Five things incumbents should learn from challengers about CX in retail banking

Challenger banks like N26 or Startling Bank and other fintechs are revolutionizing the way customers interact with banks and enjoy financial services, while giving incumbents a run for their money.

Here are five key aspects of the next gen user experience incumbents can learn from challengers:

Rich, personalized content and offers before any burdensome registration

Incumbent banks have had it easy – they've had a captive audience for their mobile apps. You’d open an account at the branch and then download the app by default, whether it was good or not. And they were content using digital channels for servicing, not bothering with customer acquisition.

But things have changed. Competition from fintech disrupters is ruthless, and customer expectations are surging higher than ever. It’s war out there and the arena is digital.

As new kids in town, fintech disrupters have needed a hook to drive adoption from day one. Not only do they need to minimize any ‘friction’ for you to start engaging with them - they need to provide you with real value before even asking you to register.

After all, some of the most popular payment fintechs today were afterthoughts piggy-backing off fully-fledged non-financial businesses. WeChat Pay took off from a free chat app; GrabPay, from a ride-hailing app; and Alipay from an e-commerce site, to name a few.

That is not to say that traditional banks should go about starting non-core businesses, but there is a lesson to be learnt - acquisition through digital channels requires value before even the slightest customer commitment.

The value-added can be as simple as lifestyle content and promotions. Challenger banks like Timo in Vietnam and Yono in India (technically a direct, digital-only bank owned by SBI) use lifestyle offers as a hook (e.g. movie tickets, online shopping…).

However, the key (and perhaps the greatest challenge) is minimizing any initial access friction and ensuring that content and offers are always relevant. So how?

Log-in with social media can help reduce entry friction and, with a single swipe, allow the app to glean over valuable data to provide you with personalized content: name, age, gender, employer, role interests… Add location from your smartphone, and you can start getting some pretty on-point lifestyle recommendations – movies and restaurants near you according to your taste, travel destinations according to suit your budget, good reads based on your interests… you name it. All without the need to fill up any forms.

Good, relevant promotions and offers then tip it off – “Like our movie recommendation? Get 10% off if you pay with our app!” And there’s the hook – it got your attention and you now have an incentive to go through the trouble of registering for an account (more on that later).

Easier said than done right? The bank needs to build up the content and figure out how to match profiles to preferences to maximize personalization.

Fortunately, open API-enabled ecosystems are increasingly thriving – there’s no need to go at it alone to create the ‘hook’ content or offerings. The bank can partner with TripAdvisor, Medium, incinemas.com, Lazada, etc. and quickly integrate via APIs to use their content on a per-call or revenue sharing basis.

Personalization algos are a little more challenging – each customer profile needs to be matched to a micro-segment associated with granular content preferences. For that, the bank needs data – lots of data. This is where data-as-a-service offerings by Cloud service providers like Oracle come in handy. These tap into billions of anonymous social media profiles and messages and use the data to help personalize customer interactions.

Frictionless eKYC experience during account opening

So the bank now has your attention – you loved their recommendation and you are craving that discount – enough to type in a couple more details to open an account. But they shouldn’t push it…

No one is going to commute to a physical location just to open a new account – this is the 21st century! Seamless eKYC via a smartphone is table-stakes.

You should just be able to take your smart phone, take a photo of your ID, a selfie and, if required, upload an eStatement or utilities bill as proof of residence, all via a mobile app.

Transunion’s IDVision eKYC solution is a great example already being adopted in Hong Kong. It uses facial and optical character recognition to ensure that (i) the ID is valid; (ii) the selfie and the photo on the ID match and (iii) the proof of residence is acceptable and the address is in the right location.

The end-to-end process is seamless and reduced to a few minutes. No hassle.

Data-driven insights & recommendations on personal finances

Now that you are up and running, you’re going to want to keep an eye on your finances.

Ever tried tracking your budget using your traditional bank’s online platform? Roll-up your sleeves, download your statements, convert them to excel, create categories, write some vLookups… You’ll feel like you need to hire a personal accountant!

Startling Bank is a great example of a challenger bank that has nailed this. Expenses are categorized as you incur them, and you get a nice pie chart to see your spend breakdown at a glance. It’s… well… startling!

On the basis of this, you’ll want to set some goals. For example, say you want to set aside some savings from your salary every month. N26 has you covered – it’ll keep you posted on how you are tracking against your goal based on your income and spend during the month.

Now that you can easily track your finances (and impose some self-discipline!), some advice on how to optimize surely can’t hurt. The next gen challenger apps can think of it before you do.

You’re running tight on cash? The app recommends an overdraft you can avail of with one click. Spending on travel or medical bills? The app can hook you up with travel and medical insurance options. Cash is piling up? The app will suggest investment products that can be tailored to your risk appetite.

It is a great experience for the customer, and it can also give the bank a great cross-sell boost.

And while it does involve some data cleansing and improved visualization, it should hardly be rocket science for the bank.

Credit card managed and controlled from the app

For most of us, credit cards are our most used payment method and they are not particularly high maintenance. We may want to up the limit for an occasional purchase and then adjust it back, ensure our card will work abroad when we travel but block foreign payments while back at home to avoid fraud, etc.

It’s really a handful of service requests common to most of us and yet it is such a hassle to get them done! Travel abroad and you’ll have to call up the bank and wait on the line to notify them if you don’t want your card blocked. Make an unusual online purchase – blocked again. Want to up your limit? Get ready to answer a long string of security questions…

Once again, challenger bank N26 did the unthinkable… it made these common tasks simple (and probably saved on a lot of cost on servicing)! One swipe is all it takes to switch card usage abroad, online payments and ATM withdrawals on and off, and adjusting your credit limits is just a few thumb-clicks away.

More natural interactions facilitated by a Robo-Assistant

?The ‘Siris’ of the world have come a long way. They can provide a much more seamless, natural experience to interact with the bank and access all the features discussed.

See it to believe it. Check out Cleo (www.meetcleo.com)

Cleo is a digital assistant looking to rule over online banking apps. It enables you to get insights and recommendations, set goals and transact, all using natural language. Simply ask for a breakdown of your spend and it’ll give you the run-down (fun emoticons included).

Cleo isn’t actually a bank, nor is it married to one. And it is not the only chatbot for financial services out there. Incumbents that might be falling behind can ramp up fast with the right partnership strategy.

It is not too late for traditional banks, but they really need to clean up their act on customer experience. The bar is rising fast and, to be blunt, disrupters seem to be consistently making the latest updates of incumbents apps look like the Flintstones.