Dave Webster, Financial Services Expert, Quadient
The Competition and Marketing Authority (CMA)’s “Open Banking Revolution”<https://www.gov.uk/government/news/cma-paves-the-way-for-open-banking-revolution> has opened the door for new challenger banks to disrupt the UK financial industry, all with the aim of increasing competition. There have already been 19 new retail and commercial<https://www.finextra.com/finextra-downloads/newsdocs/challenger-bank-2017-.pdf> banking licenses issued since 2010, with at least eight more pending as of January 2017.
With so much to play for, traditional high street banks need to focus on setting themselves apart from the field – doing all they can to provide an excellent experience at all times. To avoid the potential onslaught, and flourish rather than fail, banks need to focus on the following three points:
- Show you know your customer like the back of your hand:
Banks need to get back to basics, proving they know exactly who their customers are and the journey they have been on with the bank. This goes way beyond names and account details. Research from PwC<https://books.google.co.uk/books?id=YxO5BwAAQBAJ&pg=PA22&lpg=PA22&dq=Example+of+a+bank+not+knowing+their+customers&source=bl&ots=JjaWQ4U35w&sig=NvvzXwh9af8pliID7RI5snu13zI&hl=en&sa=X&ved=0ahUKEwjMhZPlp6nVAhWIIsAKHZ-WAZAQ6AEITzAH#v=onepage&q=Example%20of%20a%20bank%20not%20knowing%20their%20customers&f=false> found that “banks today typically do not know their customers very well. […] Plenty of credit card providers, for example, understand a customer’s value potential, can track spending patterns and make targeted offers. Yet many still send customers multiple product offers in hope that something will stick.”
To avoid this reputation, banks need to understand exactly how and why the customer has communicated with the bank in the past – whether that be new contracts, a discussion of overdraft charges or how they view their bank statements. Armed with this information, the bank can show that it knows and respects the customer’s interests, and the way they wish to communicate. For instance, if a customer prefers to use SMS, why waste their time sending multiple offers in the post? This process is crucial if a bank is to keep its customers happy and continue to provide an excellent experience at all times.
- Don’t forget where you came from:
Communicating in the right way is important, but banks must also be certain they are looking after all their customers, both new and old. We’ve all seen the adverts that offer new customers “£100 for switching to our everyday current accounts”. This approach is bound to alienate existing loyal customers, who may decide to take their business to a bank that they see valuing their custom more.
Take Sally, a customer of a traditional high street bank, for example. Sally had been with the bank for 20 years and until recently had been happy with the service she has received; but now feels forgotten as the bank continues to put all its efforts into attracting new accounts. Her bank removed the small ‘loyalty’ bonus she once received every month, to compensate for the money they are offering new customers. Sally has since taken her business elsewhere, to a bank which offered her much more as a new customer. New business is desirable, but financial institutions will find themselves back where they started if their old customers, like Sally, decide to leave. To avoid this happening, banks need to ensure they are treating everyone equally, and clearly communicating the benefits of banking with them – whether a customer joined in July 2017 or July 1987.
- Legislation – get ahead and stay ahead:
Last, but by no means least, banks need to ensure they are ready for new legislation as and when it comes into place. By preparing for new regulation before the storm hits the high street banks can prove that they are worth the consumer’s trust and set themselves apart from their competitors. Take the General Data Protection Regulation (GDPR) coming into force in May 2018, for example. Financial organisations will have to prepare for consumers to have far more control over their data; and be able to prove that all data is being recorded and stored appropriately: sharing data held on customers when requested; and even allowing customers to edit, delete or share that data when needed. Considering financial penalties can reach €20 million, or 4% of global annual turnover, being able to handle data correctly as well as proving they have done so, and that customers have been notified when necessary, will be critical.
When the new regulation kicks into action, banks will also have to make sure that every customer is given the correct information on GDPR in a clear, concise and provable manner. Failure to get their ducks in a row means not only a real risk of hefty penalties, but customers taking their business elsewhere as they lose faith in the organisation. To avoid this, banks needs to take the time to get ahead and lead the way for other institutions, by preparing for regulation before it even comes into place.
Setting yourself apart from your competitors
There is no denying that high street banks across the UK are facing tough times thanks to increased competition from new challenger banks. To stay ahead, high street banks need to demonstrate they really know their customers by communicating in the right way, with the right message and at the right time. By taking it back to basics and really getting to know their customers, banking organisations can rest easy knowing they have done everything possible to remain competitive; while preparing for new regulations such as the GDPR ahead of time. This approach will go a long way in setting banks apart from their competitors.