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The Future of Banking: Providing for All Customers

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Hans Tesselaar, Executive Director, BIAN  

 

In recent months, a number of well-known banks have announced closures of their high-street branches. Lloyds Banking Group announced in May it was closing an additional 28 bank branches. This is on top of its plans to shut 60 high-street branches, including 24 Lloyds Bank branches, 19 Bank of Scotland branches and 17 from the Halifax brand, bringing the total number of closures to 150 since June 2021.

As digital banking grows, this move from one of the UK’s largest banking groups is a prime example of how the industry is adapting to consumer trends and the shift to online banking. In 2007, around one-third of consumers utilised online banking for managing their finances. Now, more than 90% of UK consumers use online banking.

It is clear that the future of the financial services industry is digital, and shifting behaviours have forced a seismic divide between those who prefer to bank online and those who don’t. It has also raised many questions about how prepared our high-street banks are when it comes to supporting this divide, while future-proofing their services for the continued digital transformation happening within the industry.

 

Banking for Every Customer

Some banks are incorporating services to support those who are unable to access digital services. Hands-on support at branches for example, has helped to improve accessibility and improve education around digital initiatives. It has also encouraged increasingly more people to embrace digital change. However not all consumers are ready or capable to make the change, which means there is still work to be done. As banks continue to accelerate digital transformation projects, the closure of more high-street bank branches is inevitable. This unfortunately means that those who prefer to bank in person could be left in the dark when it comes to managing their finances.

Banks must ensure they continue to innovate while considering the needs of every customer. This means providing offline support, such as the recent move for banks to share services to support the local community and the future of cash. As part of this pilot agreement, large banks across the UK will assess local needs every time a branch closes. This assessment could recommend a shared branch opens, an ATM installed, or a Post Office is upgraded. Banks will commit to delivering whatever recommended to support those customers who prefer to bank in person.

In addition, regulators are making moves to further protect those who don’t have access to online banking. The Financial Conduct Authority will have the power to ensure local communities across the UK have access to cash. Banks who don’t comply could face fines. This will ensure that in those areas where digital adoption is not common, access to physical services will remain a priority for banks.

These initiatives are promising, but the industry and government must do all it can to ensure these initiatives are widespread. The industry must also continue to innovate, and develop additional initiatives aimed at those unwilling or resistant to embrace the digital future.

 

Encouraging Innovation

There is an opportunity to future-proof services and improve the customer’s experience from this shift in consumer behaviour. However, banks must also remember the need to support those directly impacted by the branch closures.

There are also some select players who provide differential services by focusing on keeping their branches, and advertising this. In the United States, for instance, community banks unique selling points are their branches and knowing their – local – customers by name.

The speed at which established institutions can bring new services to life is often slow and outdated however, due to the extensive use of legacy technology within banks. This challenge is also complicated by a lack of industry standards, meaning banks continue to be restricted by having to choose partners based on their language and the way they would work. This is instead of their functionality and the services they offer which has the potential to way transform the bank and its capabilities.

To truly digitise banks, there is a need to overcome these obstacles surrounding interoperability with a coreless banking model. This approach to transformation empowers banks to select the software vendors needed to obtain the best-of-breed for each application area without worrying about interoperability. Banks will also not be constrained to those service providers that operate within their own technical language or messaging model.

By translating each proprietary message into one standard message model, communication between different organisations is, therefore, significantly enhanced. This ensures that each solution can seamlessly connect and exchange data, from fintech’s, to traditional banks to technology providers

 

Working Together

Banks must form an ecosystem alongside fintech’s, service providers, and aggregators, in addition to taking a coreless approach to banking. This will help banks when it comes to the how fast and efficiently they can introduce new products.

With an effective ecosystem strategy, banks will become more relevant to their customers, providing an opportunity to drive better relationships and bigger wallet shares by delivering the speed, scale and differentiated products that make the most of the opportunity presented by the significant shift to digital banking. There is a risk if banks fail to take this approach: they will struggle to survive as consumers continue to demand new, digital services aligned to their needs. Which is why, working together is key for the future of the industry.

 

A Future Driven by the Customer

It’s likely that we will continue to see more and more branch closures across the UK.  This is an opportunity however, for the industry continue to adapt by embracing new initiatives and encouraging innovations based on the needs of every single customer – no matter their demands. Failing to do so only means that customers will leave for a nimbler competitor who understands the customer both now and in the future.

This shouldn’t be seen as a hard weight to bear.  By taking a core banking approach to transformation, supported by an effective ecosystem – banks will benefit immensely. The industry is at a cross-roads, and its success will continue to rely on a balance that provides for each and every customer, through maintaining previous methods of banking and developing new and innovative services for the future customer.

