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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.

 

Banking

HOW IDENTITY IS SECURELY UNLOCKING THE SME BANKING MARKET

By Mike Kiser, senior identity strategist at SailPoint

 

Have an identification card in your wallet? With a selfie and a few short minutes, you could have access to a business bank account.

Small and medium enterprises (SMEs) have long been the fuel that drives the global economy, representing around 90% of businesses and more than 50% of employment worldwide. Over the last few years, a range of financial services and platforms have arisen over the last few years to support the banking needs of these organisations. They are often digital natives and are innovating to meet the needs of their clientele.

This innovation provides great ease-of-use and rapid access to credit but also demands a careful consideration of their assumed security approach. The aforementioned scanning of an identity and a quick photo to establish a bank account demonstrates the rising importance of identity in both the consumer and enterprise arenas.

The blurring of the lines between personal and corporate identities (in this case, an individual acting on behalf of a small business) is still in its infancy. Combined with the ubiquity of mobile devices, individuals will tire of maintaining different accounts, different personas, different lives for each activity. Usability will demand that identity be reusable, portable, and secure.

This has massive implications for enterprises and the financial institutions that serve them if they seek to prevent cyber-attacks; thankfully, the same element that presents the security challenge also offers the solution: identity.

 

A New Vantagepoint 

Just as individuals desire a single identity to unify their interaction with disparate parts of the world, organisations can use identity to grant them a single, holistic view of an individual (attributes, access, and behaviour) rather than seeing only a fragment at a time. This is particularly important for these new financial institutions—much of their technology stack is cloud-based, which often leads to splintered security approaches. An identity-based approach must be cloud-aware, and able to distil these complex environments into simple and easily governed infrastructure.

This collectivisation also allows security to use identities in the aggregate: to see what groups of similar individuals exist, what access these groups have, and what their usage of this access typically is. All of this contributes to the establishment of what normal is, whether it’s attributes, access, or behaviour. Once the “normal” is established, then the outliers—the potential threats—may be quickly triaged.

 

Adaptability: The New Imperative 

The recent wave of change has demonstrated that financial institutions and organisations must be ready to adapt quickly to shifts in the environment. Portions of IT staff and services have been furloughed, and adjustments to new realities are essential. An identity approach that learns from the evolution of changes in the previously established areas of normality can grant enterprises the ability to see what is coming next and invest appropriately. Much like a view from an elevated position grants the ability to see beyond the normal horizon, basing a security strategy on identity makes it inherently adaptable.

 

Identity: Innovation and Security Intertwined 

Identity, then, is a foundational consideration for financial institutions seeking to provide services for the perennially important small and medium enterprise sector. By eradicating barriers to entry that have historically kept financial organisations and enterprises apart, it is driving rapid adoption and a growing market for innovative banking. At the same time, it shows the path forward to securing those new services in a pre-emptive, adaptable way.

Now if you’ll pardon me, I must go open a bank account for my next start-up—from my mobile.

 

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Banking

OPEN BANKING: ARE CONSUMERS KEEPING AN OPEN MIND?

Last September, the European Union’s regulatory requirement for banks to open up their payment accounts via application programming interfaces (APIs) came into effect. Since then, open banking has taken centre stage within European retail banking and payments. In this blog, Elina Mattila, Executive Director at Mobey Forum, shares insight into how emerging consumer attitudes may impact open banking services in the coming months.

It has been over six months since the revised Payment Services Directive (PSD2) came into full effect and with it, required banks to allow third party providers to access payment initiation and account information. While the regulation was designed to facilitate open banking, the market demand was uncertain. Would we, as consumers, choose to embrace the new services enabled by open banking? And if so, under which conditions?

To understand consumer attitudes, Mobey Forum and Aite Group partnered on a pan-European study to determine the appetite for open banking services amongst 1000 consumers in Finland, France, Germany, Spain, and the United Kingdom. The study, launched in November 2019, revealed many important consumer trends and attitudes, including key priorities and potential barriers for adoption.

 

Consumer appetite for change

The consumer benefits of open banking are largely perceived to be compelling, yet this counts for little if the providers of those services are not deemed trustworthy. This is an observation reflected in the study, which highlighted consumer confidence in service providers as critical to open banking adoption. People want clear visibility of who is managing their finances, and the overwhelming majority (88%) would prefer their primary source of open banking services to be their main bank, as opposed to other banks or third-party providers (TPPs).

Consumers also indicated high levels of trust in their current bank of choice, reflected by 77% preferring to use a financial product comparison service offered by their main bank. By enabling customers to compare the pricing and conditions of a range of financial products on the market, they feel more comfortable that banks have their best interests at heart. This is a welcome trend, and one which should be celebrated in the aftermath of the 2008 financial crisis. For the banking industry to have rebuilt trust levels in this way bodes well for consumer adoption of future innovations.

With a trusted provider, one third of consumers were then either ‘very interested’ or ‘extremely interested’ in integrating open banking services into their financial routine. This applied to specific use cases: account information services (32%), pay by bank (33%), purchase financing (25%), product comparison (35%) and identity check services (35%). Unsurprisingly, consumer willingness to adopt these services relies heavily on providers continuing to prove that they can be trustworthy stewards of personal data.

 

Consumer concerns

For those unwilling to adopt open banking, concerns largely focused on reservations around security and privacy. As open banking becomes more sophisticated, it will be interesting to analyse the nuances around how consumers engage with third parties. Established brands are perhaps more likely to be trusted by consumers than lesser-known online retailers. For this reason, consumers may hesitate to engage newer companies than brands they are already familiar with. In an industry as varied as finance, this creates additional intrigue in the ongoing battle for market share between the newer ‘challenger’ banks and the older, more established European banks.

Consumers might, however, be willing to deprioritise trust and, instead, favour convenience and usability. When questioned over their willingness to adopt a new payment method, for example, 91% of respondents indicated that they could be tempted to switch either by financial incentives or the promise of greater convenience.

 

The path forward

While open banking is still in the relatively early stages of development, it has made significant progress in a very short period of time. Not only is it allowing consumers to share financial data with authorised providers as they wish, but it is set to spark more competition and innovation within the market.

From a business perspective, open banking is expected to create lucrative new revenue streams, particularly for companies which are able to innovate quickly and react to consumer demand. It is prompting consumers to reconsider how they manage their finances and – most excitingly – it’s not even close to reaching its full potential. It should bring a whole new era of service partnerships between banks and TPPs, which will enable a new generation of innovative financial services.

For the industry to truly fulfil its potential, it is vital that stakeholders are able to explore new business models, innovations and changing customer expectations for open banking in a commercially neutral environment. Mobey Forum’s open banking expert group provides exactly this, and we look forward to supporting our members as they shape the future of digital financial services.

 

Where to find out more

The opportunity for open banking is explored in more detail in a report by Mobey Forum and Aite Group, entitled Open Banking: Open Minds? Consumer Appetites for New Banking Services. It provides banks and other financial services stakeholders with a market view on consumer appetites toward new open banking services and explores the possible roadblocks to consumer adoption. It is also discussed in a podcast featuring key representatives from Interac, Erste Group Bank and Strands Finance.

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