Banking

Humanising Banking: Bridging the Gap Between Customers and Financial Institutions

Published

1 month ago

August 16, 2023

admin

By Madhav Dabke, Vice President – Industry Product, SunTec Business Solutions

When was the last time you stepped into a physical bank branch? Chances are it was a while ago. Technology has brought banking to our fingertips and changed the way banking functions. Today, you don’t even need to engage with a traditional bank if you don’t want to. Fintechs and technology giants now offer several innovative and easy financial solutions delivered anywhere, any time. But can any business operate in a wholly impersonal manner? Can a bank really build trust and loyalty with a completely digitised experience only? Has the time come to focus on humanising banking in the digital era?

The business of banking is fundamentally about human beings and human interactions. After all, banks were created for people to manage their money in a safe and secure manner. In the past, banking involved a lot of human interaction, although it was not necessarily human centric. An individual went to a physical bank branch, filled out forms, sometimes in multiple slips, stood in a queue, interacted with a cashier and either deposited or withdrew money. Banking was system-focused with the business being managed primarily as a transaction system, governed by rules, regulations, and market factors. Processes, policies, and changing technologies also played a role in how banking was managed. Customers existed on the periphery of the system and business returns from technology were more important.

The role of technology in modern day banking

As new technologies emerged, banks accelerated their digital transformation efforts to meet changing customer demands for easy on-demand access and personalisation. But there were regulatory requirements to be complied with, leading to a situation where contradictory practices were in place. For example, on one hand banks sent e-statements to save paper, allowing anytime, any device access but still insisted on copious amounts of physical documentation for know your customers (KYC) requirements. This was contradictory and resulted in a confusing and fragmented customer experience at a time when most other services they engaged with offered a seamless and unified experience. But this also left some room for human interaction for those hesitant to adopt new and unfamiliar technologies. For example, ATMs and banking kiosks were introduced in a bid to reduce human interface at physical branches and encourage remote access to banking facilities. But a section of the population found them difficult to use. There was no rule in place stopping customers from going to the branch for every transaction, and so they did, preferring to have a bank teller handle their requirements instead of a machine.

The Covid-19 pandemic further accelerated the pace of digital transformation. Almost overnight, the world had no choice but to move to digital banking and the experience became a fully impersonal, technology-driven one. Since footfalls in physical branches dwindled, banks had to step up their in-person outreach programs to maintain customer engagement outside of the online world. Banks today must realise that no amount of technology can replace all human interaction. Human interaction in banking plays a crucial role in building trust and loyalty. A friendly face, a reassuring voice, and personalised advice can make a significant difference in a customer’s banking experience. In moments of financial uncertainty or complex transactions, customers need the empathy and guidance that only a human banker can provide.

The critical impact of the human touch

There is no question that the future of banking lies in the effective use of technology. Understanding customer expectations and requirements and meeting them with innovative offerings is the only way to succeed in a market characterised by increased competition from fintechs. But even amid growing digitisation, it is crucial to put human beings at the center of the banking ecosystem. Return on Investment (ROI) is important for business. But instead of focusing on technology alone, banks need to develop and provide empathy-driven experiences to drive customer happiness index and deliver value, and ROI will follow. This simply means that banks must place higher emphasis on understanding human behaviour to understand customer requirements. Phones manufacturers did this some time ago when they introduced front cameras. They understood or empathised with the human need for documenting memories in the form of photographs and realised that most people would want to be in the photos themselves while they take pictures of others. Today, front cameras are often far better with Artificial Intelligence (AI) enhanced imaging than the back camera so that great pictures can be made in a selfie mode, allowing the photo taker to be in the picture too. This human connection is what people miss in their uber digitised banking experience. This is what forms bonds and helps ensure customer loyalty.

Humanised, hyper personalisation

Innovative banks that strive to implement a human-centered design must start with buy-in and support from the senior leadership that then extends to every frontline employee. High value customer touch points that require low interaction but result in rich understanding of their requirements and behaviour will be critical in shaping hyper-personalised offerings supplemented by a human centric UX design approach. Ultimately, human-centric thinking and approaches must become integral to the bank’s strategy and be seen in everything they do.

As banks look at leveraging cloud-native, AI-powered platforms to explore new business models, they must put the customer at the core of all their strategies. Understanding regional and cultural nuances through personal interaction and human inference capabilities can help devise better hyper-segmentation strategies. Human behaviour, emotions, and lifecycle must form the basis for designing banking products and services. While data will undoubtedly provide invaluable insights into the customer’s requirements, technology must be supplemented and augmented by the human touch. Highly digitised branches with employees simplifying the customer’s physical experience can go a long way to ensuring customer satisfaction.

