Published : 9 years ago, on 26/05/2016

High-street retail banks need to ‘go big on change or go home’, says Peter Veash, CEO at The BIO Agency.

Peter Veash

Disruption in sectors from retail to travel has given consumers more control over how they want to interact with all companies. Pioneers from Amazon to Uber have set the pace and ‘wowed’ customers with personalised, frictionless experiences.

Legacy players across these and other sectors have all had to innovate and improve their offering to stay competitive or face a fate experienced by those high-street retailers who failed evolve for this digital, mobile-first world.

Today, the retail banking sector faces similar digital disruption from start-ups and entrants from other sectors who are using technology and mobile-first strategies to create financial services and tools that are more attractive to the ‘connected consumer’.

Customers who have enjoyed the experience of booking a holiday via Airbnb or ordering groceries from Ocado now look more favourably on banking providers who remove complexity and offer the ability to move money around in real-time, compare bank rates with ease and who deliver trust and reward.

These ‘challenger’ brands include digital-only, technology-led banks with names like Atom and Starling. They also include hybrids pursuing successful omni-channel strategies such as Metro and Virgin Money, plus supermarket and retail brands such as Tesco Bank and M&S.

They’re winning because they’re prepared to give people the same level of control, real-time interaction and transparency they find in other sectors.

For sure, the widespread adoption of mobile is helping. From 2015 more people in the UK now access the internet via mobile phones than by desktop PC.

People want to carry out research, ask questions, share information, give feedback and generally perform all manner of tasks from any place at any time so if the high-street banks are too slow to react to these changing consumer demands, the disruptors will deliver instead.

However, disruptive competitors will soon be empowered by legislative reform, designed to give people a better banking experience by increasing competition among financial services brands.

Recent recommendations by the Competition and Markets Authority (CMA), include as as part of a wider package of banking reform, that technology should be used to better empower those customers looking to compare and switch accounts.

The CMA says banks should move swiftly to introduce an Open API banking standard. This standard would enable personal and SME customers to safely and securely share their unique transaction history with other banks and trusted third parties.

This would enable bank customers to click on an app, for instance, and get comparisons tailored to their individual circumstances, directing them to the bank account which offers them the best deal.

At present, it’s hard for bank customers to work out if they are getting good value as bank charges are complicated and opaque and many customers think it’s difficult and risky to change banks.

As a result, nearly 60% of personal customers have stayed with the same bank for over 10 years and over 90% of SMEs get their business loans from the bank where they have their current account.

This means that competitive pressures are weak so banks don’t work hard enough on price, quality of service or digital innovation.

The CMAs package of banking reforms will help new challenger brands get a stronger foothold in a market, which is of vital importance to the whole economy. So how should the legacy banking brands respond?

In a fiercely competitive banking sector the winners will have ensured a strong digital focus is embedded throughout the company and be delivering a high-quality customer experience that can help create a truly differentiated brand.

This requires an overhaul of internal culture, systems and processes and then the ability to direct the new skills and focus to deliver what customers really want from a modern retail bank.

Customers will be looking for a seamless, consistent experience in their brand interactions across all platforms and devices. They’ll also expect real-time information at their fingertips.

For banks, this means providing up-to- the-minute data on customer account balances, visual ‘how to’ guides for opening accounts and supplying basic details like branch opening hours and 24-hour customer support.

Tools and services now have to be formatted for mobile and must be best-in-class to meet customer expectations. A single customer view of interactions across all touch-points will provide valuable data to guide decisions on where to focus innovation.

However, the use of smartphones and tablets has created a more complex customer journey and banks need to invest time and resource to understand this new world order. They will have to invest in the right technology and work with the right tech partners to gather data and mine useful insights.

The end-goal is for the user experience to meet the benchmark set by other sectors. Well-designed digital interfaces and simple-to-execute online interactions need to become the norm.

Banks need to improve functions such as user identification, inputting of account details and setting-up of regular payments.

By using digital capabilities to put the focus not just on efficiencies but on personalised customer experiences, it’s not too late for legacy banks – they can still differentiate their brand.

But they need to act now. Disruption and reform are calling and it’s time to go big on change or risk not going forward at all.