Rahul Singh, president of financial services at HCL Technologies
We’ve just finished a very exciting decade in financial services, with new technologies and new ideas shaking up an industry that had previously been slow to change and evolve. Although some technologies, such as blockchain, are taking more time to make an impact than was originally predicted, others such as Artificial Intelligence (AI) are already playing an increasingly influential role. We are also set to see a lot more jostling for position at a strategic level, as old hands and newcomers alike try to figure out exactly how they can gain a foothold in a rapidly changing market.
There are five key trends likely to have the biggest impact on the financial services industry in 2020:
1. Bigtechs like Amazon and Google are circling the financial services industry. Banks should be aware that the likes of Amazon and Google are circling the financial services sector, potentially causing disruption in 2020. Although the Bigtechs don’t appear to have a desire to actually become banks, they are taking a keen interest in the data banking activity generates. If they can gain access to this information, Bigtechs can put their unparalleled data and analytics capabilities to work on it, providing something never seen before in the banking industry. If given the opportunity, they could offer more sophisticated, highly personalised financial products and services to customers than existing market players could dream of.
2. Traditional ‘big’ banks will launch new brands to ‘challenge the challengers’. Some big banks have come to realise that they can tackle two of their biggest weaknesses – legacy technology and a lack of innovation, by simply starting afresh and creating a brand-new challenger bank that’s completely separate to the rest of the organisation.
This can take a fairly radical form, using a ‘skunkworks’ style approach that sees a small group of people removed from the rest of the organisation and put in an environment that allows them to get their heads down and innovate. In the short term the big bank will hope the new challenger brand will be a success in its own right, but in the longer term, they will be looking to use it as the building blocks for the established brand to build on. The new technology stacks that have been created could have the potential to free the wider organisation from its legacy technology shackles once and for all.
3. Banks will focus on payment platform partnerships rather than account holders. At the moment, most banks are trying to sign up as many account holders as possible, but it doesn’t have to be this way. Could they place less emphasis on individuals and focus on becoming the underlying payment platform of choice for specific partners instead? Of course banks will always need a healthy number of account holders, but it’s certainly food for thought as we head into the new decade.
In 2020, we will see more banks coming to realise the value strategic partnerships can bring, enabling them to become the preferred payment platform of choice. This can have a truly transformational effect, by opening up access to data from a much wider pool of people than ever before. If a bank is able to partner with a property platform and become its first port of call for customers, it could be in line to jump to the front of the queue for large transactions, such as mortgage applications and leasing.
4. More banks will rely on AI to detect fraud. Banks face two big battles when it comes to fraud: of course they have to prevent fraud from happening in the first place, but they also need to analyse fraudulent activity and have an element of ‘explainability’ to hand. Regulators not only want to know what has happened, but also why. In 2020 an increasing number of banks will realise that AI can help quickly identify the root cause of fraudulent activity so they can move on from fighting a losing battle in a game of ‘whack a mole’ and cut off the problem at its source.
5. Regulators will block cryptocurrencies’ path to mainstream success. In the last few years cryptocurrencies were heralded as a new dawn, with people proudly announcing which crypto they were investing in. Meanwhile, currency founders were elevated to celebrity status and the value of different digital coinage regularly made national news headlines. This progress has slowed in recent months, and the talk of cryptocurrencies getting serious will continue to cool in 2020. This is due in no small part to regulators and governments rejecting them. Facebook’s Libra, for example, seemed to have real momentum back in the summer, but the picture is now very different, with authorities asking probing questions and partners including Visa and MasterCard pulling out of the project. If an organisation as powerful as Facebook is struggling to make headway, it seems unlikely that another cryptocurrency project will break through to the mainstream in 2020.
The waves of disruption will continue to crash against the financial services shore in 2020. Banks must be willing to innovate and continually improve customer experience, keep on top of regulatory changes, and build stronger ties with technology partners if they want to ride the waves to success.
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.
TRANSFORMING BANKING: WHY COVID-19 IS UNFREEZING CONSUMER HABITS
Raj Chakraborty, Senior Managing Director, Publicis Sapient
There is much debate about the impact of COVID-19 on the economy. A lot of it is estimation and conjecture based on imperfect data. The discussion is dominated by whether we will have a U-shaped recovery, or if it will look more like an L over the next few years – and what policy decisions will drive the outcomes.
