By Stuart Anderson, Chief Commercial Officer at Target Group

The place that banks once held in the hearts and minds of consumers has changed drastically in the last few years. They no longer choose their bank of choice based on location and one-to-one experiences with staff, but instead look for speed, efficiency and ease of use. The evolution of technology over the past few decades has meant that all aspects of financial services have had to adapt – from mortgage solutions to insurers, but it is banks in particular who have felt the pressure to provide quick, efficient services for customers on the go, as preferences change from relationships to ease of transaction. 

The problem lies in that banks were originally built to be hyper-local – there to cater for local customers with local records. But this no longer fits with today’s fast paced society who often choose to live and work away from their hometown. Of course, as banks have become larger and with more sophisticated technology stacks, this has become more centralised and enabled some degree of retention. But, as digital transformation continues to take hold, banks have not only had to change their mantra, but also their approach to customer and user experience. 

The aforementioned shift to digital services combined with recent lockdowns has meant that banks have had to quickly pivot, to ensure that their services are sophisticated enough to meet every user’s needs – as this wasn’t necessarily the case 18 months ago. Whether that’s everyday money management (depositing cash or cheques) through to applying for loans and mortgages (which required written, witnessed documents – not ideal in a pandemic); and bank branches being closed for many months, the pressure to provide extensive digital services was not only omnipresent but mission critical.

This is easier said than done. The rise of new entrants such as Monzo, Plum and Emma have opened the market and provided more choice than ever. But with many banks opting for the same digitally focused strategy, how does one position themselves as the leader in such a highly saturated market?

Platformification

Today’s consumers want everything in one place – ideally from the palm of their hand. They also want apps and services to integrate. So, if they’re applying for a mortgage from their bank, they will find it useful to be recommended contents insurance too.

This ease of use is blurring the lines between financial services and other sectors, but you also don’t have to look very far to see others already moving into a space that used to be reserved just for lenders. The major tech players like Apple and Google have ventured into financial services by integrating payment systems onto smart phones. All of this has one aim in mind – make consumers’ lives easier by giving them what they want in one place, via a slick experience, and at scale. This drives loyalty and retained revenue.

Whilst providing a platform for consumers may not necessarily fit with the criteria of every market player, many can capitalise on consumers’ desire for ease. ASDA, Marks & Spencer and Tesco are other prime examples of how financial provisions can be swept up in a suite of everyday needs. Therefore, if banks want to demonstrate that consumers truly sit at the heart of their operations, consider working with others to bring ease to their lives.

Data needs to drive personalisation not just insights

Thanks to innovations such as Open Banking, customers’ data can be shared from various different sources into a single platform where it can be amalgamated and analysed to create a personalised user experience. Take apps such as Nude for example, that analyses finances and sets goals based on those findings to help millennials get on the property ladder quicker. By understanding the issue at hand (rising house prices, yet the desire to buy) and using data from a customer’s bank to analyse expenditure, the app can determine roughly how long it’ll take to save a deposit.  It will also set expectations for the type of property the user can purchase. Many banks have savings tools, analysis or savings goals, but taking this and applying it to other everyday problems or aspirations could help trigger better user experiences. 

Decide which segment you belong to

It’s stick or twist time for many as they look to cater to changing customer demand whilst balancing what they are able to provide. Whilst some will decide to adopt the platformification route, it may not be for everyone, which will lead to segmentation within the market. By choosing a new path – whether that’s as a platform, a manufacturer, a utility or a distributor, different providers will be able to integrate and provide consumers with a one-stop-shop – the new ecosystem. 

Manufacturers, for example, would earn more than operating independently. Platforms provide customer volume and revenue streams for all. Customers become loyal as they get the dual benefit of economies of scale and a great experience. Additionally, the more data, the better the analytics (via predictive modelling) and a more personalised service. Big data enables the recommendation of the right product at the right time.

It’s important to take the time to identify the best direction to take for your organisation. Doing this background research ensures that time, money and resources aren’t wasted by creating services that aren’t customer-centric, and that customers don’t want.

We’re seeing a host of challenges including the pandemic, the rise in digitally savvy users and pressure from competitors. Banks need to push forward with full digital transformation. They need to overcome the legacy technology which has thus far held them back. The next few years could define the sector for decades to come as we see provisions catering to every need – for both fiat and digital currencies. The main takeaway for banks, building societies or anyone in the ecosystem is to put consumers at the heart of operations. Loyalty no longer exists, so to lower acquisition costs and boost retention, look at how to appeal to consumers and keep doing so. Leverage personalisation. Products are not good enough, experience is king.