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Banking

HOW EMBRACING COLLABORATION CAN DRIVE INNOVATION FOR SMALLER BANKS AND BUILDING SOCIETIES

SMALLER BANKS

– Simon Healy

 

Consumer demand for digital banking products is high. As recent Unisys research shows, half of potential customers say the freedom to open and manage accounts online is a key driver of choice – while a third want a mobile app. So, if banks want to keep attracting and retaining customers, digital has to be on the agenda.

Unfortunately, smaller banks and building societies are facing some serious challenges when it comes to delivering the necessary level of digital innovation. At the same time, competition in the banking sector is fierce, increasing the pressure even further. Something has to change.

 

Understanding the competition

Digital-first neobanks have taken the market by storm in recent years, reimagining how current accounts function and offering innovative services through app-only banking. Customer expectation around digital banking has broadly risen as a result, with these capabilities felt to be a ‘standard’, rather than something that sets a bank apart.

Well-established high street banks – most of whom have a significant number of customers, as well as deeper pockets than your average building society – are also investing heavily in digital capabilities. And all the while, non-bank brands are circling the sector, with many big-name retail technology players expecting to enter the market over the next few years.

Combined, this places serious pressure on building societies and smaller banks, many of whom have limited investment budgets, a smaller pool of innovation resource, and a historical reliance on manual processes.

 

The value of trust

But – as Unisys research reveals – it’s not all doom and gloom for these institutions. While smaller banks and building societies might not have the large investment pots or the internal resource to accelerate digital innovation, they do seem to have strong reserves of customer trust to build on. In the building society sector, for example, nine out of 10 current customers still expect to be a building society customer in the next five years, citing trust in the brand as a key driver.

Meanwhile, customers are more likely to want a digital account offering from a building society than a neobank, highlighting a clear opportunity for building societies to seize – if only they can find the digital fuel to drive their innovation forward.

 

Embracing Open Banking to drive innovation

Once upon a time, product innovation in the banking sector was an inward-looking and investment-heavy process. But now, with the introduction of Open Banking, that could change. Over 60% of consumers who know what Open Banking is believe it’s key to attracting new customers. And with its introduction, there’s a real opportunity for smaller players to develop their products in a new way, delivering fresh customer experiences by integrating with other providers and technologies.

The beauty of this approach is that better customer service (and a broader product offering) can be achieved by collaborating and integrating with other providers, rather than developing the technology in house. As such, smaller banks and building societies won’t be restrained by their limited budgets – instead, they can simply focus on delivering the products their customers need, and the high-quality services they expect.

Although we’ve only seen fairly limited account aggregation so far, this could be taken much further in order to drive significant customer revenues. For example, Open Banking can provide the framework and the safe transmission of data for Embedded Banking, in which banking services are an integrated part of a broader customer service journey.

Most consumers already have some experience of this – just think about how payments function seamlessly in a service like Uber. But this functionality could be pushed much further. Applied in the right way, consumers could be granted the ability to take out a car loan as part of their search for the perfect vehicle. They could even secure a mortgage with minimal hassle during an integrated, online house purchase.

The appeal of this is clear. Embedding banking could significantly reduce friction and empower customers to receive the services they want, where they want them, and how they want them. And this could serve as a valuable distribution opportunity for banks and Building Societies struggling to find the investments needed to keep up with the digital innovators.

 

Exploring the possibilities of collaborative harmony

It’s an exciting opportunity that doesn’t only apply to personal finance: Unisys research shows that consumers would like to see building societies offer more business banking products. With an Embedded Banking approach, businesses could benefit from the ability to access an integrated bank account and accountancy solution, for example. It’s an area smaller banks and building societies could seek to develop.

Of course, this requires a degree of collaborative harmony, with different organisations working in tandem. Yet the general sense in the industry does seem to be a move towards this, in recognition of the fact that outcomes can be improved across the industry by taking a collaborative approach. Ultimately, nearly all financial services know that digital transformation is a vital undertaking to remain competitive – and this can be achieved more effectively by working in tandem with one another.

However, this isn’t a one-off assessment – smaller banks and building societies should keep one eye on the horizon, and reflect on how emerging capabilities like Open and Embedded Banking can help to ensure they don’t lose ground in the future. Customer sentiment is clear, and it’s apparent that consumers want smaller banks and societies to do well – it’s simply a case of embracing the right digital drivers to succeed.

 

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.

 

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Banking

TRANSFORMING BANKING: WHY COVID-19 IS UNFREEZING CONSUMER HABITS

COVID-19

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.

 

Conclusion

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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