Up Next

Why financial trading the next obvious step in the neobank revolution

Don't Miss

Will generative AI build or break customer service for banks?

Banking

Are SaaS platforms challenging banks for a piece of the payments pie?

Published

3 days ago

September 26, 2023

admin

4 common myths about the role of open source in financial services

Attributed to: Ralph Dangelmaier, Global CEO of BlueSnap

The finance industry is at a tipping point with software firms on the brink of becoming banks. This may seem like a farfetched idea, but now that software platforms come equipped with payment capabilities, their SME customers may want to receive more financial products from these platforms.

This is part of the wider trend of ‘embedded finance’ – when companies which aren’t banks incorporate financial services such as lending, insurance, and payments into their product.

Software firms are particularly leveraging ‘embedded payments’ – where the ability to accept and process payments comes with the software itself. Think of a school consolidating all the payments a parent would make for their children – tuition, books, extracurricular activities – in one software platform. This trend has exploded in popularity because there’s a desire among companies, and their customers, for everything from products to payments to happen under one roof.

With the market value of embedded payments expected to reach £2.08 trillion by 2026 and customers becoming increasingly married to their software, let’s look at how we ended up at this turning point in payments.

How chasing convenience puts money in platforms’ hands

Ralph Dangelmaier

The growth of embedded payments is propelled by the need for ease, trust, and convenience. As platforms are selling payments hand-in-hand with their software, customers don’t need to integrate with additional service providers just to accept payments. And they’re already bought into using the platform for its other functions.

Not only is this kind of back-end reconciliation easy and convenient but it helps software platforms generate revenue too. That’s because software companies that embed payments become Payment Facilitators (a.k.a PayFacs) – allowing them to monetize transactions that happen within their platform.

By selling payments, software firms can see up to a fivefold increase in value per client. Rather than depending on software subscriptions alone, these platforms now receive a cut of every transaction that’s facilitated using their software too. This provides them and the businesses they serve with a mutual incentive – shared profits.

Software platforms are passionate about helping their customers create the most easy-to-use experience to drive a higher volume of transactions. Of course, there are many ways to launch new revenue streams, but why leave money sitting on the table when all you have to do is become convenience-obsessed?

Why finance teams want software and payments in one

As a payment expert who’s worked in a bank’s back office, I know how important a financial software stack can be. In its highest form, it can steer a business’ entire financial strategy.

Often these stacks are well curated, but the biggest drawback is the manual collection of data across platforms. Trying to build a financial picture of a business using your ERP, CRM, human resource and billing system can involve hours of laborious data entry.

For everyday finance teams, this isn’t an efficient use of time. They need to be able to pull data swiftly to advise their executives on financial strategies. CFOs are also under pressure to choose the right software stack to streamline processes and ensure payments ROI.

That’s why payment technology that removes the manual work for finance teams – to get from A to B more quickly – is growing in popularity.

Software firms using embedded payments are saving them hassle and time. Not only that, it helps the key financial decision makers of SMEs stay in a constant state of financial planning, where they can change their strategy whatever the market conditions may be.

The end of traditional banking for SMEs?

Increasingly, SMEs are struggling to get the payments support they need from traditional banks. The ‘higher risk, lower return’ view of the small business market among banks leaves software platforms in a ripe position for a takeover.

There are over 90,000 software companies in the UK alone. With nearly half of software platforms (48%) turning to embedded payments to gain a source of competitive advantage, this figure could represent a threat to corporate banking as we know it.

SMEs don’t have the deep pockets that multinational businesses have. The Amazons and BMWs of the world have long reaped the benefits of a corporate account with a large bank – and the round the clock support this offers.

But SMEs face high conversion fees and often receive minimal support chasing late payments, leaving them between a rock and a hard place. If these businesses can save money by moving from banks to software platforms, then banks are at risk of losing their position over the middle market.

Looming regulation

Until now banks have been able to defend their position because safety and security is key. Once platforms become regulated, then what? It won’t be long before regulators eye up the software industry as their next big focus.

But regulatory bodies like the FCA, PRA and more favour ‘controlled innovation’, so this will take time.

Currently, to process transactions in Europe, businesses must go down the lengthy and costly process of becoming Payment Service Providers (PSPs). That’s why many software platforms are choosing to partner with a licensed payment provider which sells the payment package to them, instead.

