~ Scott Andrick, Industry Principal of Retail Banking at Pegasystems, explains why UK banks need to take a long hard look at themselves – and their customers – if they are to survive ~

Life, as a wise man once said, moves pretty fast – and if you don’t stop and look around once in a while, you could miss it. It’s perhaps worth noting that these sage words were uttered not by some great philosopher, wordsmith or poet, but by actor Matthew Broderick in the 1986 film Ferris Beuller’s Day Off. Nonetheless, the extent to which they can be applied to increasing number of UK retail banks, many of whom find themselves deeply entrenched in a state of institutionalised complacency, is significant.

A culture of “But that’s the way we’ve always done things” is, of course, nothing new in an industry which is notoriously slow to innovate and reluctant to embrace change. However, what feels different today is that this time, the dark clouds of digital disruption are looming large on the horizon. Unless banks are able to change the way they think, act and operate, it feels as though there’s a very real chance that these organisations, many of which have been in existence for hundreds of years, will struggle when the storm inevitably hits.

This storm is very much a reality with rain already beginning to fall. In a recent study conducted by Pegasystems in association with Redshift Research, more than a third (36 per cent) of decision makers within UK retail banks said that they already see new digital services as their biggest competition. This statistic is particularly telling when you consider that digital banking services have not arrived in this country yet in any meaningful way, with many uncertain of what form they will take when they do appear.

What is certain is that there is already an appetite amongst existing banking customers for change. The same survey found that more than a quarter (26 per cent) of consumers said that they would consider moving away from traditional banks to newer, more innovative banking providers in the future – a number that seems certain to rise as and when these services become more clearly defined as alternatives to existing providers. So why is there such a willingness from customers to embrace something so new and yet still so intangible?

The answer is that, to return to Mr Broderick for a moment, life is moving fast in and around the world of banking. There is a world of innovation, technology and communication offering a very different landscape to that in which we operated in five or ten years ago. Today, we live in a world where customers expect nothing but the best quality service from all retail organisations. When expectations aren’t met they have a number of platforms with which to tell the world. And yet, despite this, many banks seem to be operating in a bubble of complacency, stuck in a paradigm of repeating the same mistakes.

For example, the aforementioned study found that almost two thirds (64 per cent) of UK banks claimed that they understand their customers and their needs as individuals. Just 21 per cent of banking customers surveyed agreed with this statement, despite the fact that nearly half (46 per cent) of all consumer respondents said that having a customer service team that listens to them and understands them was one of their top three customer service considerations. Similarly, more than half (52 per cent) of banking decision makers claimed that their organisation responds quickly ‘every time’ to customer service – a statement that just 31 per cent of banking customers supported.

While gaps between the experience that is expected by customers and the experience that is ultimately delivered are somewhat common, this sizeable gap tells us that retail banks have become too complacent about the service they offer their customers. With this in mind, it’s no wonder that banks are concerned about the impending arrival of more agile, digitally connected services that can offer customers the level of service that they are asking for. It’s equally easy to understand why many customers are longing for a newer, yet to be defined experience that can provide them with a better quality of service. Banks must take a long, hard look – not just at themselves, but at their customers as well.

Only by learning about their customers, their needs, preferences and concerns, will they be able to head off the threat of newer, digital services. The key for retail banks over the coming years will be how effectively they will be able to communicate with their customers. There’s no doubt that this will require a fundamental change in mindset. Gone are the days where banks could tell their customers how to communicate with them, and what they are prepared to provide.

In a world where the needle of customer expectation has moved further than ever before, banks must now prepare themselves to communicate across all channels and platforms seamlessly, anticipate potential problems before they arise and resolve them quickly when they do. The easiest way for retail banks in this country to become obsolete, as digital banking services become a reality, is for them to bury their heads in the sand and keep operating the same way. Remember, life moves pretty fast – and unless retail banks are prepared to keep up with the pace, they could find themselves left far behind.