of the Future’ Possible Then?
While we can’t change the defensive mindsets of some banks, for those who would like to succeed in this challenge of becoming the ‘Bank of the Future’, McKinsey suggests that banks should be focused on implementing the following digital capabilities:
Use data-driven insights and analytics holistically across the banks
Access to large quantities of transaction data, underwriting and custom-scoring customers for creditworthiness, understanding and managing through credit and economic cycles – these are unique assets, skills and capabilities that banks have built and leveraged over centuries. But now the large-scale availability of new and big data (and the fact that banks no longer have a monopoly on such data due to open APIs implemented by PSD2), is pushing banks to radically transform just to keep up. Building a comprehensive data ecosystem to access customer data from within and beyond the bank, creating a 360-degree view of customer activities, building a robust analytics-and-data infrastructure, and leveraging these to drive scientific decisions across a broad range of activities from customer acquisition to servicing to cross-selling to collections – are all critical to a bank’s future success.
Create a well-designed, segmented, and integrated customer experience, rather than a one-size-fits-all distribution
Digital capabilities can turn the customer journey into something that is highly personalised. What have I spent my money on so far this month? How does that compare with my normal spending patterns? How can I make a real-time payment from my phone to split a dinner check? Can I afford to buy this or would I be better off waiting until next month? These advisory services that provide value-added insights and information to the customer’s life will lead the customer to the bank to seek out more information about how the bank can empower them, creating a ‘customer in’ model. To excel, a bank must not be a mere transactional body; instead, it must push the boundaries on the services it provides. Standing-out means becoming a personal ‘financial guru’ to customers; providing advice and guidance at the convenient tap on a touchscreen.
Build digital-marketing capabilities that equal e-commerce giants
Today, banks are in a fight for the customer, not only with other banks but also with non-banks. Big data and the advanced-analytics capabilities described above are merely the foundation of digital marketing. Mastering digital media, content marketing, digital customer-lifecycle management, and marketing operations will be critical to a bank’s success. Building these capabilities, as well as recruiting and retaining digital-marketing talent will require considerable time and investment.
Rapidly leverage and deploy the next generation of technologies, from mobile to agile to cloud
This is a hot topic for banks. The issue of having to deal with legacy platforms has been a thorn in the side for banks for a long time, because technology continues to do what it always does: it evolves. The technology agenda for banks and bank CIOs has become even more demanding and complex. First and foremost, “mobile first” is not just a buzzword. Instead, it is the clearest directive banks receive from consumers about how they want to interact with their service providers. Second, banks must not only strengthen their technologies, but also their internal processes and cultures, in order to defend customers’ data from breaches. Third, the pace of innovation in banking is accelerating so rapidly that banks are required to increase their speed to keep up. Banks need to move onto nimbler, significantly faster and lower-cost versions of processing platforms and replace legacy systems quickly. Since such systems are neither easily nor quickly replaced, many banks may choose to move to a “two-speed architecture” approach that builds more flexible layers of technology on top of existing systems but still draws on and interacts with those systems to provide the next generation of technology agility and seamless customer experiences.
An overarching challenge for banks is how to “open up” structurally – with respect to how they leverage partnerships and how they permit other entities to access their capabilities. Those banks that are able to evolve their business models and find new sources of value for their customers while performing well financially will be the ‘Banks of the Future’. It is up to the banks to keep up as there is no time to lose.back