New technologies are causing a paradigm shift in the financial industry, a change that is occurring at an unusual speed, driven by three main factors:
- The rise of Fintech startups. With their new business models without intermediaries,
they are already competing with traditional banks in several verticals.
- The threat of digital giants from other industries, known as GAFA: Google, Apple,
Facebook and Amazon. They are already investing in Fintech companies, and if they decide to fully enter into the financial world, they have sufficient capacity to push the boundaries of this industry even further in a very short period of time.
- The emergence of the digital customer, accustomed to using new technologies and
with very different values from previous generations, makes it interact very differently with businesses.
Although, to date, no one knows with certainty how the financial sector will look within 5 or
10 years, this scenario makes very clear the main challenges that banks and financial institutions must address if they want to remain relevant players in the future:
This post is also available in Spanish.
1. Recover customer's confidence
Traditional banks have lost much of the confidence of its customers, following the 2008
financial crisis. This circumstance was also coupled with the fact that digital consumers have
large technology companies as new business "role-models", like Google, Apple or Facebook. They trust these companies more than banks, and they do not hesitate to share their personal data with them. They will even do it for performing financial transactions.
Moreover, these digital businesses are those that have set the standard for the top digital
user experience. Any Millennial used to interacting with Apple or Amazon has very specific
expectations of how a perfect online shopping process should be. Companies that do not
offer experiences like that, up to these expectations, are unlikely to get even a second of
attention from digital consumers.
Another important factor to consider is that Fintech startups, digital from their very beginning,
know exactly how to approach the digital consumer. Beyond the fact that these companies
use technology to offer financial products and services more efficiently than banks, the key is
that they share culture with Millennials. This is a fact that has helped them to earn their trust
Given this context, banks must improve the digital experience they are offering to their
customers. We have already discussed this issue in this post.
2. Reduce the number of bank branches and digitize them
Although, since 2008, more than 20,000 bank branches have been closed in Europe, many
traditional financial institutions continue to maintain extensive networks of offices at street
level that are visited by digital customers only once in a while.
In Spain, since 2008, banks have
It is unlikely that these networks of bank branches disappear completely in the short term, because it is still important for many consumers to get personal advice when they need more complex financial products, such as a mortgage. But in any case it is important that financial institutions reduce and digitize these branches, eliminating its bland and bureaucratic appearance to completely transform the customer experience when customers visit them.
The key issues are:
- Improve the effectiveness of the branch network: Fewer offices, only in strategic locations, designed to appeal to digital customers, and with processes focused on providing a personalized and seamless shopping experience.
- Take into account the branch network when designing the omni-channel strategy: Omni-channel banking means that banks should be able to meet customers' expectations by creating seamless buying experiences, no matter which device they are using. But a complete omni-channel banking strategy must also take into account the experience customers have inside the bank branches. For this purpose, the key is to take advantage of the vast amount of customers' data that banks have.
For example, if a customer has visited the loans section on his/her bank's website, when this customer enters a digitized bank branch, the employee who approaches him/her must be able to know in advance that this customer is interested in loans. This way, the employee can anticipate the customer's needs and offer him/her help and very personalized advice. Interaction should always be based on customer's needs.
- Employees with deep financial knowledge and digital tools: Usually, digital consumers are well-informed before they buy any product or service. The same applies to financial products and services. So, if Millennials step in a bank branch because they require advice to buy a complex financial product, they need to be attended by an expert on this type of product, qualified staff who can advise them correctly based on their profile and needs. Currently, it's quite common to be attended by sales people, with superficial knowledge of the financial products and services they are selling. The need to better train these workers on finance is urgent.
Moreover, employees working at bank branches need digital tools in order to meet digital customers' expectations and offer them a simple and highly personalized digital experience inside the branch. In the end, financial products are all very similar, so what will make the difference will be how they are offered to customers and how customers interact with them.
In this sense, the electronic signature is a tool that helps provide a completely digital experience, also at bank branches, and contributes to differentiate those banks that use it from those that don't.
Financial entities that integrate an electronic signature solution into their processes can collect the signature required -for opening a bank account, buying/selling foreign currency o modifying a customer's personal data, to name just some specific use cases- through a tablet, directly at the bank branch or at the client's offices. Without any doubts, for digital customers signing documents with an electronic signature solution is already the "new normal" of signatures. Thus, it must also be the same for banks.
3. Tha bank of the future present is mobile
Although top mobile users are Millennials, the reality is that the pace of adoption and adaptation to new technologies by previous generations is much faster every day, and more and more consumers prefer to perform banking transactions through their smartphone.
The following data confirms this trend and the prediction that mobile banking is the present, not the future:
The trend of large banks boosting mobile banking is clear. In the report 2015 Global Mobile Banking Functionality BenchMark, by Forrester Research, the Spanish bank CaixaBank was named the best in the world in providing financial services through smartphones. This entity has developed even more than one app to expand its range of products and services and to be able to attend bank customers and non-customers.
But the strongest step in this direction has been done recently by the Spanish bank BBVA. The second largest Spanish bank, and one that is more committed to its digital transformation, has invested 64.1 million euros in acquiring 29.1% of Atom, the first exclusively mobile British bank , with banking license granted by the British regulator (PRA) and with plans to start operating in early 2016.
There is not much more to say to explain why it is imperative for all traditional banks to take advantage of this channel. Through it they can maintain constant contact with their customers, who already expect to make any banking transaction through the bank's app. The challenge now is open to banks on how to design a secure, intuitive and functional app, that makes bank management attractive to digital customers while providing them additional value.
This post is also available in Spanish.
- Why banks and insurers must improve the digital experience
- How can bank branches digitize and improve their efficiency to attract the digital customer?
- What implications does contextual banking have in the distribution of financial products and services?