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Banking

THE FUTURE OF CUSTOMER EXPERIENCE IN DIGITAL BANKING

DIGITAL BANKING

By Richard Billington, Chief Technology Officer, Netcall

Over the past five years, the digital banking revolution has had a seismic impact on the relationship between customers and the institutions that handle their money.  Since digital banking established itself as the new norm for consumers, there is now a growing expectation for enhanced levels of convenience and security. Recent proof of the evolution has come from Lloyds Banking Group, which recently announced the closure of 56 branches, as an increasing number of customers ditched branch-based banking in favour of online platforms.

Banks are trying to adapt to rapidly changing behaviours by integrating their services seamlessly into their customers’ daily lives. However, whilst offering new opportunities for banks to reach and respond to customer needs, the digital realm also presents an increasingly competitive playing field, with challenger banks constantly entering the market. We are continually hearing of new banking brands offering cash incentives to encourage customers to switch banks. This tug of war is putting increased pressure on banks to outdo one another, in order to retain customers and foster long-term loyalty.

Short-term cash incentives, however, will be spent in vain if a company’s long-term digital experience is not up to scratch. Lost customers mean lost revenue, a negative impact on brand reputation, and market share attrition. In order to gain and maintain a competitive edge, banks must understand what consumers expect online, and then meet those expectations.

 

Getting ready to compete with the Amazon Effect

Whilst it is clear that ‘digital’ is the direction in which the industry is heading, traditional bank brands have a long way to go to satisfy consumers who want to manage their money on their phones and tablets. Today, the so-called ‘Amazon Effect’ is impacting more and more areas of our lives, and digital banking is no exception. Modern customers require instant gratification. They want to see where their package is at any stage of their delivery and, in the same vein, become frustrated if they can’t see how things are progressing with their finances in real-time.

Customers want to stay up to date with changes on their bank accounts. They want to apply for an ISA, mortgage or credit card without hassle. They want to be able to understand where they are in the process. And, most importantly, they want an experience that is unique, personalised, and available at a time convenient to them. Today the onus is on banks to deliver these experiences – ensuring interactions and processes are quick, convenient and streamlined. Those who don’t live up to these expectations risk failure in a highly competitive marketplace.

 

Failing to connect the dots                                                                                                               

Despite the changing customer needs and demands when banking online, all too often customers are faced with a series of disjointed communications, leaving them dissatisfied, confused and frustrated. To solve this, many banks invest in customer-facing departments – marketing, sales and service – but the reality is their customer experience doesn’t just depend on the people dealing with customers every day. It is heavily influenced by processes and technology, the people behind the scenes – the IT team.

For many banks, there’s a huge gap between customer facing departments and IT – what we refer to as the ‘customer experience disconnect’. This means that when someone in the contact centre flags a broken process that only technology can fix, their request often gets ignored. That’s not because IT doesn’t care; it’s because they have a thousand and one other things to do. Realistically, they can’t drop everything to solve one small problem.

But when it comes to customer experience, small problems add up. If a customer can’t apply for a mortgage because an app is broken, that’s annoying. When they can’t get through to customer services because the lines are busy, that’s infuriating. And when they don’t receive a response via email, that’s… well, that may very well be the end of the relationship.

 

Enhancing customer engagement online

Digital transformation in financial services goes beyond just providing an online or mobile account-opening solution. Banks should build a process that connects with the customer before an account is even opened and continues throughout the entire online journey. This includes enabling tailored communication at optimal times on preferred device(s). Every customer touch point should collect insights that the bank can leverage for future communications, to foster brand loyalty and make it harder for businesses to be undermined by competitors.

Done well, digital engagement should not just represent a great communications process, but also reflect changes in the back office that simplify all stages of engagement. Most importantly, these stages should connect seamlessly across communication channels, eliminating the need to visit a branch and enabling consumers to switch between channels, such as telephone, email, social media and in-branch banking, when desired.

As the UK continues to move further towards a cashless society, which is now expected by 2030, getting digital banking right is only going to become more important in order for banks to remain competitive. And to ease the transition to digital banking while maintaining customer loyalty in the digital realm, banks must overcome customer experience disconnects and enhance digital engagement.