Banking

The importance of Customer Experience (CX) for retail banks today

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By James Isaacs, President, Cyara

 

Today’s retail banks face considerable challenges. Open banking initiatives –  that make it easier for customers to switch accounts – and increased competition from emerging fintech brands, are making it harder for them to attract and retain customers. This challenge is particularly acute for traditional banks which are seeking to attract younger people, who are drawn to the range of innovative services offered by digital-first emerging ‘neo’-banks.

To stay competitive, traditional banks must improve the customer experience  they offer account holders. They also must look for more efficient ways of working, so they can service all customers in a consistent way, regardless of which banking channel they use – whether it’s banking online, at a physical bank branch, through a contact centre, using a mobile app, or (most often) using a combination of all these channels.

The challenge of consistency

The argument for an omnichannel strategy is compelling. Fuelled by the pandemic, demand for digital banking services has grown. McKinsey suggests that 71% of European banking clients prefer multi-channel interactions, whilst 25% express a desire for a fully digitally-enabled private banking journey with remote human assistance when needed.

The delivery of such systems, however, is not without its challenges. Embracing omnichannel often means transitioning to a cloud-based infrastructure – away from the legacy on-premise systems prevalent in banks. Even when this hurdle is overcome, delivering banking services through multiple channels requires a significant investment of time and resources. Due to these common barriers, many banking CX projects fail to get off the ground.

James Isaacs

At the other end of the scale, there are the banks who have sought to implement numerous channels to cater for every possible customer demand, with varying degrees of success. The key to the delivery of a stellar CX is consistency – ensuring that every stride a customer takes in their journey is seamless, irrespective of the path or the channel they choose to take. The chance of ensuring a consistent service across all these channels is negatively impacted if organisations attempt to simultaneously deploy services to mobiles, website, in-person channels, messenger, chatbots, contact centres, alongside the adoption of newer open banking services.

Selectiveness is key

Organisations looking to optimise CX through the adoption of an omnichannel strategy are therefore advised to be more selective in their approach – adopting one or two new channels or approaches before expanding their omnichannel offering further.

An ideal starting point for retail banks is to look at automation within the customer journey. When applied correctly, automation can be used to help improve customer service in a way that also delivers efficiency gains.

The power of automation

Automation can have a significant impact on the CX delivered within retail banking, which saves valuable time for the customer and enhances the customer journey. Most customers getting in touch with their banks have fairly routine queries, such as a change of address, so the need to speak to an advisor is often unnecessary.

Automated customer-facing support solutions, such as chatbots, offer a faster way for customers to self-serve and secure the answers that they need to certain problems without having to phone an agent. Chatbots are programmed through a knowledge bank that can easily be updated with new information, enabling customers to source the information they need quickly and easily. Chatbots can also be used to direct customers to an agent if they are unable to resolve the issue.

For those customers who do still need to speak to an agent, there are Interactive Voice Response (IVR) systems, which capture information from a customer when they call into the contact centre. IVRs help customers complete simple tasks themselves and route them automatically to the right department. This directly reduces average call handling time (AHT) for agents and the length of time that a customer is on the phone.

The importance of automated CX testing

Yet, offering omnichannel and automated journeys is not enough to satisfy customers. These journeys must be flawless if they are to deliver a seamless customer experience. Forward-thinking organisations understand that the only way to assure perfect execution is through adopting automated testing that places a spotlight on the omnichannel customer journey from the customer’s perspective.

Automated testing can be enabled by leveraging an intuitive testing solution that develops test cases based on existing customer journeys. Retail banks can use automated testing to track various paths through IVRs, chatbots and then base test scripts on those journeys to ensure their flow or functionality is as it should be. Using this strategy, financial organisations can create thousands of automated test cases that cover the full swathe of customer journeys, shortening testing operations to a fraction of the time of equivalent manual tests.

While automated testing provides easily measurable benefits, certain alerts flagged by automated testing are more critical than others. Distinguishing a true failure that requires immediate action as opposed to failures that can be addressed in time is essential to achieving the true return on investment (ROI) of test automation. In doing so, banks can ensure that the customer journey remains smooth, and the CX delivered remains outstanding.

The path to good CX is paved with automated testing

Delivering omnichannel services for banking is key to satisfying customer demand. However, whether it is the delivery of a chatbot, IVR or an open banking model, retail banks are well advised to stagger the roll-out to ensure the delivery of a consistent service to customers. Automation plays a critical role here – both in the delivery of omnichannel services to customers, but also ensuring its ongoing success through rigorous, frequent and automated testing.

Financial organisations that want to remain frontrunners in the market will stand out against the competition by delivering stellar digital and in-person experiences for customers. To assure high-quality CX, walk in the shoes of your customers, testing their customer journey in each and every scenario to confirm there are no cracks in the road. Of course, there may be bumps along the way, but when those are addressed in a timely manner, retail banks will continue to attract and retain customers for the long haul.

