Creating the next chapter in banking

Banks are essential to the economy and society as they enable money to flow in the ecosystem: they receive deposits from the public, collect savings, provide and manage means of payment and grant loans. Resilient through centuries, the banking category has remained largely unopposed to outside competition thanks to its unique expertise, specific regulated status and omnipresence. Banks are built on endurance over time.

It seems things are changing for the banking category, however: customers are becoming more demanding and competent, regulation is moving towards openness and ease, new technologies have the power to disrupt banks (they have) and a new geopolitical and environmental equilibrium is required. Banks are seeing these changes happening in real time and are trying to adapt with an organization built on continuity and stability, not agility and disruption.

What will the world of FS look like in 2 or 5 years? What are the future products, services and experiences clients are going to need to live in an ever faster-changing world? These are some of the questions we try to answer on a daily basis at frog, part of Capgemini Invent. In this article, we are going to leverage recent projects with leading European banks to uncover 12 insights and opportunities banks can seize to write their next chapter.

I. It’s time to address Financial Wellbeing

Like our genes, our financial knowledge, behaviour and mindset are inherited. Some children are the beneficiaries of financial security and financial confidence that has accrued value across generations. Others are the inheritors of bad debt that shape negative, lifelong habits. Similarly, some young people are supported by their personal network to think about what they do with their money (and are equipped for the adult world), but sadly the vast majority are not and stubbornly low levels of financial literacy across OECD countries are more than enough evidence of this.

1. Providing personalized insights and educational tools for clients?

Information on saving and investment strategy is not missing, however its complex format and vocabulary makes it difficult to digest, resulting in uneducated clients and non risky investments. What if banks were able to provide proactive and personalized insights to clients to make better saving and investment choices? What if educational tools were part of the daily baking apps?

Supporting facts: 77% of French people feel they have too little knowledge about financial matters, says a survey from Banque de France, 2021. Mint is an American company created in 2006 and having raised more than 36 million euros. The platform democratizes the world of savings to the general public by grouping all the accounts of a client on a single interface and by offering free and tailored advice on the best savings strategies to adopt.?

2. Creating self-driving money tools to optimize revenues and cash flow?

If investing can be risky, not taking advantage of the financial markets is just as risky because sleeping savings are doomed to lose value. What if banks created tools that move money around to optimize the clients’ profits? What if banks made cashflow solutions more accessible such as getting paid earlier, small credits, dividing payment of big amounts?

Supporting facts: 76% of savers do not know what to do with their savings during confinement, says a survey from France Transactions in 2022. Betterment helps clients invest better by putting robots to work for you, with automated tools and strategies that can help unlock your money’s potential.

3. Setting goals for the future and achieving them

Planning for the long term is made difficult if we are unable to see the impact decisions we make today will have on our world tomorrow. Personalized goal setting, supported by scenario planning tools that help us understand the impact of different choices, are making retirement planning more graspable. What if banks helped people define their life goals and financial objectives and proposed yearly checkups to discuss saving strategies?

Supporting facts: In psychology, goals give us a roadmap to follow. Goals are a great way to hold ourselves accountable, even if we fail. Setting goals and working to achieve them helps us define what we truly want in life and prioritize things.?

Yomoni is making the bancassurance space shake because it has modernized the life insurance experience. Whatever your project, Yomoni helps you find the right investment solution. Clear goals and user experience have convinced thousands of clients in a few years.

II. It’s time to have positive impact on the planet and society??

Prioritizing growth over people and the planet is not acceptable anymore. Some banks and insurance have defined a purpose to foster good impact and yet, their engagements look like greenwashing when we know they are still financing fossil fuel and the old world. It’s time to change. The French want to act, 80% of French people are worried about the environment and climate change, 62% give an important place to environmental and social impacts in their investment decisions. (IFOP, 2022). And yet, changing is hard and banks need to set the tone and use behavioral design to change habits.

