Simon Healy, Industry Director Financial Services EMEA, Unisys
Few financial organisations have the strength of community focus as building societies. Not only do they represent a form of grassroots empowerment that can be thin on the ground in the sector, they’re genuinely connected to their customers in a positive and personal way – after all, they’ve spent years helping them to buy homes or make the most of hard-earned savings. As a result, building societies live or die on reputation. And their challenge today is keeping that intact as the world they operate in changes, and the digital expectations of a new generation of customers continue to grow.
Combined with a general reliance on manual processes, building societies have been a little slow to transform, and are certainly far less agile than digital-first competitors. This is an issue all building societies need to address: as Unisys’ recent research shows, online account opening and management capabilities are desirable for many customers, and this is only set to increase as younger customers require banking services.
Most building societies are already well aware of this, and are making moves to invest in new digital processes, whether that’s internally or customer facing. And they know that digital is no longer a nice-to-have: it’s a must. Yet in the era of app-only challenger banks, this isn’t a way to get ahead of the competition. Instead, it’s the bare minimum that’s needed to keep up. To thrive, building societies need to aim beyond simply digitalising their operations.
Product diversification is likely to be the key here, helping building societies to delight existing customers, attract new ones, and extend their consumer base. But they should also be striving to maintain their community focus – which is a delicate balancing act. So how can they differentiate beyond digital, without losing the heart that defines them?
Building a new generation of savers
It makes sense that digital native customers might be more inclined to bank with app-based challengers, so building societies need to get in early if they’re going to secure a new generation of loyal fans. An obvious answer is to build new products that specifically target younger customers – or better still, products that appeal to parents planning to open an account on their child’s behalf. Especially since customers are nearly seven times more likely to open a digital current account with a building society, than a digital bank.
Traditionally the realm of the passbook and first savings account, a lot of building societies offer fairly simply savings accounts for children. But there’s a very real opportunity to do something that is richer in terms of its functionality and the way customers access it. These new accounts can become a much more engaging and interactive tool than has been the case in the past. App functionality could include a pocket money savings features and can be set up to grow up with the child – moving from child’s account to student saver and, in time, even a mortgage deposit. In short: a lifelong relationship.
A current approach
Of course, savings accounts shouldn’t be the only area of innovation. Ultimately, customers have a huge amount of trust in building societies – and these institutions should be capitalising on this to capture more primary banking relationships. For example, 86% of customers under 35 would be interested in a simple, intuitive digital current account offered by a building society – making this an ideal diversification route to target.
Best of all, there’s never been a better time to try. While current accounts have traditionally been difficult to offer, the cost of entry has significantly reduced, and the technology is much more accessible. There is customer appeal in a simple offer – many customers are comfortable without an overdraft facility anymore and this can help to simplify the regulatory considerations and to minimise both risk and complexity which allows financial institutions to get to market fast. Building societies can offer digital current accounts and a number of organisations are already awakening to the opportunity. And with the right technology and partners, they can continue to develop opportunities for more innovative services.
The business of change
Beyond this, building societies need to reach out to new markets and find their future, expanded customer base. And given their trustworthy grassroots reputation, there is another strong avenue to go prospecting in the communities they serve.
Long considered the backbone of British economy, SMEs and sole traders are in sore need of more accessible financial tools. The self-employed make up the vast majority of SMEs, but this group have been badly under-served by the traditional banking establishment, and often find it difficult to access mortgages because they don’t fit the standard assessment models of mainstream providers.
Since 55% of consumers think building societies should extend their product range to support local small businesses, there’s a real opportunity here to build new relationships and drive incremental lending opportunities. Best of all, this can be achieved while retaining the community focus building societies are so well known for, combining a new revenue stream with traditional values.
Future thinking, traditional feeling
The UK financial sector is in a state of constant flux, which can make responding to customers’ desires a tricky game. But given the goodwill people hold towards building societies, their future is bright – providing they’re able to grow and adapt in the right ways.
Ultimately, the key will be to move incrementally, respond to what people are looking for, ensure digital capabilities are up to scratch, and always retain the community values that define them. With the right strategy, it’s possible to be both innovative and traditional, building strong relationships with customers for decades to come.
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.
BRAVE NEW WORLD: A FUTURISTIC VISION OF 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 . 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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