By Andrew Wilkins, CEO and Co-Founder, Futr AI.

Within the banking sector, “trust” is the second most important factor consumers consider when buying financial products, ranking second to “ease and convenience”.

The rapid pace of digital transformation has changed the relationships between consumers and business forever. According to data from McKinsey, the Covid-19 pandemic has catapulted digital transformation forward by several years – and in just a matter of months.

The impact of lockdowns and the rapid mass adoption of digital communications channels like WhatsApp have been key drivers in this. Organisations are finding that they need to board the digital transformation train – or face being left behind and losing customers.

Rise of the challenger banks

Compounding the problem for the traditional giants is the meteoric rise of the challenger banks. Players such as Starling, Atom and Revolut are competing directly with brick and mortar banks by excelling at digitising financial services.

Taking advantage of the latest technological advances on essentially a blank canvas, they’re able to deliver digital first solutions out of the box that offer a faster more consumer-centric approach. Take Starling Bank for example, technology is the bedrock of what they do. A customer can only use its services by signing up online – removing the need to travel to a physical branch and fill out multiple forms. It’s still secure, it’s just faster, and this kind of painless experience is a great way to start a relationship.

And proof of it working is there. According to a report by A.T. Kearney, customers are moving from traditional lenders to challenger banks. The report found that 21% of UK consumers considered their primary banking relation to be with a challenger bank, while this figure rose to 32% among millennials.

The challenge of legacy systems

A blank canvas is the total opposite to what most established organisations in the financial services sector are faced with. Having invested heavily over the years, they still rely on decades old legacy systems which are overly complex and siloed.

And changing a whole IT infrastructure is a daunting undertaking. According to Finance Monthly, 36% of businesses ranked legacy systems as the biggest obstacle to change. Even more problematic, from a customer loyalty perspective, is a widespread assumption that they will never catch up with challenger banks.

To counter that, organisations need to think carefully about short and long term transformation goals; how they’re communicated and most importantly how they’re evidenced. Short term goals or quick wins are essential to show that change is not only coming, but happening already.

Interactive chat solutions, like intelligent chatbots, are a great example of this. Providing an automated conversational interface (on the web or WhatsApp for example) in front of an organisation’s existing back-end systems achieves three very important wins. Firstly, it correctly starts the transformation journey from the front, ensuring that access to knowledge, processes and systems are democratised and future proof (i.e. any format, any language, any channel, any time). Secondly, it provides seamless transformation and continuity to customers regardless of larger medium and long term changes behind the scenes. And thirdly, it provides evidence of a quick but very visible win, building faith in the transformation process while keeping up the momentum for longer term changes.

Balancing all customers’ needs

It’s not just the tech that gets in the way. Many traditional banks are also concerned about balancing the needs of those who are digitally savvy versus those who are more cautious. While this concern is understandable, it’s important to note that digital inclusivity doesn’t mean digital only. It’s all about choice, and giving customers the opportunity to decide what fits for them.

Many customers were already widely embracing digital banking before COVID-19, but the trend will become even more accelerated now. We now expect the ability to self-serve or be remotely served across a financial service provider’s entire product range. Some organisations are tackling this by deploying automated customer contact solutions such as chatbots or offering virtual assistance through live chat. Customers can get answers to questions or run through processes quickly without having to call in, search the website or go into a physical branch.

And remember, those who want to self-serve can, whilst those who require a more nuanced interaction by choice or because of the complexity of their issue, can get that human touch. The result…. increased customer satisfaction and customer loyalty across the board.

Democratising access

Channel shift and delivering banking services through social and chat apps like WhatsApp has become mainstream in China, Africa and South America, and its democratisation of financial services has been revolutionary.

Clients of Brazilian bank Banco Bradesco used WhatsApp to consult the bank’s artificial intelligence-powered chatbot 88.5 million times last year, a 16-fold increase in interactions compared to the previous year. In the UAE, Emirates NBD has rolled out WhatsApp Banking services, and Icici Bank of India recently announced that they’re doing the same. Icici’s service is set to capitalise on the fact that over 400 million Indians already use the app.

Although change has been slower in the UK, it’s coming. COVID taught us that we can effectively access services through our mobiles, 24/7 on the go. Why not banking?

Channels like WhatsApp will increasingly become critical delivery channels for services. Combining them with the right AI technology will provide greater efficiency in customer service support and custom targeted offers, grow customer relationships and embed customer loyalty.

Using data better

Many organisations are leveraging data to understand customer behaviour. Utilising solutions like CSAT or NPS surveys on chatbots, ever present on the customers’ messaging and social channels of choice, allows them to capture regular and in-the-moment feedback from customers.

Atom Bank does this really well, using a multitude of digital channels to get realtime  and widespread feedback from customers. To understand how to make the customer experience smoother, they have App Store ratings, in app feedback, review sites, social media feeds and website feedback on complaints.

For many traditional banks, interactions with customers tend to be more reactive—usually if there is an issue that needs resolving. AI is turning that on its head, empowering institutions to become more proactive by offering more personalised advice and educational content to customers.

Take Monzo for instance who—according to a GlobalData report—uses AI powered money management to drip feed personalised spending tips. This helps build trust and engagement in the absence of in-person interactions.

The future is now

Customer needs and expectations have changed considerably over the course of the past year, with major adjustments required to meet the needs of a world gripped by a pandemic. Despite the rapid advancements over the past 12 months or so, there is still tremendous scope and opportunity for more.

According to a PWC study, “…if financial institutions want to succeed in this increasingly digitised landscape, they must simplify legacy systems, update their IT systems, and take advantage of technology beyond the cloud such as artificial intelligence and robotic process automation.”

AI powered technology is already proving to be popular in many financial institutions. Global business information provider IHS Markit, forecasted the business value of AI in banking to reach $300 billion by 2030.

Innovative businesses are taking a digital-first approach, opening their eyes to what digital technologies like automation, omni-channel and AI can bring, and consequently capturing (and keeping) more customers.