BigTech companies have changed customer expectations forever. With customer experiences at the forefront of their operations, consumers now seek the same level of simplicity and personalisation everywhere. Financial institutions have a tough road ahead to match these services, but they can learn from BigTech companies.
Digital banking has become increasingly popular over the past few years and the Covid-19 pandemic only encouraged more people to check their finances online while their local branch was unavailable. It is tough to get the exact number of users, but Statista estimates around $1.9bn people worldwide use digital banking services. With a quarter of the world’s population using digital services, it is no surprise banks are prioritising their digitalisation. A study from The Financial Brand found that 75% of financial institutions have placed digital banking as a top priority, closely followed by improving customer experiences, which 51% of respondents cited.
Giant BigTech companies, like Amazon and Google, have set high standards for online interactions and are experts at leveraging data to improve customer experiences. As other BigTech companies grow, they often look to expand into new verticals. Revolut, for example, began life as a remittance service and is now becoming a fully-fledged bank and is still exploring more financial services to add to its tool suite.
The changing landscape for retail banks
Speaking with FinTech Global, Sentiance CEO Toon Vanparys explained BigTech companies are approaching financial services from different angles than traditional retail banks. These companies are taking a technology and data perspective and using that to create a data-centric and human-centric approach to their services. “This leads to a seamless customer experience and allows them to better manage risk using deeper customer insights,” Toon said. “The deep understanding of customer needs allows BigTech companies to anticipate those needs, deliver consistent “wow’ moments and create new monetization opportunities, all based on real time contextual insights and the changing life stages of customers.”
Toon continued to state that traditional banks are under pressure from FinTech startups and BigTech companies on one side, and changing customer expectations on the other. To keep up, banks need to build their own digital strategies or partner with BigTech companies. Whichever path they choose, they will need to get customer experience right. “Improving the customer experience in digital banking has to be the number one objective for banks and financial institutions. We can safely assume that improving customer experience will increase return anywhere from 5% to 15%. This can only be achieved through the increased share of wallet, more personalized recommendations, faster and more digitized processes like cashless payments, buying more proposed services, etc.”
Making it personal
Simply digitising products will not be enough to meet the demands of a customer, Toon stated. “Reputation, security and digital innovation are not sufficient to attract new customers and retain them. Of course, ease of use, fast and high quality interactions, and trust are important, but using data to create a human-centric approach will be key.” The human-centric approach is key to customer experience.
Personalised services can encompass a variety of things. It could be used to offer third-party services in a seamless way or it could be using information to provide them certain products at specific life stages, such as a mortgage or savings for a child’s education. Achieving this requires good communication with customers and using data, whether it is first or third-party. Through this, customers and banks can build longer and deeper relations. A recent study from YouGov, conducted on behalf of IBM, found that 28% of UK banking customers believe their bank does not understand them personally and would be happy for them to use their banking data to give them personalised products.
The new battleground
Traditional financial institutions are aware of this and many have been making partnerships to cater to the changing environments. Earlier this month, Danish investment bank Saxo Bank partnered with Thoughtworks, a technology consultancy, with the aim of improving its customer experiences. The strategic partnership is helping Saxo create a data governance platform to build trust with customers. These types of partnerships are becoming more common and customer experience is becoming the next battleground for retail banks. Research from Gartner state two-thirds of marketers claim to compete on customer experiences, while a study from Dimension Data, state that 84% of companies that improve customer experiences report an increase in revenue.
Not all of these partnerships are simply focused on improving their digital onboarding or customisable products. Last year, Belgium’s largest bank KBC bought the media rights to broadcast Belgian football goals and highlights through their mobile app at no additional charge. KBC senior general manager Patrick Tans stated the move was to provide customers with the widest possible range of services. The idea is that customers that are fans of football can use the KBC app to catch up with the scores and check their bank account, rather than needing two separate apps on their phones. In a similar vein, Russian bank Tinkoff has been adding more financial services to its platform to create a mega-app for all needs.
Financial institutions are taking many different routes to improve their offerings. Whether it is building a super app that enables customers to control all their finances from one app or allowing them to buy third-party products through its services. Toon added, “Retail banks are going above and beyond with these extra values to truly enhance their customer experience.”
Sentiance is among those helping beyond traditional bounds and offer customers better products. Its technology provides banks with deep customer insights, empowering them to offer hyper-personalised services to customers and compete with BigTechs. Sentiance also boasts a self-learning decision engine that can optimise customer interactions and ensure the most relevant engagement is being offered. By addressing the specific needs of customers through hyper-personalisation while ensuring data privacy, it can build trust and lasting relations.
However, partnering with BigTechs is not always easy and firms need to be certain the product will not break the trust. Toon said, “It is clear today that if the customer becomes the product, the data provided to BigTech companies won’t be solely for the benefit of that customer. The trust relationship they are building with the customer will be compromised, which in the long run will have a negative impact. By running hyper-personalization programs in-house, banks can guarantee data is used for the benefit of the customer and the customer only.”
What route to take?
To build a more data-driven solution, retail banks can either partner with a FinTech or BigTech company to offer these improved customer experiences, or they can build it themselves. There is no correct answer for which route to take. Toon suggests before making the decision, banks should ask themselves what their core competencies are. If building technology is one of them, then that is the reason to build it in-house. However, if this is not one of the bank’s strengths, they must find partners. “otherwise they will simply be left in the dust.”
Whether retail banks decide to build a data-driven solution in-house or partner, in order to succeed, they need to realise this change is not simply a case of digitising offerings, it’s about moving with the changing customer demands. The real reason for digitising is to build a long-term relationship with the customer in a human-centric approach.
Toon concluded, “[In the future of banking] the customer will be in the centre. That’s a fact. Depending on who you are, banks will offer more than the traditional services to optimize the customer journey. Data integrity and security will be key to win and hold the trust of the customer. Banks will embrace faster new technologies and trends. They will probably become physically invisible, and will be connected with the ecosystems of the individual customer’s wishes. And lastly, financial institutions will have to be purpose-driven by taking responsibility in creating a more diverse, sustainable and social world.”
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