Trend #2: Removing Friction from the Customer Journey
The banking industry continues to talk about ‘customer-centricity’ and ‘improving the customer experience’, but most organizations have had difficulty breaking down product silos or leveraging internal data to deliver a contextual digital experience. Long-term sustainable growth in the banking industry seems only possible with a radical departure from a sales and product obsessed mindset to one of genuine customer centricity, and further rationalization of strategies to target the right markets, customer segments, and solutions.
According to the Digital Banking Report, the objective of delivering a positive customer experience has become secondary to other bank priorities, resulting in a transactional banking relationship with the consumer. For financial organizations to change this dynamic, and meet the evolving needs of today’s consumer, there are five areas that have emerged as crucial priorities:
- Move the focus of digital engagement from cost reduction to experience enhancement.
- Leverage advanced analytics, machine learning and contextual engagement to provide a highly personalized experience.
- Allow the consumer to engage with their bank on the channels they prefer at the times they want to engage.
- Transition advisory and sales activities from being reactive to being proactive.
- Engage end-to-end throughout the customer journey, from shopping to account opening, to onboarding and through relationship expansion.
As the banking industry responds to the “Age of the Individual”, big data and advanced analytics will define the winners from the losers. It is critical for banks and credit unions to deliver on the personalization promise to win the battle of having the best customer experience.
As stated by Ron Shevlin from Cornerstone Advisors in his contributed article, “It’s time to downplay customer experience improvements and up-play product reinvention. Banks can no longer afford to let their products be the horse and buggy of the 21st century.”
Insights from the 2019 Crowdsource Panel
“In 2019, we’ll see banks and credit unions evolve their digital transformations into a human banking approach that focuses on experiences rather than simply selling products to their customers. For example, a human-centered bank won’t just provide a mortgage for a customer who is purchasing a house across the country. They’ll help streamline the entire moving experience by connecting the customer with an ecosystem of partners ranging from moving companies to health care professionals in their new area. Unified data and intelligent insights will power this transformation, which depends upon deeply knowing customers’ finances, goals, and relationships.” – Rohit Mahna, SVP & GM Financial Services, Salesforce
“Increased competition and an accelerating M&A pace will favor those institutions that deliver the best customer experience, dialed-in for each segment of their base, delivered consistently across all products, services and channels — how, when and where their customers desire.” – Jana Schmidt, President of Harland Clarke
“In 2019, banks will embrace a hybrid workforce strategy — offering conversational self-service to customers across channels, and seamlessly connecting to human employees as needed to handle complex questions and concerns, leveraging AI and automation to improve efficiency and customer experience.” – Jenni Palocsik, VP of product strategy operations at Verint
“After several years working on digital transformation, banks now are finally ready to jump into the ‘genuine value banking’, where customers find once again a trustful partner.” – Maria Jose Jorda Garcia, Chief Innovation Officer at BBVA Microfinance Foundation
“Real-time digital customer engagement will continue to be a key focus for financial organizations in 2019. The processes, tools, and algorithms required to measure customer satisfaction will need to mature beyond trailing indicators such as Net Promoter Score and voice-of-customer surveys. Investments in sophisticated customer intelligence systems will prove to be critical to delivering service excellence at scale.” – Craig McLaughlin, President of Extractable
“More community bankers will realize that they can accomplish digital transformation without surrendering human connection, which is, after all, their primary differentiator. More tools and partnerships will be available to help them achieve personalization with customers in digital space.” – Joe Sullivan, CEO of Market Insights, Inc.
“Creating a great client experience will become the mainstay in 2019, whether through the physical or digital channel. A bank that does not create a holistic approach to the client experience will not be able to compete.” – James Anthos, previous SVP and Director of Strategic Planning at BB&T
“The digital technologies and ‘network effect’ cause a dramatic change in the traditional banking paradigm — ‘transactional banking’ is disrupted by ‘experience banking’. The future KPIs should focus on experience-related metrics rather than selling-centered ones to avoid millions in losses over the long term.” – Alex Kreger, CEO of UX Design Agency
“Financial wellness will become the new digital engagement strategy. FIs will start implementing a new set of financial wellness strategies that will move from making consumers aware of the financial picture to one that offers real-time digital advice and guidance.” – Tiffani Montez, Senior Analyst at Aite Group
“In 2019, we will see financial institutions moving from the traditional product and service offering — one size fits all — to a truly hyper-personalized type of banking, where banks provide customers with tailored products that better fit the customers’ short and long-term goals. All this heavily powered by big data and ML/AI.” – Sofia Flores, Product Manager for Retail Banking at Backbase
“Smart technologies, processes and enablement will provide a giant leap forward — not the usual incremental gains — in personal and automated client experiences.” – Chris Fleischer, Director at Fiserv
“2019 will be the year in which rate takes a back seat to other relationship drivers, such as customer experience. Net interest margin pressure is extraordinary and rate is not sustainable as the sole basis for competition.” – Rick Spitler, Co-CEO of Novantas
Trend #3: Expanded Use of APIs and Open Banking
Open banking provides both a threat and opportunity for financial institutions in the future. Banks and credit unions can either sit on the sideline, or leverage the power of open APIs to compete with both small and big fintech providers. This is a global requirement that extends beyond those regions where regulations regarding open banking and shared APIs have been implemented.
