By John Rakowski, director of technology strategy, AppDynamics

Digital technology is shaking up all manner of industries; with mobile applications and software changing the way we work, shop and interact with brands and their services. The banking sector is no exception and it was recently predicted that as many as 2,400 bank branches could close over the next five years, with 1 billion people expected to be using their mobile device for banking purposes by 2017.^[1]

As customer behaviour shifts, long-established banks must consider how they can restructure their business around technology and software in order to stay relevant and maintain a competitive edge. Whilst they get to grips with how they do this, they face mounting pressure from the emergence of digital focused challenger banks such as Atom and Fidor, who are ready to capitalise on the change in customer expectations by offering more transparency and easier online access to accounts, whenever and wherever customers want, from any device.

The Competition and Markets Authority (CMA) recently released its report into the banking sector, encouraging the industry to work better for the consumers they serve.^[2] The report praised the number of challenger banks entering the market and their dedication to providing better customer service, being held up as an example to the sector for their development of innovative products and fresh ways to engage with users across online and mobile banking. Whether customers are visiting a bricks-and-mortar branch or using a digital service, they are expecting a more seamless, personalised experience and easier access to information about their accounts.

In spite of this shift towards digital, established banks have a reputation of being slow to implement new technology and they struggle to move away from legacy infrastructures which have been in place, in some cases, since the 1960s. For these global corporations, with highly complex business structures, adopting mobile or cloud technology can be a long process, with many citing security concerns and ultimately cost as challenges to quick and effective deployment of digital services.

The success of banks like Fidor is down to the fact that their business strategy has been entirely geared around customer experience, co-creation and challenging the idea of “what a bank needs to be” to meet the needs of today’s consumers. Fidor’s online-only model allows it to focus on re-establishing lost connections with customers and allowing them to actively participate in the bank’s decision making process, therefore continually strengthening trust, an essential factor in any relationship. Its community-based approach asks members to say what services and products they want and offers services such as peer-to-peer loans and quick and easy access to account information.

Other institutions are becoming increasingly aware of the need to transform, and have started to take vital steps to introduce digital services to connect with customers in genuine and useful ways. These include faster mobile transactions and apps which give customers more insightful analytics into their accounts and expenditure, and tailored financial services available to them. Many organisations have standalone digital teams, whose function is to trial and create intuitive connected experiences for customers and bring them to market. These dedicated groups are responsible for accelerating the pace of innovation for their organisation, ensuring they can continue to provide customers with what they need.

Although a seemingly great way to fast track innovation, the structure of these independent digital teams, who often operate on a project based basis, means that the output can create confusion to consumers. For example, a number of leading UK banks have two or more mobile apps in addition to a day-to-day banking application. These apps focus on areas such as customer spending analytics, through to video banking, but the fragmented approach of multiple apps leads to customer confusion and low adoption. For absolute success in providing value to customers, these digital services need to be easy to use and totally seamless. Pressure is on for these siloed innovation teams to be integrated into the overall technology and business estate in order to create a user friendly experience.

Over 20 challenger banks applied for banking licences over the past year, so the race is on for all organisations in this sector to innovate. But as banks move to deliver more intuitive connections with their customers through digital, new challenges emerge. Digital is disrupting in all areas of life and business, and as software continues to play an increasingly important role in how people bank, there will be more pressure on companies to make sure that their apps and other associated digital services are up to the test. To succeed in this highly connected world, these services need to provide seamless, smooth, personalised experiences with minimal user friction and outages.

A number of major banks have fallen victim to software glitches in recent months, with technical outages causing disruption to customer transactions, leaving many unable to access their accounts or delaying salary payments. The results of these outages include frustration and reputational damage for the bank involved, on a national scale. But it is not just major incidents that banks need to be wary of. With digital increasingly becoming the major touchpoint between consumers and banks, if these services delivered through apps are consistently buggy or difficult to utilise, customers will not hesitate to jump ship, take their money elsewhere and opt for a new provider offering better customer experience.

To highlight this, recent AppDynamics research revealed that three in ten people would change banks if a mobile app wasn’t up to scratch. Customers expect banking apps to be reliable no matter when or where they are using them. This means that banks must ensure they are meeting this expected level of performance, providing constant access to key services, fixing emerging issues before they become headline glitches, and ensuring they have foresight of any changes in customer demand.

Application performance monitoring will help banks to deliver a first rate service to customers, but they need to go one step further if they want to build brand loyalty. As demonstrated by the success of banks such as Fidor, customers are demanding more personalised online services which are built around their behaviours. The industry-wide move to digital is resulting in a huge amount of data being generated, through millions of interactions with digital banking applications. This data provides a great opportunity as it contains a wealth of detail into customers’ needs and wants, detail that can used to win lifetime loyalty. It is therefore essential that banks can quickly analyse this data rapidly through analytics, to identify new opportunities and ensure their services directly correlate with their customer’s banking needs.

Digitisation of the banking sector will continue at breakneck pace, bringing with it both challenges and countless opportunities. Providers who can master new technology, shift to a modern software strategy, and can maintain a customer-obsessed focus will reap the benefits in a competitive and fast-moving marketplace.

^[1] The Telegraph, Thousands more UK bank branches could face closure, September 2015 [source]

^[2] Competition and Markets Authority, CMA proposes better deal for bank customers, October 2015 [source]