Banking
Banks must improve customer experience to compete with Big Tech
By Madhur Kumar Jain, Senior Vice President and Global Head of Solution Consulting, SunTec
Big Tech companies like Google, Amazon, Facebook and Apple are muscling their way into the financial services sector to capture consumer loyalty and are muddling the boundaries between industries and financial services in the process. Why? Because big banks have failed to do so. As a result, consumers are voting with their feet, moving to companies that offer more personalized digital financial services experiences.
Given the power and size of these Big Tech companies, banking as we know it might not survive the onslaught as tech companies grab market share in payments, credit cards, consumer loans and even small business loans. With their fiscal capital, customer data, strong brand loyalty and daily presence in consumers’ everyday lives, big tech companies have the firepower to drive innovation, and in doing so, pressure the traditional banking model further.
This is best illustrated by McKinsey’s annual digital-payments surveys which previously held that banks were more trusted than tech firms, now tells us that Amazon is running neck-and-neck with banks. Similarly, Raddon’s research into Gen Z Americans finds that two-thirds expect tech firms will change the way financial services are provided.
We are seeing more and more examples of Big Tech companies moving into this space through partnerships with traditional players. Take the recent announcements from Apple and Amazon that both plan to launch credit cards. For, Apple its partnership with Goldman Sachs to launch Apple Card means the first foray for Goldman Sachs into the consumer finance market. While, Amazon has chosen to partner with publicly traded bank Synchrony Financial to launch Amazon Credit Builder, a credit card aimed at the “unbanked” and shoppers with either no credit history or bad credit.
Open Banking is paving the way for the industry to own customer journeys by providing best in class customer experience rather than simply selling products. Banks now have the ability to fast-track their digital transformation to keep and attract customers and grow wallet share. This provides a basis for banks to embark on a journey of digitally transformed, advanced product innovation to expand their financial offerings.
Open Banking helps banks advance their features to meet consumers’ changing needs, enhance their revenue and at the same time increase customer engagement using differential and personalized pricing. By treating personalized propositions as a commodity, banks can begin providing the personalized customer experience that helps retain customer loyalty. Banks can also go beyond their typical scope, increasingly becoming links in the value chain, for example, to help customers buy a vehicle rather than just give the loan. Leveraging customers’ data with the offerings of an agreement will give banks the opportunity to build business beyond their traditional financial products.
Partnerships like this can help commercial banks become more inventive and nimbler, digitizing their processing, systems and customer experiences to create new ways to meet the needs of their customers and form new income streams. With Open Banking, banks’ partnership with fintech companies and other third-party providers is driving technology innovation to help traditional banks stay atop in today’s digitally-centered world.
New banking models increase growth and customer satisfaction
As banks embark on their digital transformation journey in an effort to hold onto market share and capitalize in the digital economy, the industry will need to reinvent itself, driving the creation of more customer oriented, hyper-personalized services. Banks will increasingly become links in the value chains that will also contain non-financial services, meaning suppliers will join their digital ecosystem to offer a one shop stop for customers banking and other needs.
A fundamental change in the financial services sector is taking place as banks begin applying strategies to stay ahead of the curve. Financial institutions are prioritizing digital transformation of their ecosystems to achieve optimum efficiency and customer-centered experiences. Open Banking is quickening this move, making banking truly digital by establishing an interconnectedness that we currently see in the ecommerce industry.
With their size, analytics capabilities, capacity to appeal to huge, loyal userbases and revenue models, tech giants are strengthening their position in typical banking services at a fast clip. The competitive challenge that tech companies bring to the financial services sector presents a threat for banks to defend their market share by transforming their digital capabilities to deliver superior digital services that satisfy the demands of increasingly connected customers with growing expectations.
Banks understand that in this age of customer-centricity, the only way to survive and continue to exist is to transform and work hard to retain loyalty of their customers and market share. As more technology firms move into financial services it could make the sector more efficient but it also introduces risks for existing players. For now, traditional financial services companies must transform by embracing new technology or risk becoming extinct.
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