4. Choosing positive impact among a large palette

Spending money has become a way to vote and protest, yet investing your money for the right cause is not yet a common act. Faced with the lack of awareness of impact funds, banks need to boost impact investment and sustainable savings. Because every euro counts to make the world more sustainable. What if banks created questionnaires to ask clients about their ESG concerns and help them set personal goals and invest in the right cause?

Supporting facts: Only 15% of French people know about SRI funds. Sustainable finance" assets represent less than 1% of life insurance assets (€124 billion vs. €1,876 billion), Survey conducted for the SRI Forum (2021) and The French and responsible finance (2021)?

Goodvest is an investment solution committed to the environment. So that your savings work for you and for the ecological transition. Various investment themes aligned with the Sustainable Development Objectives of the United Nations are proposed to clients.?

47% of savers are willing to sacrifice a little financial return if they are certain that their savings will benefit environmental projects.?

5. Tracking positive impact, individually and collectively?

86% of the French consider that banks are not transparent in the way they use savings and deposits (Opinionway 2021). Education needs to be reinforced. What if banks offered an annual summary of the impact of the money, with the CO2 score of the investments allowing the client to make informed choices for the following year? What if banks compensated for "brown" investments by supporting natural capital restoration and carbon sequestration solutions??

Supporting facts: 80% of French people believe that banks must change the way they invest their money, in particular to finance the real economy (70%), local economy (80%), and fight against global warming (63%).

Tickr is an impact investing app that allows users to invest in positive companies (education, environment, cybersecurity) via ETFs and offset their carbon emissions by financially supporting climate protection projects.

6. Coaching clients to go a step further?

Banks have access to all our financial data and can analyze our life habits and yet, they don’t use it to coach us on a daily basis. What if, with the help of an adapted payment card, banks could analyze the customers' expenses, calculate their environmental footprint and suggest solutions to consume more sustainably and/or compensate for their carbon emissions?

Supporting facts: The carbon footprint of the French is on average 11t of CO2 equivalent per capita, whereas it should be 3t to be in line with the objective of limiting warming to +2°C (Min Transition écologique).?

Greenly enables banks to scan the banking data and evaluate the carbon footprint of the transactions. Banks such as BNP Paribas propose this service to their clients, creating the first step toward a sustainable digital coach.?

III. It’s time to make banking great again

Customers use digital products and services all day long and the banking industry can suffer the comparison with other categories that impose new standards in experience. The latest Capgemini report on banking “Next generation banking, 2023” says that the emergence of platform businesses, intelligent products based on Artificial Intelligence (AI), and changing customer expectations driven by global best practices have the power to move the banking experience forward. Intelligent financial products are expected to be hyper-tailored to customers. They should be able to make predictions and advice based on real time data processing, adjust features to new data or context, create new product bundles when necessary, adjust appearance, presentation and communication to the level of knowledge of the customer and complement experience with natural language interaction that understands and expresses human emotions. This is the banking experience we want and need.?

?

7. Creating a simple and fluid user experience?

The myth of simplicity is that all profiles are looking for the same levels of simplicity. However, depending on one's expertise, the word simplicity does not mean the same thing. What if we made an interface that adapts to the customer's level of expertise? What if we hide the complexity of the UX linked to the countless possibilities that the investment induces??

Supporting facts: 86% of clients feel that having a fluid and ergonomic banking interface is somewhat important or very important. (frog survey, 2022). 77% of users connect to their application at least once a week, Inbanque and Capgemini 2022 survey?

Seven criteria are key to a good user experience. Your experience must be Useful, Usable, Desirable, Findable, Accessible, Credible, Valuable

8. Providing transparence on fees, free is better

The neobanks have changed the relationship between customers and the bank by imposing new standards of use and services that are no longer differentiating but becoming the norm: a free credit card, native real time, ultra-transparency. What if incumbent banks were able to offer competitive fees and user experience to compete with neobanks??

