We are all aware of how much the financial services industry has changed in recent years, as a result of both push and pull factors across the banking landscape. Synergizing the evolving needs of the consumer alongside the need for operational efficiency, increased competition, complex regulation and wider macro factors is no easy task; and this does not look to be getting any more straightforward.
It is therefore no wonder that many organizations within the industry are re-evaluating who they are, and equally who they want to be for the future. Repositioning banking from transactional to more of a ‘destination of services’ could be the breeding platform for renewed competitive differentiation, facilitated by digital capabilities.
Many of us now live in a digital-first world of banking and benefit from the flexibility this can bring. The younger Gen Z and millennial generations are often cited as being the most tech savvy, but it is not just this segment who are attracted by the convenience of digital. With the right engagement, and by enabling the adoption of services at varying paces for different generations, digital customer service can be a game-changing differentiator. It seems however, we are not quite there yet. The integration of digital into the overall experience is still hindered by friction points as well as the need for more personalized, tailored services, which shift the transaction from functional to favorable.
Personalization has been a hot topic within the industry for some time and for good reason. With nearly half (48%) of consumers citing their current banking experience was not emotionally connected
i , the opportunities for enrichment are ripe. Digitization holds huge potential to offer more contextualized customer journeys and a move towards more experiential banking could help facilitate this. For example, 74% of Gen Z and 71% of millennials would find it very appealing if their bank helped keep their savings in sight
ii , for example through an app suggesting additional saving potential or connecting a savings plan to a picture of something they are saving for. FinTechs are stepping up in this space, offering speedy account opening, visual saving spaces and mobile wallets.
However, taking this step forward may first require taking a step back; reviewing the fundamentals needed to achieve new depths of customer interaction through value added services. For example, not all financial institutions offer online basics such as current account opening, and those that do are experiencing higher abandonment rates for onboarding processes (up 68% in 2022 compared to 40% in 2016
iii ) suggesting further harmonization is required.
Traditionally many consumers have remained loyal to providers, but as expectations rise, we may see an inflection point where patience wanes and customers are willing to take the short-term inconvenience of switching to obtain services better suited to their needs.
As both the industry and consumers navigate this new path of evolution, does the answer lie in changing the face of banking and this shift to destination banking? JP Morgan can be described as a technology company, and Tesco Bank is a retail company with a banking license. Therefore, do organizations need to reimagine themselves as a customer company and not a financial institution? This certainly brings a new angle to the industry and focuses on cultivating the right customer journeys and experiences, as opposed to the delivery mechanism.
This is likely to be a process of evolution, but one factor we can be certain of is that now is the time to move beyond short-term resilience and focus on creating a solid foundation for the future.
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First appeared in Global Banking & Finance Review
iWorld Banking Report 2022, Capgemini
iiNielsenIQ International Retail Banking Consumer and Technology Survey commissioned by Diebold Nixdorf
iiiThe Battle to Onboard, Signicat 2022
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