By Mark Sullivan is global business leader, Banking and Capital Markets at Genpact
As we enter a new decade, the banking sector faces a pivotal moment, with digitisation transforming business models and processes in new and greater ways. In 2020, banks must innovate and invest in advanced technologies to remain in the market. It is no longer a question of achieving a competitive advantage. It’s table stakes.
In the future, the banks that survive and thrive will use these advanced technologies to make the transition from delivering financial services to enabling financial betterment. To this end, we see several priority areas on which banks should focus their efforts, to succeed in the next decade.
Innovation of customer experience
Customers increasingly expect tailored products and services delivered to them in real time, in tune with their moods and behaviours. To do this, banks will need to fuse artificial intelligence (AI) and human judgement to turn the troves of customer data they possess into actionable insights that help customers improve their financial wellbeing.
Banks’ capital in the last decade has largely been spent on compliance, risk management, and stress testing, rather than on designing new customer experiences. Some banks, though, are recognising the importance of building an attractive experience for their customers, as they are challenged by new market entrants. In 2020 and beyond, banks should focus on innovation of customer experience.
This holds true for both retail and commercial banks. Increased competition and changing demands are forcing banks to focus more heavily on the customer journey. Yet recent Genpact research found that while 41% of commercial banking leaders say growing customer satisfaction is a top priority, just 35% have mapped the customer journey across both treasury and lending product lines. This, despite the fact that commercial banking executives identified the growth of these areas, respectively, as their company’s first and second priorities.
Shifting to an ethics-driven approach
In the future, banks will need to become more like partners to their clients, using AI and analytics to make helpful nudges and interventions to encourage healthy spending habits and make recommendations on how to reach life goals sooner. Adopting this approach will require banks to restructure services and products around the short and long-term impact of financial decisions, helping customers to make more purposeful investments and purchases.
Until now, banks have been authoritative and functional, but this perception is starting to shift as they are required to take a more supportive and emotional role in their customers’ lives. They will therefore need to reskill their employees and adapt their recruitment process to create a workforce that takes a more advisory role, working alongside technology to add the empathetic human touch to customer interactions. The ethics-driven approach relies heavily upon AI and analytics, meaning that a greater emphasis will need to be placed on the morality behind the decisions taken by machines to ensure the decisions they make are fair, unbiased, and in the best interest of the customer.
Considering the whole system
Given the current climate, we’re seeing consumers – in particular, millennials – demanding that enterprises take an active and ethics-driven role within their communities, shifting their focus from economic growth at any cost to sustainable goals that put people and planet first. Evidence of this is the European Union’s planned mandate for financial advisers to tell clients about environmental, social, and governance investment options. Banks can have a positive impact not only on individuals and communities, but also on global-scale issues, such as climate change.
For example, the challenger bank Aspiration allows customers to track their spending against the bank’s ethical index, which provides a “planet score” based on how sustainable a brand’s processes and practices are. Banks will also need to consider how to protect their own ecosystems, looking into new strategies for diversifying and de-risking. This may include brokering partnerships with businesses previously considered as competitors, which would create a stronger, safer banking ecosystem.
Using data to add value
The one thing that these themes have in common is data. Genpact has studied these trends, which will impact banks in the future, in our Banking the Age of Instinct report. To succeed in the next decade, financial institutions need to focus on learning to connect, predict, and adapt at speed, placing data at their core and embedding AI throughout their organisation. With competition growing every day, incumbent banks should consider new business models and potential partnerships to develop strategies to compete with nimbler fintechs and challenger banks.
Placing the customer, the community, and the planet at the heart of the services banks provide will be key in the years to come.