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A 2020 ‘PERFECT VISION’ FOR THE FINANCIAL SERVICES SECTOR: WHAT WILL YOUR BANK DO FOR YOU?

By Doug Gross, CEO at NGDATA

 

It’s been an exciting year in the banking sector. Along with innovation being pushed along by the industry, there has also been the added pressure of regulatory change, such as the introduction of 2FA this September. In the past few years, much has been made of the potential for technologies such as blockchain, IoT and cryptocurrencies to revolutionise the industry. However, adoption and progress seem to have been slower than analyst estimates – with Accenture announcing we were close to AI critical mass back in September 2018. But could the moment finally be upon us? It seems like an ideal time to look to the future and imagine what the retail bank of the future may look like. Here are my predictions for the trends we’ll see emerging or continuing in 2020…

 

1. F*ck features – innovation must equal experience

As a range of industries increasingly move towards the ‘freemium’ model, banking is no exception. 2019 was certainly another year full of exclusive premium features. From metal banking cards released by N26 and Revolut, to a high street bank releasing a fingerprint biometric card. The challenge for the financial services sector in 2020 will be to see beyond their often-gimmicky appearance and branding, to truly understand underlying customer desires. What do consumers need and how can the bank fulfill that need? This could lead to an exciting new suite of services for customers, where the bank acts as a facilitator for a range of activities outside of hardcore banking. Think of the way you currently buy tickets for public transport or find offers for specific events – banks could make these interactions less painful and more enjoyable for customers. The key will be to move from a superficial to a deeper understanding of customers in order to build the services which will hit the right note with audiences.

 

2. Conversational fluency: time for bank brands to get chatty?

While marketing teams have been preoccupied with becoming omnichannel for several years now, the truth is that the consumer world is already miles ahead – becoming ‘channel neutral’. But there is nothing more jarring for the consumer than disjointed communications across channels, which belie banks’ compartmentalised approach to dealing with customers. In 2020, banks will bring down walls between the siloes of data generated by different channels and platforms. This will allow them to make the customer interactions seamless across branch, online, mobile and more. Going forward, the power to choose the channel of communication will be that of the consumer, not the bank – and they will be able to expect the same level of customer service whichever channel they choose.

 

3. The financial ecosystem: banks become data vaults

As customers, we’re becoming increasingly aware of the need to protect our data. Banks are the perfect candidates to become our ‘data vaults’, becoming the central guardian of our personal data and acting as a platform to manage it and handle data transactions. Data has been called the new currency, but in the new future we can expect banks to position themselves as a trusted advisor over data as they did traditional cash and credit. This will mean a significant rethink of their business models in order to capitalise on these opportunities.  So far, open banking legislation has led to the emergence of apps like Cake which run on this premise. But with the rising adoption of technologies like machine learning and AI, in the near future banks and other financial services providers will collaborate more on building new, relevant services and democratising the availability of on-demand expert financial advice and communications. This will be part of a wider trend in which your bank will now be able to offer you goal-oriented help, rather than just new products.

 

4. Profit v purpose

What marketers need to learn in 2020 is that there is indeed a business case for brand purpose in the financial services industry. Building brand loyalty in 2020 will have a foundation of authenticity and deep understanding of customers, where the customers and brands are telling stories together.

Research from Kantar Consulting has shown that consumers expect companies to exercise their influence over the world responsibly – and that when it becomes the foundation of everything a company does, that company will be more financially successful. Yes, banks offer practical services that are necessities of modern living, but likewise they need to have authentic motives in order to gain the trust of audiences who are now looking for brands across verticals to align with their own priorities and social interests.

The message to banks is clear: evolve or die. With an ever-growing number of competitors emerging from a variety of industries, from fintech to big tech, in 2020 the financial services sector will be challenged to truly show its worth to the customer by letting go of their traditional inflexible approach and focusing instead on growing their position as a trusted advisor to customers – irrespective of platform, channel, or industry.

 

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Banking

THE FUTURE OF CUSTOMER EXPERIENCE IN 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.

 

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BRAVE NEW WORLD: A FUTURISTIC VISION OF PAYMENTS

PAYMENTS

James Booth, VP, Head of Partnerships in EMEA for PPRO

 

Over the last ten years, the retail e-commerce ecosystem has undergone a wide-ranging transformation. As recently as 2010, the e-commerce and payments value chain were relatively straightforward: Any eCommerce merchant could integrate a payment processor’s front-end HPP into their checkout or perform a deeper API integration for a customised checkout experience. The customer then enters their card details or other bank details, which were passed on to payment platforms and schemes for processing.

In 2020, we are now well into the era of open banking, and things look very different. The volume of payments has exploded. By 2018, global digital payments were worth US$3,417.39 billion, and are expected to increase to US$7,640 billion by 2024. Using integrated real-time payments systems — which incorporate everything from authentication through settlement to confirmation — consumers send and spend money in the blink of an eye. And the speed and volume of transactions are made possible by the increased use of technology and artificial intelligence to do everything from risk assessment to anti-fraud measures.

But this very visible — and much written about — transformation is not the only way in which the payments and e-commerce landscape has been changing beyond recognition. Because while e-commerce over the last ten years has gone increasingly global, the way people pay online is more than ever local. In some markets, low rates of financial inclusion make cash-voucher schemes the best option. In others, bank-transfer apps are the most popular.

Our research has shown that between 2017 and 2019, the number of UK online transactions paid for using a bank transfer increased by 36%. Driving the use of bank transfer payment methods by UK consumers to now account for  8% of all British online transactions, with cards and e-wallets, including PayPal, leading the race. In fact, card payments account for 56% of transactions, followed by e-wallets (25%), bank transfers (8% ) and lastly cash (7%).

Some markets prefer e-wallets or primarily use locally issued credit cards. In the Nordics, deferred payment methods are becoming the norm. And in countries such as Germany, most online shoppers prefer via direct debit.

The result is a global online and digital payments market that is now incredibly diverse. And even more complicated. Even markets right next door to each other may have very different payment preferences. In Latvia, for instance, 49% of online transactions are paid for using a credit card [2]. In neighbouring Lithuania, it’s just 24%.

Globally, by 2021, only 15% of all transactions will be paid for using the brands of credit cards familiar to most Western merchants. That number is only set to decrease. Today, local payment methods account for 77% of e-commerce spend; by 2024, it is forecast that this share will increase to 82%. There are an estimated 450+ significant local payment methods worldwide, so considering the UK mostly rely on PayPal and card payments, there is a big world of alternative payment methods the British public are yet to realise. To truly go global, merchants don’t just need break down language barriers, but also payment barriers.

Already, Klarna, one of Europe’s most popular bank-transfer and pay later app, processes €53.4 billion in online payments every year. Merchants operating in or entering Europe which doesn’t support Klarna are effectively saying that they’re not interested in any part of that €53.4 billion. And this situation is not unique; it applies to markets throughout the world.

 

Local payment methods, as they drive financial inclusion, will only proliferate.

When we look forward to the state of e-commerce in 2030, a personalised shopping experience is not a nice-to-have. It is an absolute requirement. Consumer preferences must be noted; if they aren’t, retailers will miss out on sales. Almost half (47%) of UK consumers will end a transaction if their preferred payment method is not available, according to PPRO research, so customising payment options for cross-border shoppers is vital. This is highly important to attract international customer bases beyond a retailer’s local remit. It’s no longer adequate to offer customers one single way of paying – in-store or online. Payments aren’t a one size fits all approach.

The best brands do this already. Those who don’t will struggle to make it to 2030.

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