Consumer banking: reinventing a wheel or business as usual?

The newly adopted (out of necessity) working form home model is a good example that the current crisis does not create any new megatrends. What it does, though, is the change in dynamics of the processes, which we have already observed since Lehman’s collapse back in 2008. Digital banking transformation is no longer the thing of the future. It is happening right now.

Processes, that took months to implement over the last years, now constitute the need of an hour. Most of the analysis, tests, deployments, has been also restricted to the absolute minimum. However, in the banking industry, it plays a fundamental role to keep both internal and external processes under the regime that guarantees security while working within a distributed network, in the branch, or telecommuting. This, in turn, requires both incumbent institutions and their customers to change their mind-set as for the risk tolerance, requirements, expectations, etc. As we look at this closer, it seems that we are still not aware of all potential threats this sudden change has exposed both banks and their customers to.

What we know is, however, the pandemic-induced crisis brought to the light that many of the incumbent institutions are not ready for fully digital interaction with their customers yet. The traditional front line in most of the banks has no sufficient capabilities to meet new demands from their customers. With cash transactions being in decline for some time already, together with the increasing number of companies getting their brick and mortar channels shut (bank inclusive) – the number of good reasons to go to the bank branch once the restrictions are lifted is steadily diminishing.

Again, as we have no clarity when and what we can expect from the “new normalcy” in a long run, we still can anticipate that the initial period of roughly 12 to 18 months after restrictions are lifted, will constitute a surge in demand not only for the banking products and/or services per se but mainly for the trust that people put in the financial institutions and the system in general. Speed, continuity, accessibility, and security – these are probably the most important features that would drive consumers choices as for their bank of the first choice. Failing to deliver any of these - would cost the institution quite a lot.

Probably the last thing the customer would like to face in the critical (any) situation is being incapable to reach his bank for essential products or services. Omni-channel is no longer a nice-to-have functionality but, as the Covid-19 example proves, a must-have option for bank clients who in the situation of a market panic – must maintain the interrupted access to their financial assets, market insights, adviser or self-servicing tools. They must get it fast and in a secure manner so their comfort zone, as for the interaction with the financial institution, is not affected in any dimension.

The increase in resources to address emerging concerns doesn’t seem to be an adequate measure here. On the contrary, the response should go towards more digital form of interaction and channel migration to provide better user experience and security for customers who may (as we all would) expect another wave of infection, which, in turn, would trigger adequate counter-measures, including lock-downs in countries or regions. A lesson already is taken, so it would be na?ve to think that people would stay with the institution they already had a negative experience with. Particularly, in the times of the crisis.

That is why it is a bank’s call to build trust and better engage with customers, extending their digital capabilities and doing an extra mile to deliver pieces of information or advice before the customer even asks for this. In times of crisis, such a proactive approach should keep the customer with the institution much more than e.g. discounted rate applied to products or services.

Customer engagement around digital channels makes a lot of sense particularly in the environment of the low-interest rates, which, in many countries, oscillate around nominal zero. For these reasons, banks need to find alternative ways to support their business continuity and profitability as proceeds from interest margin are on the negative trajectory. For some of the banks, a subscription model for a package of products and services would come out of no surprise.

Everything digital. Digital prospecting and on-boarding, using new or existing in different jurisdictions solutions is just a good beginning. Remote tools for running onboarding/KYC processes could enable customers to access financial services in a frictionless way. Under the lock-down conditions, this functionality makes a huge difference. 

If you go to the bank behind the corner – would they offer you the same level of engagement? Would you stay with them or rather with a purely digital bank that provides solutions that satisfy your immediate needs in a simple way? Or, perhaps your choice would go towards big tech companies offering banking products and services?

Market sentiment is very unstable as the time is unprecedented now. The winners will tailor their offering to behavioral changes. Digitization and digitalization should take the lead. It’s not about reinventing the wheel – but the business is nothing as usual…