By Richard Broadbent, MD Banking at Wincor Nixdorf
Today’s consumers are more demanding than ever when it comes to the service experience they expect from their bank. Driven by customer experiences outside of the banking sector, there has been a clear shift in how individuals want to interact with their financial-services providers. Whether it’s a need for instant information or a more detailed transaction, convenience, simplicity and choice are the critical factors behind how, when and where consumers choose to access financial services.
In recent years, rapid digital transformation has changed customer expectations across all industries. Within the broader financial-services marketplace, this has not only opened up the market to new forms of competition but has forced banks to reevaluate customer experience across all of the touchpoints they have with their customers. With FinTech start-ups, digital challengers and new technologies emerging, there is a real risk that traditional banks are in danger of losing control of the customer journey, unless they are able to adapt, quickly.
The rise in digital and mobile services within the financial sector has largely been driven by consumer demand rather than through banking innovation. Although the benefits of digitisation are now clear, in comparison to other sectors, banks have been much slower to adopt mobile and indeed digital technology. As a result, the door has been left open for third parties to introduce niche services that are redefining customer experiences. This is particularly noticeable in the payments ecosystem, in which the introduction of financial offerings from companies such as Apple and Samsung are challenging traditional payment methods.
With consumers feeling more and more comfortable utilising a wider range of services from different providers, particularly at the point of sale, is there a risk that banks are losing their grip over who owns the customer journey?
“Out with the old, in with the new”
Partly due to the legacy systems many financial institutions have in place, and partly due to tight regulatory restrictions, the scope for banks to be agile and adopt new ideas quickly can be limited. Globally, many core banking systems are more than half a century old and not designed for today’s customer-centric world. This is further compounded by the fact that digitisation has dramatically increased the volume of transactions with which these core systems have to contend, which they were simply not designed to handle. Inevitably this has left the door open for niche service providers to attack the business model of banks and has encouraged the emergence of new digital-first or digital-only competitors that are not encumbered by legacy technology. Apple Pay is perhaps an overused example, but it shows the potential for customers to be drawn in by a new user experience.
Some banks have attempted to address the challenge by separating their channel solutions from their cores, whilst others have recognised that long term, the only option is to replace their cores with new, open architecture platforms—a process that can be incredibly costly and time-consuming. Either way, many banks have to fight hard to remain relevant in what is a very dynamic environment.
The future is collaborative
While addressing the legacy-system issue needs to remain at the top of the banking agenda, it can be a long and lengthy process. Alongside modernisation projects, it’s vital that banks continue to cater to the needs of their customers in parallel. If existing systems are unable to support innovation, banks must look outside and consider other ways to enhance the customer journey.
One approach is to work collaboratively with FinTech companies to drive innovation. Rather than striving to control the end-to-end customer journey, some banks may be better advised to focus their efforts on how to integrate the services of third parties to create a seamless and more compelling proposition.
Financial institutions are now starting to embrace this approach more and more, targeting the FinTech community to identify the disruptors and the creators of new technologies that can fundamentally enhance their ability to innovate. With many FinTech companies being fleet of foot and adaptable, new ideas can be tried and tested quickly without the rigors of traditional corporate processes.
Most recently, Deutsche Bank announced the launch of its innovation lab in Silicon Valley. By gaining early access to new technology and ideas it may not otherwise discover on its own, the bank is looking to better position itself to exploit new technologies and services as they emerge. Accessing innovation in this way will enable banks to win over the hearts and minds of their existing and future customers.
Technology is clearly changing how, where and when customers interact with banks. To keep up with rising expectations, financial institutions must focus on re-evaluating end-to-end distribution capabilities to deliver the right product through the right channel at the right time—seamlessly and consistently. While improving mobile and online channels is part and parcel of this strategy, restructuring the core branch environment should also be a key development area for banks. As new technologies continue to emerge, banks will need to continually evolve their customer journeys in a way that seamlessly enriches both the digital and branch experiences.
Given the level of change that is happening within the financial-services industry today, it is difficult to predict exactly how customer journeys will evolve in the future. However, it is important to recognise that new and emerging services only form part of the end-to-end customer service. If financial institutions want to retain control of the wider customer journey, they need to position themselves at the forefront of emerging technologies to react to and drive innovation. Whether this means integrating third-party services into long-term strategies, modernising legacy systems or developing innovation labs—or a combination of all three—banks must ensure choice and convenience remain at the heart of their customer offerings.