Traditional retail banks have an unprecedented opportunity to increase customer loyalty and advocacy, market share, and revenue in the wake of rising competition.
However, this opportunity stems from the fact that big industry players are more at risk from emerging organizations and non-traditional players than they have ever been. In recent years, fintechs have introduced completely new business models to shake up the industry – for example, loan approval times that previously took days, if not longer, have been greatly reduced. Retailers and telcos are offering financing options as part of their value chain, and companies like Apple, Facebook, and Google have all launched mobile wallets as payment solutions.
Customers today have more choice and opportunity to engage with banks and non-traditional banks than ever before. How the traditional banks respond to this new world of digital banking will define whether they sink or swim. All of them want to be digital banks, but does this resonate with their customers?
Findings from SAP’s 2016 Australian Digital Experience Report show the banking industry has more consumers that are unsatisfied than are delighted with the digital experiences provided. The business outcome of getting digital interaction right in Australia is huge, as customers delighted with the digital experiences are five times more likely to remain loyal over those unsatisfied and more willing to share personal information such as buying preferences. Customer insight and understanding are where the business is; and using this data to better personalize (without the creepy factor) only comes with accurate, appropriate, and timely information.
As traditional industry players equip themselves with the resources and capabilities they need to thrive in this new market and satisfy customer expectations, what do they need to focus on?
Reimagine business models
The starting point of any transformation is to reimagine your business by placing the customer at the center. This means:
- Going beyond banking: Traditional retail banks need to extend their value chain to proactively manage their customers’ financial matters and become an integral part of their daily lives. For instance, when a customer buys a home, the bank should offer a loan and a comprehensive set of services that are part of home ownership.
- Building a new marketplace: Offering platforms for corporate partners, such as fintechs, banks can in turn provide additional offerings, giving customers a one-stop-shop experience meeting their every financial need.
- Integrating with others: By integrating their own offerings more deeply into the value chains of telcos and retailers, banks can extend their reach beyond their current customer base.
- Embracing mobile and cloud: Cloud platforms and mobile services mitigate the high expenses associated with building and supporting a branch network, enabling banks to profitably offer services to the unbanked.
Reimagine business processes
Having identified the frameworks for new business models that enable banks to deliver experiences that delight customers, the next phase is ensuring the IT infrastructure supports them. Banks need IT systems that empower them to analyze data from structured and unstructured sources, like social media, in real-time and that allow them to seamlessly engage with customers across platforms.
If done correctly, banks can use these insights to rapidly launch new products to satisfy market demand, personalize marketing materials to drive business outcomes, quickly react to the latest regulatory requirements, and introduce new forms of customer engagement. I know of a bank that can now adopt a change in regulation and be market ready largely within 24 hours.
The new business models and processes will require a workforce with digital skills and competencies in order to be successful.
We have all heard of STEM education requirements for the future, and the current shortages threatening the rapidness of change required by our own expectations. Overlay this with the focus around lean-style startup approaches and entrepreneurial thinking, rapid prototyping, and experimentation, all delivered in an agile fashion; these digital skills, and I could argue culture, are becoming more intrinsic to an organization’s success.
Developing and acquiring these skills within existing workforces will help banks to:
- Enable innovation: With banks needing to manage increasing volumes of data, it’s critical they embrace connected technology to automate manual procedures and workflow, empowering employees to focus on the customer journey and add value to the business.
- Unlock the power of mobile: Banks need intuitive mobile solutions for service, sales, teller, and branch manager applications. These solutions can offer full-service and transaction capabilities, guided cross selling, needs assessment analysis, and other productivity capabilities that drive continuous engagement and high-touch customer experiences.
- Deliver quick access to information: Real-time digital information on the right devices is critical when advancing the business agenda through staff engagement, especially in a world relying on physical and virtual workforces.
Thriving in the new banking industry
There is a huge opportunity for banks to play a more integral role in their customers’ lives, providing better digital experiences, making it easier to process payments, manage funds, and seamlessly interact with the world around them. Imagine a bank that can truly manage a customer’s stage of life expectations and go beyond just financial services.
Banks cannot afford to rest on their laurels by providing merely functional and transactional services anymore. The technological capabilities are there for traditional players to embrace change and evolve to go beyond existing consumer demands to offer new innovative services that will drive the industry forward for the good of the customer.
For more insight on how digital technology is affecting the financial industry, see Why Fintech Will Not Kill Banking.