Traditional banks need an overhaul

Published On : 09/28/2021

By Steve Rackham, Senior Solutions Engineering Manager, EMEA Global Finance at NetApp

The way we interact with banks since the dawn of internet banking has changed considerably. This is only set to continue in the wake of widespread digital transformation and technological advancements, such as open banking.

On top of this, the pandemic has forced the financial services sector to adapt, quickly, to a digital-first business approach. Yet, despite the charge towards a digitalised financial market, customers’ attitudes towards a full-on digital banking service remain varied. Data is the crux of the issue here and consequentially how consumers perceive the use of their data by financial institutions.

These changes, combined with the continued, rapid rise of FinTech’s and their domination of a new-look financial services landscape begs the question if traditional banks will be able to keep up, and if an overhaul of existing models is required to do so.

In this article, I’ll discuss NetApp’s latest financial services survey, that revealed the challenges traditional banks are facing and how customers perceive financial institutions – in turn affecting brand trustworthiness, and potentially limit growth.

The dilemma 

Customer perceptions, expectations and as a result, demands, have increased as the data landscape has evolved; and crucially that traditional banks cannot afford to overlook this.

Providing the ease of digital-first services to a generation that has adapted to doing most things online – from buying toilet roll to virtual counselling – is essential. This is supported by NetApp’s findings that 82% of respondents prefer to access information or services from their banking provider via their website, and the 94% that rate online banking as the most important banking service.

However, the research also indicates that in-person consultations are still valued by customers, with 52% preferring to go into a branch to access information or services, whereas just 27% like the idea of automated and AI based banking services. When compared to all the other countries surveyed, UK customers also ranked the highest (of all countries surveyed) for rating in-person face-to-face service as the most important banking service available.

In the move to a more digital service to meet customer’s growing expectations and perceptions, the biggest challenge banks face is not actually technology but trust. Consumers are trying to balance convenience with security, quite often this is about what they feel comfortable with. NetApp’s research reveals that while 80% of consumers believe that their banks can be trusted to protect their money, only 66% believe the same can be done with their personal data.

While 82% say they like the convenience that comes with paying through a third-party provider such as PayPal or Apple Pay, 64% of consumers were still concerned that their personal data may be stolen by criminals if they use third-party providers. This is unsurprising since the 2020 Edelman Trust Barometer reported that the least trusted industry sector is financial services.

Concerns with data security is a matter of trust and how information is being shared with customers. The survey also supports this, with its findings that more than half (53%) of respondents say that if they knew more about the safety of online banking, they would start to use it or use it more often.

The competition 

On top of this challenge is the emergence of FinTech companies. With their cloud-based capabilities and digital-first model, they can adapt to change easily as new technologies arise and consumer expectations evolve.

However, it’s third-party providers like PayPal and Apple that traditional banks need to pay more attention to. Because these companies have more access to data and customers and are able to reach them in new ways by delivering personalised services which traditional banks cannot.

FinTech’s are disrupting the market now, but it’s the potential disruption from the tech giants of this world in the future that presents fierce competition for banking services. And unfortunately, traditional banks are still playing catch-up with the newer players in the market.

In addition to this challenge is the fact that many traditional banking customers don’t have the app mentality, with consumers more likely to use a banking website than an app. Ultimately, why would customers move to banking via an app if they’re already accustomed to engaging with the website? Traditional banks will have to give customers a good reason to, if they’re to join the competition.

The future of traditional banks

This range of issues are challenging the future of traditional banks and must be faced head on if they’re to compete with new players in the market, make an impact now, and lead the way in the future.

In general, consumers of today have come to expect highly personalised services from businesses – 90% of consumers are happy to share their behavioural data to get a better brand experience, while 72% will only engage with services that are tailored to their interests, according to SmarterHQ.

So, while traditional banks must deal with concerns of trust while providing the best service to their customers, they must also find ways to utilise a data-driven approach. If financial services are not moving at the speed of data, these organisations are at risk of being left behind.

This means integrating a data-centric approach into their products and using data to manage processes such as mitigating risk, managing fraud, automating payments, delivering mobile online banking services and processing mortgages. If financial organisations do this successfully, they will continue to meet customers anywhere, anytime, and on any device, now and in the future.

Jessica Weisman-Pitts

Jesse Pitts has been with the Global Banking & Finance Review since 2016, serving in various capacities, including Graphic Designer, Content Publisher, and Editorial Assistant. As the sole graphic designer for the company, Jesse plays a crucial role in shaping the visual identity of Global Banking & Finance Review. Additionally, Jesse manages the publishing of content across multiple platforms, including Global Banking & Finance Review, Asset Digest, Biz Dispatch, Blockchain Tribune, Business Express, Brands Journal, Companies Digest, Economy Standard, Entrepreneur Tribune, Finance Digest, Fintech Herald, Global Islamic Finance Magazine, International Releases, Online World News, Luxury Adviser, Palmbay Herald, Startup Observer, Technology Dispatch, Trading Herald, and Wealth Tribune.