6 Ways Digital Is Transforming the Customer Journey In Banking

In the span of a year the banking landscape has undeniably changed putting immense pressure on traditional institutions to innovate and build customer-centric solutions. The industry's future will be mobile-focused ‘ubiquitous banking,’ powered by interactive and intuitive engagement models.

The Covid-19 pandemic has been challenging and, at the same time, a transformative experience for banks and credit unions. While banking providers have invested in digital capabilities, the pandemic pushed them to rethink, redesign and re-engineer their business operations, services and products.

To ensure business continuity, financial institutions transitioned to remote working models of sales, digital outreach and customer support.

Apart from drastic operations changes, the pandemic also brought along a fundamental change in consumer behavior. Through social distancing and work from home, the average consumer’s life was confined to home. In that environment, there was a surge in the adoption of digital and self-service solutions — regardless of age — for daily transactions.

According to McKinsey, the industry “vaulted five years forward in consumer and business digital adoption,” in just eight weeks. Accenture notes that the adoption of mobile banking increased among first-time users in 2020.

COVID drives changes in consumer banking behavior

The Need for Change

Today’s customer journey is channel-agnostic. Consumers can start from the website, go to their mobile, chat with a bot, or pick up the phone and talk to a customer representative. Throughout the journey, even if their touchpoint is different, the customer expects the same experience regardless of the channel. For banks and credit unions, it’s crucial to build on this omnichannel need and not focus on improving only a single channel.

Even before the pandemic, the implementation of artificial intelligence (AI) chatbots was already on the rise. Over 2020, customers and members have come to rely on self-service platforms to minimize risks. Chatbots have been a reliable driver for self-service capabilities.

Using the advances in AI and machine learning, technologies like chatbots can be upgraded to present relevant offers to consumers and centrally manage requests across channels, so that people will have a contextually relevant interaction any time, across devices and interfaces. For instance, Swedbank uses a Nuance Intelligent Virtual Assistant or Nina for customer self-service.

How COVID accelerated digital at six banks

Amidst lockdowns, contactless interactions, and a slow economy the fintech sector has flourished. The need for social distancing pushed for critical banking process changes and a higher dependency on digital payments.

What the Competition Is Doing:

Digital-only neobanks, such as Atom, Monzo and Emirates Liv, have reported steady growth in the number of consumers, despite a rough start in 2020. Revolut’s app was downloaded 5.8 million times last year – double the total downloads of its competitors.

Most traditional financial institutions reacted to the pandemic with digital solutions as a patch job. Now with the world moving ahead, new and innovative digital solutions should take a stronger role to strengthen relationships across the customer journey.

We take a look at six of the touchpoints where banking providers can enable users to shift to digital.

1. Seamless Onboarding

First impressions go a long way in establishing a trusted banking relationship. With rising competition, the initial onboarding is crucial to retain the customer. Traditional onboarding processes are tedious, cumbersome and paper-heavy. Deloitte research reports at least 38% of customer dropouts during the onboarding process just due to the cumbersome process.

The pandemic highlighted the need for a seamless digital onboarding journey that quickly responds to the dynamic environment. Positive experiences for customers and members would be to reach their banking provider of choice through their preferred channel and get the information and support needed.

Banks and credit unions are utilizing an innovative mix of mobile, video, and web applications to deliver a personal touch to customer onboarding. Financial institutions like BBVA Switzerland are using video technologies to verify and enable “zero contact” Know Your Customer (KYC) checks for new users.

Whereas Bankia and Minsait ensure the security and better user experience of their products and services with video-identification solutions with features such as ID scanning, selfies, and video proof-of-life test for biometric data collation.

2. Banking-as-a-Service and Merchant Payment Options

The unprecedented need for contactless payments has led to the rise in e-wallets or digital wallets. PYMNTS research reported a 59% increase in Apple Pay across the U.S. Leading the change in India is the Unified Payments Interface (UPI) systems providing seamless mobile wallets and digital payment apps.

Driven by Millennial consumers, e-wallets are slowly replacing traditional payment methods. Banks and credit unions are increasingly shifting to e-wallets to enable smooth financial transactions across non-banking products and services with just a smartphone. YONO, offered by State Bank of India (SBI), is a standalone mobile banking platform with wallet services. SBI will soon follow a Banking-as-a-Service strategy with a plug-and-play model for domestic and international banking providers.

With an open market strategy, SBI will be extending its capabilities to smaller rural banks and credit unions – digitizing India’s large rural economy. The BaaS platform also integrates merchant services and shopping allowing easy cross-selling of financial products.