 

Creating an effective digital banking experience 

At the moment, departments within banks are operating in silos. This needs to stop if businesses want to create a successful digital banking experience. In order to build trust, long-term relationships and help solve any digital experience problems, it’s important that banks start by bringing customer-facing and IT teams together.

Low-code software solutions can prove invaluable in this instance, helping to accelerate digital customer experiences whilst also enhancing efficiencies within the business. Due to their simplistic nature, these offerings can be integrated across departments and be used by non-experts and developers alike. Well-established banks with bigger IT teams can also benefit, as low-code software solutions work alongside existing systems, significantly helping to improve customer experience quickly and without the need to replace existing infrastructure at a high cost.

In our rapidly expanding digital world, businesses face more pressure than ever to pivot in response to market changes and customer expectations. Therefore, having access to tools that are easy to use whilst enabling innovation will be key to building a better digital customer experience. In addition, analytics tools can also help track performance and offer insights for process improvements and adaptations. Implementing these tools will help empower businesses to remain competitive in today’s rapidly changing banking industry.

 

Banking

SEIZING THE OPEN BANKING OPPORTUNITY

Nick Maynard is a Lead Analyst at Juniper Research

 

Open Banking has made significant progress in 2020, having recently launched across much of Europe and now starting to emerge in other markets too. And there are two primary reasons why Open Banking is disrupting the banking industry so much:

  • Banks have begun to discover the real competitive advantage of a more open approach to banking. Offering a superior Open Banking experience to customers can be a compelling differentiator from other competitors as part of a wider digital app experience. Open Banking also creates a level playing field in markets where regulatory intervention has led to Open Banking deployment. As all banks are required to deploy APIs in this scenario, the situation is the same and does not put any one particular bank at a disadvantage.
  • Legislation – for example, in October 2015, the European Parliament adopted PSD2 (the revised Payment Services Directive). By early 2020, major banks in the EU had adopted Open APIs. There have however been many cases of late deployments of APIs and problems with the availability of APIs.

 

Nick Maynard

The Disruption Factor

Open Banking is a major disruptive factor for banks. The reason for this being that it opens up account data to both AISPs (Account Information Service Providers) and PISPs (Payment Initiation Service Providers), which can attempt to carve out a role in the banking area.

  • AISPs: These new vendors are able to access transaction data and balance information, as well as related information. This has, in particular, led to the rise of vendors such as Emma, Yolt and Connected Money. These vendors combine information from multiple sources, adding value to the user.
  • PISPs: In this case, the vendors are able to leverage Open Banking API connections to initiate payments directly from the bank accounts in question. This means that these players are able to bypass traditional payment methods, such as cards. Vendors such as American Express and PayPal have already launched solutions that have taken full advantage of this action.

 

PSD2 Changes

Generally, the implementation of the new PSD2 European regulation for electronic payment services effectively reduces the entry barriers for new digital players. It also opens up banks to the potential for competition, enabled by their own APIs. This allows these players to compete with existing services in fields currently offered by the banks. In the case of AISPs, it is possible that third-party applications could displace the role of the apps from incumbent players, which would dilute the bank’s relationship with their users.

As with any fundamental change to markets in the banking area, there is the potential to bring a number of both opportunities and challenges to consider with Open Banking.

Open Banking Opportunities & Challenges to Consider

Source: Juniper Research

Banks and other parties that are looking to become involved in the Open Banking ecosystem must weigh these opportunities and challenges carefully. Open Banking certainly needs a more collaborative approach than traditional banking models, which will require significant effort to make them successful.

 

The Forecast for Open Banking

The total number of Open Banking users is set to double between 2019 and 2021, reaching 40 million in 2021 from 18 million in 2019. The ongoing Coronavirus pandemic is increasing the need for consumers to have the clarity of combining their accounts and gaining insight on their financial health, and also boosting momentum in the adoption of Open Banking.

This extraordinary growth is being driven by Europe, where the regulator-led approach to Open Banking has created a standardised market, with low barriers to entry. This contrasts with markets like the US, where a lack of central regulatory intervention is limiting growth potential.