Supporting facts: 40% of account openings have been with online banks in the last 2 years and 70% of online banks users are attracted by low-cost and transparent fees, Inbanque and Capgemini 2022 survey. 55% of French people expect complete transparency from their bank (Etude Elabe pour Wavestone, 2018)

9. Being useful, at the right moment and the right place??

The financial industry is immensely expanding its scope to attain an improved customer experience and boost the revenue even more than it was just yesterday. Banking as a service BaaS is an end-to-end process that enables licensed banks to execute financial operations and offer digital banking services to other third parties, for an enhanced customer experience. What if banks expended their BaaS capabilities to meet the customers needs and facilitate day to day purchases and transactions with third party services?

Supporting fact: E-commerce keeps growing into an ever larger portion of the economy with studies estimating it will represent 15.9% of all Western Europe Retail sales by 2025. Lebow S., 2021 "Ecommerce sales in Western Europe beat expectations", Insider Intelligence

Klarna, the Swedish fintech company provides online financial services such as payments for online storefronts and direct payments along with post-purchase payments, enabling better user experience on ecommerce websites and boosting retailers sales.?

IV. It's time for banks to go Beyond Banking

Banks have a role to play beyond their core-business of financial services. As part of a trend that began several years ago, banks are increasingly offering non-banking services to their customers and prospects, entering into new verticals. While the scope of these initiatives is still being defined, between purely communication-based actions and the genuine launch of new value-creating businesses, the movement is spreading.

10. Becoming the trusted advisor to a more sustainable life

Banks have a role to play in educating, lobbying, connecting, advising and ultimately financing households and corporations to transition from high consuming and inequalitarian lifestyles and more sustainable and inclusive futures. Banks are well-positioned to play a central role in the transition considering their expertise and connections and trusted capital. What if banks became key players in the next economy world? What if banks were the trusted companions to transitioning to a more sustainable life??

Supporting facts : 91% of executives consider that their companies are suffering from the impact of climate change and 32% of companies are struggling to define an impactful climate strategy, according to Climate check, The disparity between urgency and action, 2020

In order to meet the long-term challenges of 2030 and beyond, the Credit Agricole Group is restructuring and creating two new business lines that will be useful to society and provide opportunities for development. They are launching Crédit Agricole Transitions & Energies to make energy transitions accessible to all and accelerate the advent of renewable energies. They are launching Crédit Agricole Santé & Territoires, to facilitate access to healthcare and good aging throughout the country.

11. Creating the holistic platform for housing and mobility

Banks’ legitimacy on subjects like housing and mobility has grown over the years in the eyes of the customers. Banks have the resources needed to become major players in other domains, for example BNP Paribas with its subsidiary Arval specialized in long-term car rental has set foot on the mobility scene. This is why BNP Paribas is now confident to announce it wants to generate 1 billion euros in additional revenues from mobility, addressing all the value chain. What if banks offered products or services beyond their core business in mobility, health, housing, loyalty, entertainment by leveraging the proximity and knowledge they have with their clients ??

Supporting facts: 58% of French customers believe that banks are legitimate in extra-banking services, especially for real estate, according to the 2022 study made by In Banque and Capgemini Invent.?

Revolut launched Stays in 2021, a travel booking platform accessible via its app. With this new service, the neobank is reinforcing its desire to become a key partner for travelers.?

12. Launching the superapp for the next generation?

The first thirty years of our lives are marked by many personal milestones, implying evolving requirements concerning our financial needs. In order to attract and retain this new generation with millions of options at the palm of their hand, the banks’ offer has to be hyper-personalized and evolve with the client. What if banks were capable of evolving and growing up with their clients? What if banks were responsible for the financial education of the next generation?

Supporting facts:?

37% of the under 35s think it is possible to change banks in the next 6 months (20% for the whole population), according to the 2022 study made by In Banque and Capgemini Invent.?

CaixaBank's Imagin mobile banking app is available in three versions: ImaginKids (0-11 years), ImaginTeens (12-17 years) and Imagin (18+ years). The content and features evolve according to the age and expectations of the target.

In a nutshell,?

In the next chapter of banking, banks have the opportunity to position themself as a major player on multiple subjects: financial wellbeing, sustainability, beyond banking services and a great user experience. Hopefully banks will be resourceful enough to take action on the 12 insights and opportunities we described to write their next chapter.?Let's get in touch!