By Sudeepto Mukherjee, Senior Vice President, Financial Services, Publicis Sapient
The global Covid-19 pandemic has changed consumer behaviour and their expectations indefinitely. Consumers expect the same experience from their bank as they do in their other daily interactions. The pandemic also made digital capabilities critical, enabling banks to continue to serve their customers remotely. Bogged down by legacy cultures, many were sceptical this could be done in a pre-pandemic world, but the last year has shown that with a strong imperative, big banks can move faster than they ever imagined possible. When bank branches across the world closed, customers had no choice but to embrace digital channels where appropriate; bank employees became equipped to serve customers from the confines of their homes in a matter of days because there was no other choice. This prompted an accelerated culture shift within banks who had previously been reluctant to view digital as the primary channel for serving customers.
With this shift, came a whole new expectation of what customer experience should look like. This race for banks to adjust the way they serve their customers both in the short and long-term, laid the foundations for a new banking model that’s reflective of the shift the pandemic created in both consumer behaviours as well as the underlying economic environment. Customers want access to the financial services and tools they need, when and where they need it. Covid essentially created a new opportunity for banks to fundamentally re-imagine their operating model to meet customer needs in a digital world, introducing new innovative services via new technologies/partners while reducing their cost to serve. But that’s not all, the availability of new technology and tools to enable this transition is also facilitating change.
However, for all the positives in how banks have adapted to serving their customers over the course of the last year, it has also only served to reinforce the gaps in legacy banks’ customer experience and operational transformation. According to a recent study by Publicis Sapient, 70% of banks surveyed say that the pandemic has highlighted weaknesses in their customer experience, and nearly all (81%) say the pandemic has made improving their digital skills and capabilities more urgent. Incumbent banks realise the urgency with which they must now act to compete with a wave of digital-first challengers, new tech entrants, fintechs and peer firms that have been stealing market share from them in the recent past. According to the Global Banking Benchmark study, most banks say they must do more to keep up with digital-first challengers and competitors, and appeal to a new generation of digital-native customers that has been evolving over the years. When it comes to transforming, It’s now or never. Banks know that digital-first is the path forward as digital native challengers, new tech entrants and customer expectations will continue to shape new priorities. They know they must lead in both customer experience and operations en route to a digital-first future – areas of strength for competitors such as Monzo, Revolut and NuBank, and many banks are now taking the necessary steps to get there.
To truly take advantage of the opportunities that digital-first offers, banks need to optimize all pillars of their customer experience and operations – from their business models and technology, to their products and services, and even their people. To stay ahead, banks must not only deliver a reimagined experience based on the pillars stated above but also focus on increasing their operational agility in enabling cross-functional collaboration, real-time data access and a more adaptive culture that will allow them to continue to innovate at speed as customer needs and expectations evolve. Today, banks need to deliver superior customer experiences while being operationally agile to drive growth and compete with digital-first challengers and new tech entrants. Banks that are leading the charge in this area have already grasped this shift and are focused on building urgency – in fact, these organisations believe that agile product development is the key trade of digitally innovative financial service firms. Big Banks like ING are leading the way by shifting away from branch banking. These transformational leaders have made significant advances in both customer and operational leadership. Leaders also tend to bet big on innovation, tech, and talent. Research from the study highlights how “banks’ efforts are focused in three areas: product innovation, technology investments, and talent development. Leaders are most focused on innovating core product streams and creating new products and services that blur the lines of traditional financial services offerings. Customer centricity can no longer be the priority for just the marketing, sales or design functions within a bank, it needs to be embraced as a core cultural component and every department from product to technology, risk and control needs to use customer metrics to drive decisions on roadmap and future spending.
Cross-industry leaders like Amazon, Disney and Apple tend to display certain key traits.
- They have an established customer-led culture. Banks need a workforce that has the imagination to see what technology might deliver for customers and the skills to put that vision into practice. That requires upskilling and cultural change throughout the organisation.
- They have a 360 view of customer. Customer experience is a metric at the highest level for banks, yet according to the Global Banking Benchmark study, fewer than one-third of them are prioritising data for a 360-customer view.
- They’ve adopted a platform-based approach. Alongside the fintechs, banks are increasingly seeing big tech companies like Alibaba, Google or WeChat as their competitors. Banks need to make the transition to a scalable, reusable banking platform.
- They deliver omnichannel servicing. Banks need to prioritise omnichannel servicing to create seamless customer journeys as a core part of their transformation strategy.
- They offer personalized experiences and products. Banking experiences and products need to be anticipatory and personalised. They need to make customers’ lives easier, and it easier for them to manage their financial lives in one single ecosystem.
The banking industry may have been slower than other industries to adapt, but financial institutions have been making progress in reimagining their customer experience as evidenced by the leaps and bounds in digital offerings made newly available in the pandemic. Furthermore, by investing in technological innovation to keep up with challengers, banks can offer the competitive, digital-first customer experiences that customers demand in this rapidly changing environment.
Most banks have now invested in a robust mobile platform to access basic banking services such as checking balances and making payments via mobile/web with a degree of efficiency. However, beyond these core services, retail banks also now need to be able to deliver more complex transactions like mortgages and loans via digital channels without the need for manual intervention. Banks also need to create a robust data and API infrastructure that allows them to not only stream data to all their customer channels but also to connect directly into other partner ecosystems. Take Nationwide’s Speedlayer, a near-real time cache which stores and structures data and allows customers real time access to relevant data across channels using secure APIs. David Burke, CTO, Nationwide, says that this platform is a key component to providing “…a faster, more convenient and more secure experience for our members.”
There is such an enormous opportunity for banks to leverage the full power of technology such as AI and cloud-based services to create exceptional customer value and claw back market share from the Fintechs. It will take a clear strategy and a collective effort to overcome organisational inertia via the right incentives and operating model changes but in doing so, banks can create a true digital-first future that will offer unmatched customer experience and be of benefit to both customers and shareholders. Infact, greater investment in both cloud-based technologies and intelligent technologies are expected to be the most beneficial in helping banks deliver on their digital transformation plans in the next three years.
Take Amazon and Netflix as examples of companies that have disrupted entire industry sectors with their digital-first platform approach. They have successfully leveraged technology to create superior customer value, offering frictionless experiences that appeal to a new generation of customers. It’s crucial to take on board what has made them so successful and ultimately, that boils down to one thing: customer obsession. Going back to the 5 traits of customer leaders, the likes of Amazon, Netflix, even new financial services challengers such as NuBank, Revolut, Chime, and Tandem can easily tick them off. But most importantly perhaps, they have adopted a platform-based approach. Transitioning to a platform-based approach from a legacy base can be daunting. However, Banks should adopt a diversified blend of “Evolve, Jump, and Attack” to manage the risk of transition. These three transformation models emerged for how banks could approach the challenge, which weighed the immediate threat with the longer-term transformation needs: evolve their current model incrementally , attack new markets or propositions by leveraging modern platforms, or jump to a new architecture for parts of their business that are struggling to modernise. To remain competitive and lead in customer experience, banks essentially need to see themselves as tech companies, making both engineering and cloud transformation central to their transformation strategy.
Customer loyalty has been challenged like never before and to both retain and attract customers banks need to become truly customer-centric. The next few years will be crucial for the banking industry to see who can take advantage of changing customer expectations and a wealth of new and emergent technologies available to build a banking model fit for the future which reduces its reliance on expensive brick-and-mortar branches, all the while continuing to deliver superior and innovative services and experiences to customers.