Nic Merriman
UK CTO of Financial Services, Avanade UK
Bill Gates once said that banking will always be needed but banks as we know them could easily disappear. How profound this statement proves to be will become clearer over the coming years, however the current landscape certainly appears to support the sentiment.
New entrants to the market, new business models, changing customer expectations and fragmentation of traditional services are all contributing to put traditional banks under pressure. Metro, mBank and others are all demonstrating that focusing on the new experiences and needs of their customers is driving increased loyalty and revenue. Meanwhile services like Barclays PingIt and Paypal demonstrate that disruptive services can significantly move customers away from traditional banking offerings. The appetite for such services is clearly there, and the maturity and takeup of them can only move on an upward trajectory.
Indeed, changes are afoot and the physical manifestation of these changes is apparent. At a macro level, the branch appears to be in decline with most established brands reducing their footprint. Cash is no longer king, mobile payments are increasing in popularity and no longer is the current account the only thing one uses to manage money. Banking is becoming more democratised by technology and new services are changing the way we think about banking, our money and the application and capability of technology.
So is the branch dead? Well who knows for sure, but the received wisdom and the empirical evidence certainly indicates that the purpose of the branch is changing. With traditional branch banking services moving online, the high streets are seeing branches of the most established banks disappear. In fact, 2,000 branches have been wiped off the map over the last decade and many more closures will follow.
The good news is that this is not the death knell of the industry, more an evolution that sees the focus shift from the noun to the adjective, from banks to banking. One where customer satisfaction, convenience and new services will feature more prominently. Where the commitment to digital banking and the support for new channels and services make it easier for financial institutions to build relationships with the customer.
Differentiation through added value services
So how will the banks compete in this new world of banking? The answer is in how they deliver services and products. No longer will it be competitive to just show account balances on a page or to provide online facsimiles of paper applications. Customers want a more holistic and engaging experience that can span channels and be supported in by them all.
Customers will expect everything that can be done in the bank to be available online or through mobile – they will see no reasons to be forced down any particular route. Customers will increasingly look for personalised products that have a simple application and acceptance mechanism such as ‘one click’ to buy.
Additionally, customers will increasingly look for value added services, to help them manage their finances and to help them to understand their spend. There will be a need to deliver tools that offer additional budgeting services and run alongside the capabilities they already have at their disposal to manage their finances. For example the establishment of the new children’s banking service from Halifax is just one indicator of the direction in which banks are heading. They are gearing their services towards a more expectant, tech savvy customer base with growing numbers of digital natives.
For the high street banks that will continue to operate in traditional bricks and mortar settings, the need for a free flow of services between channels is hugely important. Omni-channel retail banking will see customers interacting with services in branch but will be given access to information and services they can research and interact with further while they’re on the go. Tablets and mobiles will be the delivery system but the services they will use will need to be user friendly, genuinely useful and provide full fidelity of service.
The right strategy, people and innovation will drive success
The majority of established banks already have the platforms to deliver new services – the challenge is in the exploitation. The ability to join the product centric thinking into a more customer centric and focused set of offerings will challenge traditional operating models. It requires the skills of an IT department that takes a holistic approach to change.
The first consideration should be the needs of the business to better serve its customers, which is included in the brand strategy and digital strategy. The last thing a bank needs in this new age of banking is a glut of tech-led solutions that leave customers puzzled and frustrated. It’s the reason why the technology implementations driven by Avanade begin with the vision of the company. The exploitation of banking platforms to do more should be a positive experience that provides value.
From our experience, we see that the most successful banks are delivering a range of channels offering a full spectrum of services. In addition, they’re starting to expose new services to drive innovation and differentiation. Examples include Barclays, which recently enabled some of the Barclays PingIt application programmable interfaces (APIs) to be used by third party developers in the provision of banking services. As a result, customers were given much more functionality and the base of potential users was expanded.
To deliver in this new era, successful banks are looking outside of the traditional banking fraternity. They are hiring designers, customer experience professionals, retailers and innovators who have an understanding of customers’ needs and expectations from non-banking sectors. This strategy coupled with flexible product innovation is providing a formula for success in traditional banking environments which if followed will enable banks to compete with the new entrants and disrupters in the market.
In a customer-led era of banking, Avanade works with its clients to develop the strategy that helps banks reach their desired end goal of improving interactions they have with their end customers. We work with firms to help define the customer experiences, the journeys and technology to deliver the new experiences needed to succeed.
Today’s digital customers have higher expectations than ever. To be fruitful, companies need to harness new innovative approaches to attract and retain customers through highly relevant and personalised experiences across multiple channels. Although customers now have the freedom to switch banks more quickly than ever, it’s the job of the banks themselves to unlock added services and ultimately put the customers firmly at the centre of what they do. Working with the suppliers that can get them there is a positive step towards this goal.