Ahmed Michla of financial IT leader Sopra Banking Softwaredescribes a possible digital banking future
To achieve growth in a rapidly globalised, increasingly regulated world, banks need to use digital assets and capabilities tocreate new value propositions for their customers. The best way to dothis, we believe, is to focus on not just milestone events (e.g. marriage, buying a home,having a child) but incidental moments that crop up in every customer’s 24 hours,seeking to add banking value in many micro-increments. This can be done, we are convinced, only by using customer data in a truly aggressive and innovate way.
With this principle in mind, let’s visualise what a customer’s daily interactions in such a scenario might look like. Meet Joey, a citizen of 2019, who has just got a Facebook message from his friend Gaby reminding him that she paid for his drinks last night as he had left his e-wallet at home.Joey clicks on the button at the bottom of the message; paying back the micro loan without even having to leave the social media app he’s on.
Joey is now entering the shopping centre, getting the latest discounts from the stores he visited previously on his wearable headset. Loyalty coupons and rewards are factored into the discounts, while his bank provides extra discounts at selected stores if he pays with the new brandedcredit card offering highly personalised promotions.
The bank flashes an update on his smart glasses; according to his e-recorded and agreed budget plans and forecast, he has 250 New Euros left to spend on personal goods this month.Joey starts browsing the stores and coupons– his attention is attracted to a TV and home cinema, and a 40% off discount.
Unfortunately, the set falls beyond his allowed spending for the month, plus thediscount only lasts a few days.Joey consults the retailer for a consumer loan, today at 4%, plus gets a quote from the bank. He instantly receives a 3.75% loan proposal – as his bank, knowing the retailer through geo-location, the rates offered by this retailer, as well as Joey’s credit rating, caninstantly make a better offer. Joey accepts the e-offer, the bank authorises the transaction and starts the loan plan there and then.
Science banking – not science fiction
Like Joey in our example, 2015’s banking customers are also looking for proximity, agility and speed from a financial service provider they can trust. Plus, they are more connected than ever, and expect this connectivity to extend to their bank. The better availability of information leads to better-informed customers that compare offers across different platforms, including social media and collaborative tools, central to the modern-day customer experience.
Other expectations include personalised services on demand, transparent and simple products and services that are easy to mix and match. Banking customers are often multi-banked, and interested in new alternatives like crowd-funding and P2P lending to support projects and communities they value.
In parallel to these social and technological changes, new regulations are supporting these trends by improving the transparency of fees and prices, the ability to easily switch between banks, and so on. The most significant change is arguably the acceleration of the pace of business: according to Barclays, while it took 13 years to get two million customers using Internet banking, it took just two months to reach that number for mobile banking.
Such acceleration is seen everywhere, toughening the challenge of dealing with the ever-changing business context. In particular, competition is now shifting to ‘business moments,’ the brief everyday moments in time when business opportunities that span multiple channels and ecosystems appear.
And just as with 2019’s ‘Joey,’ who got a customisedloan proposal at the very moment he was considering a purchase, a digital organisation will be able to spot and exploit such business moments before they vanish – or get picked up by a more agile competitor.
Banks have the opportunity to retain and expand their privileged position in the value chain by providing pro-active offers and services, some entirely out of the banking business scope. To do so, financial services leaders must integrate seamlessly into the life experience. Transactions and interactions must become smooth and invisible. Banking must be simplified to the point where it becomes abstract.
In essence, we will move from the current ‘Straight Through Processing’ standard to the next-generation ‘Touch Through Processing.’
In addition, core banking products must become simpler, modular, and transparent. In particular, customers are looking for products they understand, that they can buy without worrying about the small print, and that they can change easily (and without penalty) as their personal situation evolves. New value-added services such as wallet solutions or peer advisory can then uplift those products.
Another crucial element is the notion of pro-active advice; today’s customers expect banks to help them manage and optimise their cash and investments. For instance, when some money is left dormant on a low-interest rate account, banks should spontaneously suggest transferring it to a higher yield account. Suggestions should be accompanied bya clear simulation of the expected gains and based on the customer profile, ideally in an attractive, graphical form, delivered straight to their smartphone.
Similarly, customers expect to be informed of unnecessaryfees or redundant product combinations. In most cases, these proactive advices can be fully automated (think of Google Now in banking). They should also be offered in real-time and take account of context and location.
New thinking caps required
To achieve the agility and openness necessary to do all this, banks need truly modern tools, including multi-channel customer experience platforms, advanced analytics for CRM and marketing and open platforms for app stores and APIs.
That’s probably just the baseline in terms of what we need to do. Banks may well need to undergo a much deeper modification of their business, culture, and IT – as any of this next generation of digital banks will have to put innovation at their core and use data to create new business, revenue and customer engagement.
The good news is banks have the opportunity to engage with and to add value at almost every moment of the customer daily life, which will in turn create newrevenue opportunities.
But this journey needs to start now– as it will take a lot of bold new thinking to get off the drawing board.