Why Banks must Keep up or be Left out
Banking is not somewhere you go. It is something you do.
This is a basic truth. This is how the new evolved customer sees it. And banks need to sit up and take notice of it as well.
Accenture reports that by 2020 as much as 35 percent of traditional banks’ market share in North America could be at stake thanks to new digital advancements. They go as far as saying that up to 25 percent of today’s roughly 7,000 North American financial institutions could be gone as a result of consolidation before 2020!
Every traditional Bank tries to come up with strategies to keep its head above water. Some think of increasing fees they charge on products. Or charge more interests on loans. Do they let go of a lot of people? Or shut down brick and mortar branches and move their activities online? Should they outsource their business to another country where it is cheaper to run it?
The Banking industry is seeing a whole gamut of new trends spanning delivery and payments, competition and operations, customer experience and marketing.
First of all the customer and his demands have changed. The customer is more evolved now. He wants the same kind of experience that he gets from other businesses he engages with – businesses that have gone digital and are able to give him a consistent customer experience across the various channels the customer uses. What a customer wants is for banking services also to be delivered to them as seamlessly and ubiquitously as any transaction that they would make on Amazon for example. It is not just great customer service – it is a lot more than that. It is all about delivering both service and sales through the channel the consumer chooses to use to engage with a bank. This calls for a complete change in the infrastructure and tools that some banks use – the existing legacy systems that they use cannot support the requirements that the new paradigm dictates. So unless banks ramp up their act and get up to speed, the customer will simply take his business elsewhere – because bottom line – all banks offer practically similar products and services. What attracts the customer of today is convenience.
The convenience that going digital brings.
Armed with smartphones and other mobile devices, the customer of today can research, purchase and manage his financial portfolio from wherever he is. The “drive-to-digital” is already competing with the “Drive-to-Branch” approach. The silos of traditional retail delivery channels are starting to crumble and a more holistic approach to digital banking is taking hold. The world is going mobile and banks are starting to offer features and transactions that can be done on it as well – anything from new kinds of authentication for security and ease, to more relevant and contextual information that can be sent to customers as alerts, push notifications and other forms of messaging.
Customer data and business intelligence can help the bank learn about the customer’s personal financial habits. The extent of digitisation is so great that, in time, some banks might only have IP addresses! There is already a growth in the presence of wearables, thumb print and biometrics readers that aid banking transactions facilitating easier payments and quicker sales processes. The payment disruption process is seeing a huge change as well. Merchants have their own apps. Like Starbucks for instance. Apple, Paypal, Square and Google already offer technologies like iBeacon, Beacon, Real-time P2P and HCE emulation. Mobile Wallets from Apple and Amazon are slowly taking transactions to mobiles and away from cards.
Increasingly, non-traditional players and new financial organisations like neo-banks, hardware providers, third party payment processors, and mobile app developers that merchants and consumers use are taking away from banks and credit unions, their erstwhile trusted role of being the collector of funds, provider of loans, and processor of payments and advisor of financial relationships. Banks are starting to offer video-based services for higher value, complex sales such as mortgages and investment products.
Just like it is in other sectors, the focus is primarily on the customer and what he needs. So what works now is a digital service and experience that is built around a customer’s needs. While banking products are what we call essentials to a customer, the way the bank offers these products to them is the differentiator. And banks are increasingly beginning to move towards digitising their
On the one hand, customers want real time access and simplicity in banking interactions. And on the other, increasingly, the present branch-based models are not sustainable. And so they “smart-size” their operations – branches are closed, footprints shrunk, and new technology is incorporated to digitize transactions while trying to retaining the human touch.
It is easy to see at the end of the day, that technology is changing even the banking industry. It is not just about taking things online. It is a lot more. There are things like wearables that disrupt pretty much everything. And banks need to pull out all stops to keep pace with the advancements in digital technology – but the way things are right now, it looks like things are moving faster than most banking organizations can handle.