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Challenger Banks going Digital to enhance customer experience, digital banking is a must. Magazine

Challenger banks are changing perceptions and practices, but how can they win trust? ByDominic Zammit, Head of Digital at global brand consultancy Industry.

Dominic Zammit

Dominic Zammit

Consumers have neither forgiven or forgotten the role of banks in the 2008 financial crisis, as demonstrated in a recent YouGov survey in which 84% of respondents agreed that ‘Bankers are greedy and get paid too much’. Keen to leave the past behind them and meet the changing needs of consumers, major high street banks are investing millions in their digital transformation, but for the most part are simply treading water, weighed down by tradition, bureaucracy and legacy systems.

These attributes have provided new challengers with a point of reference from which to juxtapose their offering, cutting through a saturated market by addressing the key pain points of the traditional players. Built for the digital age, unencumbered by size, legacy or expectation, challenger banks are capitalising on the post-2008 new world and are beating traditional players in the race towards true digital banking.

Built for its time

The attraction of a challenger bank is its unique outlook and fresh approach to delivering a highly-personalised, real time banking experience. Where traditional banking propositions focus on trust, history and stability, the growing wealth of challenger messaging speaks to millennials by focusing on technology, simplicity and automation. Yet they too have pain points.The EY Global Consumer Banking Survey, carried out at the end of last year, showed that a third (33%) of consumers still don’t trust a bank without bricks and mortar branches. So how can challenger banks tackle this problem?

Customer experience

Put simply, in this new world, trust will be earned through the delivery of a positive user experience rather than through the physical reassurance of a high street branch.The trend in 2017 and beyond will be towards lifestyle propositions; digital challengers need to align themselves more closely to life stages and position their services as integral to living life to the full.

This was the premise behind our work with CBD NOW, the Middle East’s first digital only bank, with a strong proposition centred around the joy of living and the empowerment of instant financial decision making. The new brand’s strapline “Love the moment” enshrines both its ethos and customer promise in a fresh and engaging statement that inspires customers and challenges their perceptions. Living life to the full is no longer something to hide from your bank manager, but rather it is supported by being in complete control of your finances.

To effectively challenge an established market, new entrants need to offer either substantively new services, or a sufficiently novel way of delivering existing services. In the case of banking, we have yet to witness anything in the way of new services for decades, and so the point of differentiation lies first and foremost in the way that existing services are delivered. This is where new challenger banks are making headway. By entirely digitising traditional banking experiences, they are shaking up convention and flipping typical banking dynamics on their head by placing power both figuratively and literally in the hands of the customer.

Personalisation

Focus is being placed on providing seamless personalisation and transparency across devices, meaning customers can access full financial data and the ability to transact wherever they are, and through whichever device is to hand (or wrist). Investment is also being made into the use of biometrically secured accounting, replacing traditional password protection with finger printing or voice recognition, further streamlining the experience. This provision of real-time, tailored banking provides a tangible and identifiable benefit from which digital challengers can build a lasting brand proposition.

But going beyond the expected, digital challengers are starting to carve out elevated positions for themselves by providing data-rich predictive intelligence to allow customers to better control their spending. Placing big-data squarely at the centre of customer experience, this machine-led approach to money management challenges not only the traditional bank statement, but also the role of the bank manager and financial adviser.

As a consumer the experience will be totally empowering. The bank knows your mortgage payment is about to go out. It also knows your weekly shop is about to happen, taking you overdrawn. It automatically pings up the option to transfer money from another account or take out a short-term loan, helping you avoid punitive overdraft charges. It’s a bank that’s on your side.

Communication

Digital challengers by their very nature need to adopt a new, simple, more accessible communication style that immediately engages a diverse audience in an impossibly fast digital world.

Most digital challengers to date have marked their distinguished style of communication by explicitly drawing out the differences between their organisation and legacy players. They have altered the typical customer-banker dynamic by focusing on collaboration and a shared journey, using words like partner and founder to encourage onboarding of new users. It’s no longer about winning market share, it’s all about building a movement. This shift in perceived ownership exemplifies the underlying premise of digital banking; empowering customers to manage their own finances and to reap the rewards of doing so.

Communicating in a pure digital banking world is informal, upbeat, fast-paced and rich in personality. Digital challengers are social-natives and adopt a sophisticated multi-channel strategy for both proactive communication and responding to customer queries and complaints. Traditional banks who try to mimick this are in danger of dad dancing.

 There are clear synergies between digital challengers and more typical start-ups; think Uber or AirBnB, now think Monzo or Atom. Even the nomenclature is indistinguishable. In an industry known for being stuffy and old fashioned, an infusion of start-up mentality offers customers a much-needed alternative for managing their finances in the new world.

Sector convergence

As digitised banking becomes the norm, challengers will be looking outside of the sector for customer value-add and new product offerings. In a bid to monopolise markets and ease the consumer service provider roster, the future may see innovative sector convergence between lateral industries. Just as Amazon targets supermarket shoppers, could Atom set their sights on telecoms and internet provision, or other high-volume markets?

We have already witnessed segment creep among the supermarket-turn-money-lenders with varying success. Is there any reason banks couldn’t flip the coin and target grocery consumers? A single platform shopping experience linked directly to real-time customer finances sounds like a compelling proposition. It would cut out the grocery middleman, minimising the consumer journey, while providing a welcome additional revenue stream to digital banks.

Another model might see banks form partnerships with retailers where they can offer added value perks to their customers in the form of affinity deals and special offers, delivered at the right point in time. After all, the bank knows what you like, where you shop and when you shop.

Whatever the future may hold, what is clear is that challenger banks and legacy institutions alike need to build their businesses around a brand that is future-proofed and compelling in an increasingly digital age. Impact is key. They need to be bold and sincere. Serious players must be visible and approachable on the customer’s platform of choice. In 2017 the customer is in charge and is aware of that fact. If they want to tweet their bank, they will, and will expect a personal response. Ignoring digital communication will be the kiss of death for banks looking to the future, and those without a robust brand strategy risk losing out to the new kids on the block.

Dominic Zammit is Head of Digital Strategy at global brand consultancy Industry. It has deep expertise in running global brand transformation programmes for professional services clients. 

“Original publication in Finance Digest Issue 1 https://www.financedigest.com/finance-digest-print-magazine/
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