However, regardless of policy or recovery timeline, it is clear that consumer and small business behaviours will change dramatically during and after this crisis. Without an alternative, consumers get on with their lives, bank in the way they always have and business continues to get done, however given a compelling reason, in this case physical restriction to “normal” ways of doing things, people will begin to unfreeze old habits and move to digital channels and remote ways of engaging.
In response, banks have to act now – before new customer habits refreeze in a way that is detrimental to their business. They must:
- help customers by supporting them when, where and how they need, enabling personalized experiences and offering advice that they can access digitally
- provide employees the tools and resources required to successfully serve customers remotely, and with flexible schedules that can meet demand
A significant moment – unfreezing of habits
This is a significant moment for banks. In a time where consumer and business habits have suddenly unfrozen, banks have the opportunity to step up and become more engaged with their customers, guiding them through these uncertain times. The critical elements in these interactions will be personalized experiences – enabled by digital and data, with a helpful person exactly when needed. Those that act and adapt in real time will be rewarded with greater loyalty, new customers, and better performance when behaviours refreeze in a new mold.
Along with opportunity, the unfreezing of habits also presents a tremendous threat. Consumers and small businesses will question the value that a bank brings to them. More than half of consumers already say that they would be willing to bank with non-traditional players like Google or Amazon if they provided the service. And over 60 percent of the emerging affluent say they would consider switching their primary bank. Those that don’t engage with their customers in an effective, personalized way now will be forced to play catch-up later, hoping they’re not too late.
Help customers by supporting them how they need, enabling personalized experiences and advice that they can access digitally
The COVID-19 crisis has pushed us to an extreme end of the spectrum in understanding what consumers and businesses are willing (and have capability) to do remotely. Prior to this, many financial institutions would have said that people doing 30-50 percent of their transactions using digital was very good. In the past month, that view has changed dramatically as customers are doing more transactions using digital. Today, this behaviour is driven by the fact that they can’t go to a branch, and contact centers are currently overwhelmed with long wait times. Tomorrow, it will be driven by a more personalized journey – before, during, and after the transaction – that gives consumers more confidence in the engagement and makes it more convenient. Think back to something as simple as depositing a cheque at an ATM. In the early days, printing an image of the cheque on an ATM deposit receipt dramatically increased adoption of ATMs over tellers for cheque deposits; it gave people confidence that the cheque had actually gone through.
The modern version of this is a bit more sophisticated. Banks must build an understanding of the customer, ethically weaving together internal and external data with a layer of Artificial Intelligence that can help detect patterns of what individuals actually want. They must engage those individuals using the right messaging and channels – and then deliver a seamless and lightweight experience for the transaction that puts the customer at the center. When needed, a remote advisor should also be available – someone who has the context of the customer’s experience thus far and can assist going forward.
We’re seeing leading banks rolling out pilots of these concepts right now.
Provide employees the ability to serve customers while they work remotely, and with flexible schedules that can meet the demand
The crisis has also shown us how unprepared the financial services industry is to work remotely. On the retail banking side, many firms have had to cut call center staffing dramatically due to the close proximity of the representatives’ desks. This, coupled with the tremendous increase in call volumes, has resulted in long wait times and poor service interactions. However, many leaders in the space have, quite literally, been able to flip a switch and bring up significant work-at-home service teams and managed to keep up with demand. They have matched their capacity more closely to the demand and are getting real kudos from customers.
In wealth management, some firms have literally had movers come box up equipment and phones from the office and deliver them to advisors’ homes because of regulatory and compliance requirements on the equipment and infrastructure. Others however, had the cloud-based technology infrastructure already in place so advisors could conduct fully-compliant video conferences and phone calls, securely access customer accounts and conduct transactions, and serve clients in this greatest time of need without putting themselves in harm’s way.
Ironically, the new cloud-based and flexible infrastructure that enables the new ways of working are actually easier to manage, maintain, and scale up in times of need.
Whilst it’s true that old habits die hard, the unprecedented events of the past few months have forced consumers and small businesses to ‘unfreeze’ their traditional habits. Depending on how it’s addressed, banks have a tremendous opportunity or significant threat on their doorstep. Customer habits will be in flux for a short period as they understand and work through what’s available, and then those habits will ultimately, freeze again.
During this period, banks must move quickly to become valuable to their customers through personalized experiences that are digitally-driven, but enabled through actual people when needed. They must also build supporting capabilities and cloud-based infrastructure for their people so they can work remotely and in flexible hours to meet customer demand. These technologies are all available and we are putting them to use today – all indications are that this crisis and the opportunity and threats it presents has the potential to transform our industry.
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