 

Open Banking – Delivering Opportunities and Threats

It is worth noting that Open Banking can be both a threat and an opportunity for traditional banks. While Open Banking exposes user information and access to potential competitors, this threat has the potential to affect all players in the market equally. Consequently, established banks must create innovative Open Banking services that will provide benefits for the user, while also attracting customers from less innovative competitors.

Payments will be critical to the emerging Open Banking ecosystem; accounting for over $9 billion in transaction value in 2024. However, payments in this ecosystem are at a particularly early stage. While eCommerce is dominated by card networks, there is the potential that this role will be eroded over time by ‘direct from account’ payments. Consequently, card networks should look to offer Open Banking-enabled payment services, in order to offset the risk of future disruption.

Open Banking Users in 2021 (m), Split by 8 Key Regions: 40 Million

Source: Juniper Research

 

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Banking

2021: THE NEW-NORMAL LIFECYCLE FOR BANKING

Laura Crozier, Global Director of Industry Solutions, Financial Services at Software AG

 

It would be impossible to talk about predictions for the banking industry in 2021 without mentioning the cataclysmic impact that 2020 and the pandemic has had on people, businesses and countries.

Unlike with the global financial crisis, banks have been able to step up as “good guys” this time around, rebuilding their reputations as well as accelerating digital transformation. One of the main outcomes is increasingly smart, efficient online payments.

In 2020, the banking industry innovated like never before. This is the new normal. Overall, customers and society will be the beneficiaries from the changing industry. Here are my predictions:

 

Reputations are reborn

Banks across the globe pulled out the stops to integrate and adapt systems and processes to help customers during the pandemic. They offered accommodations in loans, assisted governments with the distribution of financial relief, and supported consumers by upping contactless spending limits and virtual deposits.

In 2021, banks will risk losing that rosy glow as economic circumstances drive them to deal with non-performing loans, mortgage foreclosures, layoffs etc. But, beyond their role in society as providers of capital and liquidity, banks will invest to sustain their reputations as trusted and good corporate citizens and use their power to persuade their customers and providers to adopt higher environmental and ethical standards. This will be in the areas of bank carbon-neutrality, sustainable financing, serving the unbanked, diversity and gender equality (as the number of women running a major global bank will double from one (Jane Fraser at Citi) to two). It’s a start.

 

Coming of age in the way of working

Back in Q1, when bank employees cranked up their laptops on their dining room tables, banks that were strategically undertaking business transformation accelerated their efforts. Those that were tactical, or on the fence, now understand with painful clarity that this work must be undertaken strategically.

Cracks in process and the way of working and their resulting risks can be crippling. Especially from a back-office perspective, it is not enough to rely on “organisational memory” and collegial proximity for work to get done right. Advanced banks pushed the boundaries of remote work, and the proof of concept was successful. So, they’re doubling down on developing digital twins and moving to the cloud. They’re adopting the hybrid office/WFH approach to reduce health risks and reduce cost permanently. The watercooler will never be the same.

 

The death of cash

Ok, maybe the rumours of the death of cash are a bit exaggerated since there will always be the need for cash (and, to some extent checks; the USA, for example, cannot seem to live without them). But the pandemic has permanently changed the way that consumers and small businesses bank, and the demotion of cash has been accelerated by a decade by the pandemic. For example, the Norwegian central bank said that cash payments in that country have plummeted to just 4% of transactions since March.

Implications? It will be critical to continue evolving payments to be smart, safe and flexible to compete in new world, in both retail and commercial banking. Also, the permanent change in the mix of channels will see banks’ face-to-face engagement with customers fade. Branches aren’t going to go away entirely, but they will be reserved for high value activities – by appointment only. To compensate, the personal touch has to be delivered digitally and intelligently.

The role of the bank as a “financial wellness partner” is being born. Banks will use customers’ data, not just to personalise and differentiate banking experiences, but to make recommendations for products and services beyond traditional banking from across their ecosystem to serve their customers well. Just as customers own their cash (physical or digital), in the future they will demand that they own their data (and can share it with whom they choose). Then retail and commercial clients will share their data in return for value.

 

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