Banking Must Embrace Digital Tech's Full Potential For Customer Engagement

Rob Hetherington

The banking industry is no stranger to digital technology. A short-lived online home banking service was offered in 1981 by four major New York City banks (Citibank, Chase Manhattan, Chemical Bank, and Manufacturers Hanover). In 1983, the Bank of Scotland offered an Internet banking service. Many other early adopters followed in the 1990s as they introduced us to online and mobile banking services that now are commonplace around the globe.

Although digital technology in banking dates back over 30 years, incumbents haven’t fully embraced technology innovation rapidly or robustly in recent years. This slow evolution has opened the door for innovative non-traditional competitors, such as financial technology (fintech) startups, next-generation banks, and non-banking institutions.

PayPal, a company that revolutionized digital payments, is a prime example. Telecommunication companies are in the mix now too, as they offer an array of banking services in emerging countries through mobile devices. There are also  multitude of fintech organizations that provide everything from peer-to-peer lending, to financial planning and credit card processing.

These non-traditional vendors cherry-pick the most profitable services and erode the profitability of the incumbents. Incumbents are feeling the pain of this disruption – a seasoned executive in the banking industry recently described this growing trend as an “existential threat” to his business.

Protect the greatest advantage: customers

While banks may not have capitalized on technology, they do have a distinct advantage over fintechs: their vast existing customer base.  One bank CEO recently mentioned that he would rather play his hand than that of a fintech startup. The bank has 15 million plus existing customer relationships, while most startups have few or none. These precious relationships clearly give banks a major advantage if they can protect and nurture them appropriately.

To prevent customer churn, banks not only need to provide higher quality services to their clients, but they must also compete with fintechs and other challengers by leveraging digital technology. Banks need to implement a comprehensive and  proactive approach to customer engagement that:

  • Combines structured, existing in-house data with unstructured social media analytics to better understand customer purchasing habits, needs, and behaviors
  • Utilizes predictive analytics to anticipate and satisfy customer needs. Big Data combined with the speed of in-memory computing helps banks to identify more relevant offerings and services ahead of demand.
  • Leverages digital solutions to personalize customers’ experiences and creates  seamless engagements for customers through multiple channels and touch points
  • Creates opportunities to collaborate with non-banking organizations to build joint propositions that appeal to customers’ holistic needs
  • Capitalizes on digital networks to extend a bank’s reach into a broader array of customer “value chain” activities for better visibility into customer insights

Customer satisfaction always wins

When banks focus on improving their digital  strategy, customer loyalty increases, which ultimately opens a pathway for cross-selling opportunities.  SAP helps banks to harness digital and mobile technologies, real-time analytics, real-time data platforms, and creates truly personalized omnichannel banking services. With SAP solutions, banks gain the flexibility they need to keep up with the ever-changing  customer expectations, demographics, and demand.

To learn more, visit SAP Digital Banking.

Rob Hetherington

About Rob Hetherington

Rob Hetherington is the Global General Manager of Financial Services Industries at SAP. He is an experienced, broad-based, general manager and consulting leader who has worked predominantly with major banks and other significant financial insitutions globally on critical strategic initiatives and IT-enabled transformation programmes.