There are multiple instances of financial institutions helping the community with innovative initiatives that ease the life of consumers. Starling Bank, for example, offers its “Connected Card” to senior citizens and personal account holders with a supplementary debit card. This card can be given to trusted individuals to help them buy essentials, without having to share banking details or cash.

Digital payment value post pandemic

3. Engaging Effectively with Gamification

In the world of digital banking, gamification plays a strategic role in customer engagement. Banks and credit unions are partnering with Fintechs to provide gamified financial education to their customers and members. Banks like Ally Financial have crossed over into the world of video games by capitalizing on the buzz of “Animal Crossing.”

Ally’s idea was to create an interactive program to engage and teach young Millennials and GenZ consumers about finances – in exchange for “virtual turnips.” The initiative was such a hit that the virtual island had to shut down due to congestion.

4. Lending Services for Big-Ticket Items

A notable change in consumers is the shift in spending priorities. Collective fear of unstable markets and impending recession is pushing consumers to reduce spending on non-essential items. To ease the burden of purchasing big-ticket items many neo or challenger banks have introduced innovative micro-lending schemes.

For instance, Klarna, — a leading Swedish Fintech company — introduced the ‘buy now, pay later’ (BNPL) offer that provides a flexible, transparent payment solution to consumers. Klarna provides eCommerce payment solutions to merchants and shoppers. By understanding consumer behavior, Klarna encouraged its users to shop with zero-interest payment options.

Similarly, providers such as Tabby — a UAE-based BNPL fintech — appeal to a younger target audience to offer micro-lending schemes with no credit history. Tabby integrates with the merchant’s POS systems to allow consumers to shop and pay only 25% of the transaction value at checkout and the remainder is charged over three monthly installments. These solutions enable merchants to encourage shoppers who are hesitant to spend in an uncertain economy.

5. Personal Finance Management

As we head to a post-Covid world, experts fear the effects of recessions with high unemployment and low-interest rates. To help consumers, banks and credit unions must focus on enhancing customer journeys with a focus on personalized financial recommendations.

Similar to Amazon’s suggested buys or Netflix’s suggested movies, financial institutions must tap into their analytics capabilities to cater to goal-oriented planning. From pausing loan payments to resetting spending budgets to creating awareness of new government programs – banking providers can help people understand their finances better and make the right decision.

Artificial intelligence will play a crucial role in personal finance management. According to an Oracle survey, around 85% of business leaders want help from robots for finance tasks. Whereas 56% of the respondents believe robots will replace finance professionals in the next five years.

6. Complete Marketplace

Over the last few years, marketplace banking has gained considerable interest from incumbents, challengers, neobanks and account aggregators. The transition to marketplace banking comes at a time when consumers are shifting to non-banking entities such as GooglePay, PayTM, PhonePe, Alibaba, Amazon and Facebook.

To reconnect with people, banks and credit unions are moving toward creating one-stop platforms that let you do more than just basic banking. Early in 2019, DBS partnered with Singapore Airlines, Expedia Partner Solutions and Chubb Insurance Singapore to launch its DBS Travel Marketplace. The unique ecosystem of partnerships is boosting innovation, rapid product development, and increasing customer convenience with multiple reengagement points.

DBS wanted to reduce customer burden and provide valuable services by reducing the time and effort it takes to plan a vacation. Further, consumers also get free travel insurance, wherein DBS reward points can be redeemed.

Looking Ahead: ‘Ubiquitous Banking’ and Beyond

Over a year the banking and financial services landscape has undeniably changed. Now, as the economy shifts from ‘respond to recover’, banks and credit unions alike play a crucial role in restarting the economy. Keeping pace with the changing customer expectations has put immense pressure on traditional financial institutions to innovate and build new digital solutions. Juniper Research predicts that online and mobile banking users will exceed 3.6 billion by 2024, a 54% increase from 2020.

Through multiple lockdowns and stay-at-home orders, banking consumers have gravitated towards self-service digital experience platforms. The future of banking will be ‘ubiquitous banking’ or ‘banking anywhere’, most likely powered by mobile.

As banks and credit unions catch up with core banking modernization, some players are already looking at interactive and intuitive engagement models. For instance, Australia’s Westpac uses an augmented reality personal financial management tool to allow users to interact with their credit cards. Using the smartphone’s camera, the user hovers over their credit cards to view account balance, transactions history, spend history, and others in 3D bar charts.

Looking ahead, the banking industry is expected to build on customer-centric banking solutions and end-to-end digital models that are cost-effective, easily accessible, and self-service driven.

About the author:
Vivek Agrawal is responsible for driving Enterprise Business (Banks, Fintech & Retail) globally at Comviva. Agrawal works closely with banks and fintechs on various digital banking and payments solutions.

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