In fact, 89% of software platforms choose to work with PSPs rather than become a PayFac themselves. It makes sense when it’s taken more than a year for some platforms to begin processing payments on their own.

Given the sizable financial risk of processing your own payments and the administrative burden this brings, it’s no wonder software firms are looking to fintech for a better way.

After all, it’s not just about processing the payments. A partnership with a payment technology partner comes complete with support in onboarding, underwriting, compliance, risk, payouts and customer support.

In short, software platforms see the benefits of selling payments and are primed to become the next big financial players.

Not only is there revenue for the taking but their customers benefit as well. With software platforms ready to offer SMEs a banking alternative and a superior customer experience, they’re offering a truly win-win solution for all involved. And it’s payment technology partners that can help them make this vision a reality.

Banking

Emerging technology will power long-term sustainability within the UK banking industry

Published

3 days ago

September 26, 2023

admin

By Peter-Jan Van De Venn, VP Global Digital Banking at Hexaware Mobiquity.

Sustainability has been a big focus for the banking industry in recent years, with the issue becoming increasingly important for consumers. It’s no wonder that sustainability has become baked into the purposes of almost every bank, from Natwest to HSBC.

However, the economic uncertainty of the last year has led to many banks putting it on the back burner. Challenging market conditions have forced financial institutions to change their priorities to concentrate on protecting the bottom line. Our research found there’s been a significant drop in the number of UK banks saying that sustainability remains a key business strategy. 12 months ago it was a major priority for 100 per cent of banks, but now that number has shrunk to 60 percent.

Whilst it’s understandable that banks are feeling the pressure at the moment, there’s a risk that they will miss out if they hit the pause button. From cost savings brought by innovative digital products and services, to improved brand reputation and increased profitability, there are a lot of longer-term benefits they could be failing to unlock. So how can they keep moving forward?

Losing momentum

Emerging technology holds the key to their success, with the power to disrupt current behaviours and promote a more sustainable culture. Banks are already aware of this, with 76 percent using digital transformation to drive sustainability, but a lack of leadership has made it difficult to build momentum in the last 12 months. Currently just over half (54 percent) of banks have tasked an executive at board level with overseeing sustainability – way down from 83% just 12 months ago.

This lack of board authority means banks are struggling to engage the entire organisation to move ahead with sustainable initiatives. As a result, almost two-thirds of banks are seeing progress slow, admitting they are not actively taking steps to foster more sustainable behaviours throughout the organisation. Those that have taken their foot off the gas need to find a way to move forward again.

No time for standing still

Banks know that technology can drive sustainable behaviour. For instance, many of them are already encouraging their workforce to work remotely, as a way of reducing travel. This has two benefits – not only does it cut the costs of running physical offices at full capacity, but also reduces the bank’s carbon footprint. There has never been a better time to invest in technology to drive more sustainable behaviours.

New digital products and services can also extend the benefits beyond employees to encompass the wider customer base. A fair number of banks are already investing to make this happen. More than a third (35 percent) of banking organisations are using Machine Learning (ML), Artificial Intelligence (AI), cloud and analytics to make digital services more easily accessible. Investment in these technologies will be critical as the number of physical bank branches continues to decrease, with figures from Which? showing this is taking place at a rate of 54 branch closures each month.

Hitting environmental and social responsibility goals

Emerging technologies can also help banks keep pace with tightening ESG rules and regulations. Banks are faced with demands for increasingly granular reporting and transparency on ESG – demanding a new approach. In line, 41% of them are developing data visualisation tools to improve stakeholder engagement and understanding of ESG risks and opportunities, while 37% are using machine learning and artificial intelligence to identify and track ESG risks and opportunities across a wide range of data sources.

More than one in three are also using the blockchain to improve transparency and traceability in supply chains, and implementing digital tools and platforms to collect, analyse, and report ESG data and metrics in a standardised and consistent manner. All these applications of emerging technology will put banks on track to address global environmental challenges and unlock a greener future.

Long-term sustainability

As the economic pressures hopefully start to subside, increasing numbers of banks will start investigating how they can use emerging technologies to provide engaging experiences and value-added services for customers, to drive greater revenue and efficiencies.

Whilst banks are right to focus on their revenue under difficult trading conditions, it’s important they don’t miss out on the long-term benefits that sustainability can bring. To capitalise on this, banks must keep pushing the boundaries and invest in emerging innovations to drive more sustainable banking behaviours, benefiting the planet and driving great digital experiences for customers.