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Innovating the digital future of retail banking: customers’ needs come first

By Matt Phillips, VP, Head of Financial Services, UK and Ireland, Diebold Nixdorf,

spotlights why being led by customers is key to innovating today’s retail banking landscape.

 Business as usual has been upended by the Coronavirus crisis. While the future and how it might look in a post-lockdown world remains unclear, two things we can be certain of are these: the impacts of this disruption will extend far into the future, and customers are going to need increased sensitivity and support from their bank as they navigate this new landscape. This makes now a prime time for retail banks to evaluate their innovation strategies – ensuring their goals are aligned with customers’ evolving needs, both now and in the longer term. Customer loyalty and trust are likely to be the results for those who do this well.

 A new normal – and how banks fit into it

Matt Phillips
Matt Phillips

The most immediate impact of the lockdown measures on the UK’s retail banking landscape has been on how customers practically engage with their finances. We have observed a seismic shift from in-person, bricks and mortar banking, to digital and telephone channels. No one could have possibly predicted such a sudden and dramatic migration, even among customers who most rely on in-person branch banking. So the top short-term priority for many banks now is ensuring their digital channels can handle this uptick in user traffic – but they must also be prepared to safely accommodate higher volumes of in-branch customers once lockdown measures ease; and be sensitive to the ways people’s financial situations and needs may have changed over the course of the crisis.

Banks have not ranked highly in the list of ‘trusted institutions’ since the 2008 market crash, and this is an opportunity for the industry to communicate clearly and caringly to customers as we all navigate this new normal. This crisis is not the result of the financial sector’s behaviour and while we are seeing its impacts reverberate across the sector, we must remember that, at its core, the pandemic is a public health crisis. It is vital, then, as we manage the current pandemic and consider how customer needs and restrictions might evolve as lockdown measures ease, that banks place customers at the heart of their innovation agenda – critically assessing how these initiatives will benefit and support the end user.

Sensitivity to market landscape

We must bear in mind that the needs and preferences of the end users will vary from market to market. For example, physical branches and the human touch have been an important part of UK banking for many years, with many customers viewing branches as a pillar of their local communities. As a result, a shift away from this form of banking – even while lockdown measures mean some branches remain shut – would be negatively received.

Comparatively, the Middle East is a market which has seen considerable adoption of digital, in-person solutions, such as banking kiosks, which have enabled a reduction in the staff required per branch. But how banks evolve their offerings cannot be based on technology-driven efficiencies alone: banks must be sensitive to the nuances of a nation’s preferences, which must form the bedrock of any service differentiation and personalisation offering.

When it comes to innovation, one size does not fit all

Banks setting their innovation agendas and deciding which avenues of new technology to drive to market must be aware of the challenges their customers are facing. Since one size solutions will not fit all, this presents an opportunity for banks to flex their capabilities to provide real solutions to their customers.

For many who have traditionally relied upon in-person banking, digital and telephone channels represent an unfamiliar – and potentially stressful – new way to bank. This creates the opportunity for banks to drive education around the use of these channels, ultimately helping customers to upskill and become comfortable with more digital means of managing their money.

Crucially, this will not come at the expense of the in-person banking and advisory services that so many customers prefer. Instead, by taking a joined-up approach to their offerings, banks can adapt both their in-person and digital functionalities – allowing customers to tailor their banking journeys in line with their needs.

This said, there are, of course, some areas where digital banking facilities can create more value for the end user. Forrester data from April 2020 revealed that 50% worry about forces outside of their control impacting their finances, and 37% were living paycheck to paycheck[1]. Led by the clear need for support within this demographic, banks could – for example – build out an app, powered by open banking, to support users in getting a hold of their financial management. The potential user base for such a personalised tool clearly extends beyond those who have been struggling; but for those who are, thoughtful innovation in this area could really empower customers – showing them that their bank is thinking of them and their needs.

The global crises we are facing has catalysed the conversation on how technology will factor into the future of retail banking. But this future cannot be an arms race in finding applications for new technologies: those setting the innovation agenda must be led by the needs of the end user. By thoughtfully applying cutting edge technologies to the pain points that customers are facing, banks can ensure that they are differentiating from their competitors, and driving solutions that can have a truly positive impact.