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Banking

Challenging the challenger: Why the digital transformation of traditional banking is key for competing with challenger banks

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By Sam Schofield, Senior Vice President: Global Enterprise at Udacity

 

Monzo and Revolut are only seven years old. Starling, which is often thought of as one of the first challenger banks, is just eight years old. Much of what we consider the ‘challenger’ or ‘digital’ bank sector came into being in 2015/2016. It’s a brand new industry and yet it has had an outsize impact on how we all manage our finances.

Back then, the legacy banks looked vulnerable. Most were still reeling from the global financial crisis of 2008/2009, and the narrative was focused on the new banks potentially taking meaningful market share.

As a reaction, the legacy banks embarked on wide-ranging and often expensive digital transformation efforts to keep pace with the challengers. Fast forward to 2022, and much of the functionality pioneered by the challengers has been successfully implemented by the legacy brands. An instant phone notification when you make a transaction? It felt pioneering in 2016, now it feels ordinary and expected.

The challenge that neo-banks have is not around adding more and more features (arguably there are only so many different ways we want to interact with our bank), but that to become profitable and survive, they have to become the very thing they used to fight against – a financial services provider that offers profitable services like loans, overdrafts, and mortgages. This is a process that many have undertaken already, with some success.

So, the battle for market share can be summed up like this: either the challenger banks reorientate their business models to focus on profitability, or the legacy banks innovate them into irrelevance.

Legacy banks might feel dramatically unprepared for the fight. But that ignores their greatest strength: people.


The shift away from high-street banking presents opportunities

The legacy banks are still grappling with digital transformation, but this presents opportunities as well as potential threats. Last month, Santander Group became the latest retail bank to scale back its high-street customer-facing operations presence when it unveiled plans to shorten its branches’ opening hours.

The news came a month after Lloyds Banking Group also closed more than 60 UK-based branches. While the withdrawal of retail banking from the high street has not come without resistance from the public, both banks cited a decline in branch usage as the cause for the scale back.

As of January, more than a quarter of British adults had opened a digital-only bank account – three times more customers than in 2019 – and this rise doesn’t seem to be slowing down.

Ultimately this feels like the right approach, and traditional banks have some way to go before their digital offerings can keep pace with the challenger banks. In the same month that Santander announced it would be scaling back customer-facing operations, the Spanish bank also revealed that it had migrated 80% of its IT infrastructure to the cloud. Whilst clearly a positive step, it will come as a surprise to those not in financial IT that this is news in 2022 when most non-banking companies have a well-established cloud strategy.

Encumbered by ageing and creaking tech stacks, the legacy banks will struggle to keep pace unless they can speed their digital transformation efforts. All the while, the likes of Starling are doubling in valuation. In this case, the proceeds of a recent £130.5m funding round will provide “a war chest for acquisitions” as the challenger continues to scale.

Legacy banks have an enormous, diversified workforce, while challenger banks take pride in their ‘tech-first’ approach to hiring. Recently, the CEO of challenger bank Revolut stated that its “headcount is mostly genius data scientists, product and business people rather than bankers”.

Legacy banks can’t necessarily compete with that hiring strategy, which is no surprise given the findings of a recent Udacity study where 55% of UK businesses claimed they couldn’t hire the right job-ready talent, resulting in the slow down of digital transformation efforts.

However, the solution may be closer to home. Banks must look inwards and utilise the invaluable talent that they already possess. As the trend of branch closures continues, legacy banks should look to retain and retrain staff with digital skills via talent transformation initiatives. For instance, Lloyds recently stated that it would try to find new roles for the 124 staff that have been impacted by recent bank closures, recognising the “need to adapt to the significant growth in customers choosing to do most of their everyday banking online.”

With a range of talent transformation services already on the market that provide ready-made technical skills training, traditional banks such as Lloyds have the option to seamlessly retrain their branch staff into more digital-focused roles. For instance, an underwriter could utilise their existing industry knowledge to make better credit and lending decisions with the help of AI and data analytics. Equally, future-thinking banks are beginning to leverage data science to help their fraud departments improve customer security.

By enrolling existing employees on talent transformation initiatives in AI, ML, and data science, traditional banks can tap into a readily available talent pool that possesses invaluable industry knowledge that can then be combined with the technologies of the future.

It was once accepted that traditional and challenger banks have different offerings to serve different demographics, but this view has all but vanished. To keep on top, legacy banks must remind themselves of this fact, while also recognising that their people are their biggest asset. Amid a digital skills crisis and the Great Resignation, banks must equip their staff with the necessary skills to remain valuable as we journey into a new age of digital-first banking.

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