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Responding to rising customer expectations in banking: it’s time to adapt or die

By Thomas Muth, UK and European fintech specialist, five°degrees

Rising customer expectations

The emergence of ‘big tech’ has led to instant expectations from consumers and business customers alike. Companies such as Google and Amazon are providing fast, personal, safe and always-available portable solutions to customers. These expectations and attitudes towards customer service have been mirrored within the banking industry.

Thomas Muth
Thomas Muth

Challenger banks’ ability to provide quick and easy to access banking services has led to the rise of  instant banking expectations. An Accenture report on how banks can meet customer demands highlights some of the main factors rising up the customers list of priorities for a better banking experience, including benefits for the sharing of personal data, automated digital support, the protection of personalised data, personalised advice and product offerings that go beyond banking, and easy branch access.

Our survey of 2,000 banking customers shows that 4 in 10 (43%) expect to be able to set up their bank account instantly. However, under half of traditional and challenger banks are provisioning for an instant set up, highlighting a substantial gap in the market. The research also shows that almost a third (31%) of higher earners would switch banks for a better online experience, and 1 in 5 (20%) would switch if they had a better customer service. If traditional banks were to utilise this market gap, they have the ability to set themselves apart from other institutions.

What are the challenges facing traditional banks?

Firstly, due to the digitalised market, traditional banking institutions are no longer able to define themselves to the customer via their product offerings. Therefore, instead financial institutions must adapt new ways of standing out from their competitors by responding to expectations for personalised and exceptional customer experiences.

Secondly, as fintech’s continue to emerge offering more agile, speedy, customer-centric services, it’s becoming ever more crucial and time sensitive for banks to develop their offerings. At the same, we’ve seen traditional banks struggling to keep up with the pace of change – missing out on opportunities to attract new customers and retain existing ones.

Thirdly, outdated technology systems must be updated or completely replaced with a fully digitalised core banking system in order to keep up with customer expectations, competitor offerings and emerging regulations.

It’s time to adapt or die

For traditional banks to stay ahead the time is now to adapt or die. Banks must evolve quickly to customer expectations providing a highly personalised and nimble approach to catch up with challenger banking competitors. The alternative is to do nothing and with it the risk of alienating existing and new customers with nostalgic ways of working and lengthy on-boarding processes. Banks need to ditch the hybrid onboarding process that involves both digital and paper processes, and respond to new competition by fully digitalising their offerings. This change is vital in altering the way banks understand and interact with their customers to respond to and service their needs.

Additionally, to fully transform, banks must abandon nostalgic ways of working and start placing customer experience at the heart of innovation. Championing customer satisfaction across all channels will enable them to become more flexible with the products and services they provide.

There is a clear market opportunity in Europe for traditional banks to target the next generation of banking customers by providing an instant, seamless online user experience. To effectively align with the development of customer demands, banks must foster a culture of collaboration.

The opening up of data via ‘Open Banking’ will gain access to ‘outlier’ third parties enabling banks to offer personalised products and services at speed – expanding their portfolios to align with new expectations.  Furthermore, through the opening up of API’s banks will be able to access more customer data, allowing them to offer competitive prices and easier to access services relevant to customers financial needs.

By connecting with other fintech’s, financial institutions will be able to take full advantage of new technologies – such as Artificial Intelligence and machine learning. Such technologies will allow banks to provide effective automated digital support, as well as providing personalised information and advice to customers – that goes beyond banking.

Implementing a fully digitised core banking model will enable banks to adhere to customer expectations, providing personalised services, online data security, and digital support. However, not only will this benefit customers but in addition, banks will also reap the benefits – significantly reducing operational costs through the streamlining and automating of processes while reducing their technical debt of complex legacy IT systems.

For the majority of banks, it is inertia and fear that is holding them back from capitalizing on the European market opportunity. Banks need to ditch this fear and transform their banking model.