Mark Grainger, director at data-driven customer engagement solutions company, Engage Hub

With significant regulatory changes coming into force over the next couple of years, it is clear that key governing bodies want to intensify competition in the financial services industry. The Revised Payment Service Directive (PSD2), for example, will completely change banking as we know it. Under the new EU directive, banks will be obliged to allow third-party providers to access their customers’ accounts through open APIs and as such, both consumers and businesses will be able to use third-party providers to manage their finances. In the near future, we could find ourselves using the likes of Facebook or Google to make transfers and analyse spending habits, whilst having our money safely stored in a bank account.

As a result, traditional banks will no longer just be competing against other banks – they will be in competition with any company approved to offer financial services. So as the competition heats up, there is a mounting pressure for banks to differentiate their offerings. More and more are beginning to understand the importance of delivering secure and seamless cross-channel customer communications in order to enhance the customer experience.

But in order to get this right, there are a number of challenges banks will need to overcome.

1. Meeting the demands of the 24/7 consumer

Today, customers demand digital services from their banks. During 2015, there were 11 million internet bank logins a day and this number is only set to continue growing as on-the-go consumers increasingly want to check balances, make payments and even apply for a mortgage at the touch of their thumbs. And with a number of fintech start-ups offering a digital-first banking experience, the pressure for the more traditional banks to deliver a seamless digital experience is on.

However, the expectation for banks to serve customers centred on their mobile phones creates a huge challenge: delivering relevant and timely information to each and every customer. And with so much choice now on offer, customers will easily go elsewhere if they do not get the level of service they expect.

Banks, therefore, need to do more in helping customers proactively manage their finances. One of the most effective methods to do so is by automating the delivery of real-time notifications detailing events that impact a customer’s account and the mobile channel is the ideal medium from which to focus communications. While email continues to be the primary delivery channels for notifications, SMS alerts and push notifications from apps are proven to have higher open rates and faster responses from the customer.

2. Facing fierce international competition

It’s not just competition on UK soil that banks are increasingly facing – the digitalisation of banking has also brought down geographic boundaries to introduce fierce international competition too. This competition is likely to intensify even further with the introduction of PSD2 as consumers look further a field for the banking solution that best fits their needs. On the back of increased competition, most traditional European financial institutions have invested in developing market-leading mobile banking and app features, as well as cross-channel technology, over the past 12 months.

One international bank championing this cross channel strategy, in particular, is Turkey’s DenizBank. Turkey ranks in the list of the top five highest social media users globally so clearly there is an appetite for banking services via social media. As such, DenizBank created a new channel of communication with its customers, reaching out to them via Facebook Messenger for all matters related to their accounts. It’s quick and it’s convenient – everything the ‘on-the-go’ consumer demands.

So as banks from further afield strengthen their digital offerings, the pressure mounts on traditional UK banks to orchestrate cross-channel communications to deliver contextually relevant and convenient experiences which fit into a fast-paced lifestyle. Those that fail to do so will find themselves falling behind the competition.

3. Fighting fraud

Security has become a huge and very costly challenge for banks to tackle in recent years. Figures from Financial Fraud Action UK reveal that financial fraud losses across payment cards, remote banking and cheques totalled £755 million in 2015, an increase of 26% compared to the previous year. Allied to this, there have been an alarming number of data breaches reported by financial institutions. In fact, British financial institutions have been investigated 585 times for data privacy breaches in the past year – almost triple the number of times on the year before.

However, banks can actually to use their data to fight the fraudsters as opposed to just focusing on the security of customer data itself. Banks are in a unique position as they have access to valuable data such as a customer’s spending habits and location information. By analysing this data, banks can develop and record ‘normal’ customer behaviour patterns. This then allows for anything out of the ordinary to be quickly and easily identified- such as potentially fraudulent activity – and send simple, automated communications via SMS, email or push notifications to customers to verify (or not) these unusual transactions.

This two way communication between bank and consumer ensures customers can purchase the goods and services they want quickly, but securely.

Overcome challenges, reap the rewards

The digital banking revolution is more than just launching a new and multifunctional smartphone app – financial institutions need to fundamentally change the way they communicate with their customers in order to deliver an experience that needs their ever evolving demands.

Utilising leading mobile engagement solutions to integrate disparate digital and physical channels into a single, seamless experience has to be a priority. SMS alerts, voice calls, email, push notifications and social media can all be used to automate communications to prevent fraud, improve the customer experience and increase retention rates. The banks that get it right now will be remain ahead of the curve and are likely to come out on top at a time when the competition is more intense than ever before.