Regulations around open banking, like Europe’s PSD2, will soon prove to be a boon for technology giants like Google, Amazon, Facebook, Apple and other tech giants — providing wider access to consumers’ financial data (currently held by banks) and allowing these firms to restructure their marketing strategy towards product/service expansions. With consumers in their 20s and early 30s becoming more and more receptive towards banking services offered by non-financial services companies, open APIs come at an opportune moment for these tech giants.
Third-party service providers accessing banks’ financial data may pose a threat for banks. For example, by using the customers’ data they can offer real-time finance management services, which traditional banks have been slow to embark upon.
However, banks can turn this threat into opportunity through careful positioning and should avoid turning their back to initiatives like open banking APIs. Rather than making room for fintech firms to innovate, banks and credit unions should capitalize on this opportunity to infuse innovation with their existing range of products.
In the end, preparation for the future of open banking will pay off and potentially protect legacy financial organizations from some competitive threats that are already advancing on their prime customers and members.
Insights from the 2019 Crowdsource Panel
“As the U.K. bank ‘remedies’ regime evolves and PSD2 hits in September, the coming year will demonstrate clearly what many of us have been postulating for some time: ‘That open banking is a much bigger deal than you think’. It’s not about account aggregation and dashboards, it’s about shifting the balance of power away from the banks in an always-on connected society.” – David Birch, Global Ambassador at Consult Hyperion
“In 2019, banks will be focused on two decisions that will be pivotal to their future business model – their level of autonomous banking and their degree of participation in or construction of an ecosystem model.” – Nicole Sturgill, Principal Executive Advisor at CEB, now Gartner
“Open Banking will continue to wither on the vine with little to no consumer value being recognized from aggregation services. A paradigm shift is needed in how we think about open banking. The value resides in the underlying API economy, still under-looked in much the same way as blockchain ledger technology was when we all marveled at bitcoin.”
– Daryl Wilkenson, U.K. Managing Director and Global Digital Lead at United Outcomes
“Open Banking will lead banks to open their IT infrastructures to third-party providers, fostering innovation and partnership with fintech firms and creating a friction-less banking experience for even more demanding customers. This can translate into new sources of revenues and great customer experience.”
Antonio Grasso, founder of Digital Business Innovation Srl
“Open banking will result in a growing ecosystem outside banks with traditional banks losing their unique identity. My (hidden) champions in this ecosystem will be voice, digital assets and tokens.” – Andreas Staub, Managing Partner at Fehr Advice
“With the European Banking Authority’s Strong Customer Authentication requirements due to come into effect in September, 2019 looks to be an important year for PSD2 and adoption of Open Banking. It will also be interesting to see if merchant payments are going to start migrating to account-to-account rails, particularly in markets where cards are strong today.” – Zilvinas Bareisis, Senior Analyst at Celent
Trend #4: Improving Multichannel Delivery
As banks and credit unions around the world retool their branch experience for the digital age, many are pouring more tech into their brick-and-mortar environments. But such digital investments might do little more than simply delay the physical delivery network’s eventual obsolescence.
As has been stated frequently, becoming a digital organization goes beyond simple redesign or replacing tellers with technology. A digital branch network requires a complete rethinking of digital delivery and how the branch works with other channels. It requires much more than replacing paper. Entire processes must be rethought, with the development of a personalized customer experience at the forefront.
The goal should be to migrate more than 90% of simple customer activities to assisted or self-service formats, while having 90% of employee time spent on targeted, analytics-driven activities. Technology in the branch will assist both the consumer and the employee, with new data sets available that will reduce misappropriated resources.
The financial impact of transformed branches will include human cost savings from transaction migration and the real estate cost benefit of smaller branch footprints. At the same time, new analytics and targeted communications will improve sales results.
Once all of the processes are optimized for digital delivery, consumer insight should then be leveraged to determine the number, size and location of physical branches. Not the other way around. While the result will not be the “death of branches”, the need for branches in the future will be significantly less than today.
