Banks must plot a digital route to regaining relevance

Technology

Dig­i­tal dis­rup­tion has reshaped almost every indus­try in recent years, but one which has been among those slow­est to change is finan­cial ser­vices.

In part, this is down to con­sumer demands. In oth­er indus­tries, such as retail, con­sumer pres­sure has dri­ven brands online and forced them to trans­form the way they serve and engage their cus­tomers. But in finan­cial ser­vices, con­sumer pres­sure has been less demand­ing. Many cus­tomers have still want­ed face-to-face inter­ac­tion with their banks.

Many banks have also seemed will­ing to embrace this lack of urgency for more sophis­ti­cat­ed dig­i­tal ser­vices, per­haps because it has allowed them to defer the task of unrav­el­ling crit­i­cal lega­cy sys­tems and try­ing to mod­ernise age­ing infra­struc­ture and high lev­els of man­u­al process, based on paper­work and forms.

Fur­ther­more, the suc­cess of estab­lished banks was some­thing of a self-ful­fill­ing prophe­cy. Peo­ple have always need­ed banks, whether they liked it or not.

But now banks are com­ing under pres­sure to trans­form, because con­sumers have more choice and more oppor­tu­ni­ties to break with their old banks. Inno­v­a­tive fin­tech start-ups are eat­ing into their busi­ness from beneath, and dis­rup­tive brands such as Ama­zon are threat­en­ing to crash into their busi­ness from above.

These threats to the future of tra­di­tion­al banks are also exac­er­bat­ed by con­sumer atti­tudes, shaped unfavourably by events since the finan­cial cri­sis of 2007 that have left them look­ing like ‘the bad guys’ of glob­al busi­ness, dis­liked by many con­sumers, par­tic­u­lar­ly the much-dis­cussed ‘mil­len­ni­als’. As younger gen­er­a­tions wres­tle with an econ­o­my where the odds can seem stacked against them ever own­ing a home, or escap­ing from stu­dent debts, the banks have square­ly been placed on the ‘them’ side of ‘us and them’ trib­al divi­sions.

The need for social trust

Banks have always enjoyed a cog­ni­tive trust among con­sumers. Most peo­ple know they will look after our mon­ey and do what we pay them to do. But what they have strug­gled to estab­lish is a social trust which car­ries a lot of cur­ren­cy among more dig­i­tal­ly-mind­ed con­sumers who live their lives on the inter­net and whose opin­ions are often shaped by the polar­is­ing, emo­tive dis­cours­es they are a part of online.

In response to this, banks must rebuild rela­tion­ships with con­sumers and estab­lish their rel­e­vance.

The cre­ation of bet­ter dig­i­tal ser­vices needs to be at the heart of that push for rel­e­vance and must estab­lish a thread of con­sis­ten­cy through all touch-points between a bank and its cus­tomers, both online and offline.

Banks need to cre­ate more per­son­alised ser­vices and deliv­er on cus­tomer expec­ta­tions of speed and ease of use.

The good news is that many are already doing so. They are learn­ing to make smarter use of their data and embrace tech­nolo­gies such as AI and machine learn­ing to speed up the back-end of their busi­ness and empow­er the front-end to be more cus­tomer friend­ly. They are using dig­i­tal doc­u­ment man­age­ment to mod­ernise and speed up their process­es and make it eas­i­er to analyse mean­ing­ful data.

As they trans­form and dig­i­talise their busi­ness­es, banks also need to be take advan­tage of greater agili­ty to pro­vide cus­tomers with more flex­i­ble, more per­son­alised prod­ucts that they can eas­i­ly man­age.

There is no such thing as a typ­i­cal bank­ing cus­tomer any more. The idea that we work from 18 or 21 until we retire at 65, and along the way we buy a house, sev­er­al cars and start a fam­i­ly at 30, is no longer rel­e­vant. Our lives have changed and peo­ple rarely con­form to the tra­di­tion­al stereo­types of past gen­er­a­tions. Con­sumers need prod­ucts and ser­vices which acknowl­edge that fact with flex­i­bil­i­ty and per­son­al­i­sa­tion.

Final­ly, banks need to recog­nise they will nev­er fin­ish trans­form­ing.

Trans­for­ma­tion does not have a fin­ish line or an end point. It will always be ongo­ing. The changes we have seen in con­sumer expec­ta­tions and behav­iour in recent years are not a blip. Change will be con­stant as tech­nol­o­gy evolves and dis­rup­tion con­tin­ues.

At the moment, the trans­for­ma­tion most banks are under­tak­ing is a dig­i­tal trans­for­ma­tion, to cre­ate ser­vices that are rel­e­vant to mod­ern cus­tomers. But this will be ongo­ing and will need to be com­ple­men­tary to oth­er trans­for­ma­tions from cus­tomer ser­vice to review­ing and renew­ing prod­ucts, as well as evolv­ing busi­ness cul­ture to ensure they are not only main­tain­ing ser­vices which are rel­e­vant to con­sumers, but also a brand that con­sumers want to do busi­ness with.


Technology
Michael Plimsoll

Posted on 20-11-2018


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