Insights from the 2019 Crowdsource Panel
“High performing institutions will be focused on ‘audience-of-one’ highly personalized relationship marketing programs to their customers. Relevant, timely and actionable pieces of multi-media content delivered via a personalized URL (PURL) will be the next big trend in digital marketing.” – Scott Hansen, Chief Marketing & Strategy Officer at Harland Clarke
“To remain viable, financial services brands will dramatically increase their investments in sophisticated platforms that orchestrate the continuous delivery of personalized experiences — through digitally-empowered relationship managers, automated customer care centers, and AI-driven self-service interfaces.” – Wilson Raj, global director at SAS
“As adoption of remote channels becomes more reliable and less complex, digital and in-branch experiences will become increasingly similar and interchangeable, with potentially less dependence on in-branch banking. In order to do this, banks must invest in innovative cutting-edge technology to give customers the same experience when banking in person as remotely.” – Bill Safran, CEO of Vizolution
“Financial institutions will re-think their approach to ‘branch transformation’ to be more about the customer journey and less about implementing self-service technology. Consumers still use branches — they just use them differently. But when they drive to a branch, park their car, and walk in they still want personalized service, not just another automated alternative. We need to use technology more to support front-line staff in providing advice and support, not just providing another alternative to what can already be done on mobile apps or the internet.” – David Kerstein, Founder of Peak Performance Group
“Customer preference for full self-service will result in more banks enhancing their mobile capabilities to stay relevant in 2019 and beyond. In addition, competition for deposits will heat up significantly driving banks to increase rates.” – Alpine Jennings, Director, Product Management at State Farm Bank
Trend #5: Building Fintech Partnerships
The banking ecosystem is in a state of transformation. New fintech entrants are coming into the marketplace regularly, while traditional providers are trying to adjust to the realities of digitalization, advanced technology and increasing consumer demands. Traditional financial institutions and fintech firms now understand that collaboration may be the best path to long-term growth.
Understanding the opportunity for collaboration with fintech firms and being able to take action on this opportunity are not the same thing as traditional banks and credit unions hope to jump-start innovation. Between differing cultures, vastly different infrastructures and an ever-changing compliance playing field, collaboration between banking and fintech is far from simple, derailing many proposed partnerships.
The rationale for any strong collaboration is the ability to bring a synergy of strengths together that create an entity stronger than either individual unit could bring on their own. For most fintech organizations, the primary differentiators are an innovation mindset, agility (speed to adjust), consumer-centric perspective and an infrastructure built for digital. These are obviously advantages that most legacy organizations don’t possess.
Alternatively, most fintech organizations lack the ability to scale adequately due to brand recognition and trust. They also usually lack capital, knowledge of compliance and regulations and an established distribution network. These are inherent strengths of traditional banking organizations.
The real goal for banks and credit unions is to find the right mix of fintech solutions and traditional banking. Play to the tried and true strengths of each type of organization while also opening up to new opportunities to access tools that will empower consumers and reinvigorate marketing opportunities.
Insights from the 2019 Crowdsource Panel
“As mobile banking matures and commoditizes, banks find it getting difficult to differentiate through digital experience. Many will re-focus on branches hoping to differentiate with human touch. Others will seek to provide innovative services by integrating with non-banking fintech partners.” – Danny Tang, Worldwide Channel Transformation Leader, Global Banking at IBM
“Community financial institutions will face expansion in net interest margins in the next 18 months. Innovative fintech firms will focus on acquisition and analytical tools to better retain and gain deposits for partner traditional banks of all sizes.” – Tom Shen, advisor for Malauzai Software
“Large financial institutions will continue to stretch their asset dominance in the U.S. through solution acquisition, digital product offerings, hiring talent, and strong tech partnerships. The super regionals and top 100 banks will look to partner with fintech firms to build offerings specific to their customer needs. The smaller banks and credit unions will face even more of a technology product gap and have to look for unique engagement/joint product offerings in order to compete.” – Sam Maule, Managing Director, North America at 11:FS
“The fintech ecosystem will go inclusive, vertical and (even more) collaborative in 2019. There will be a number of adjacencies crossing the fintech space, with the B2B (corporate), pension and wealth management, and the real estate world bringing additional opportunities for new business models and innovation.” – Matteo Rizzi, Co-Founder of FinTechStage Limited
“P2P lending and investment platforms will be tested as the economy starts slowing down. The question always was if fintech newcomers will be able to weather the recession. When the music finally stops playing, we’ll see who is left standing.” – Alex Nechoroskovas, Founder of Fintech Summary
“There will be some fintech firms that will continue to survive on their own, but there will be a lot that will not be able to succeed without partnerships. When we think about some of the challenges that fintech firms will have, it will continue to be things like scale and distribution, which they can get through partnerships.” – Bill Sullivan, Vice President – Global Head of Financial Services Market Intelligence at Capgemini
“We will continue seeing what I call ‘the complete open sourcing of financial services’ through apps, APIs and analytics. The front office relationship is in an app, the middle office processing is through an API, and the back office is all about analytics. And all of this will be done by a lot of specialist fintech companies that have narrow focus.” – Chris Skinner, CEO at The Finanser, Ltd.