Traditional banking as we know it could be close to an end. A recent Gartner report shows how the changing demographics of banking consumers are of grave concern to financial services’ CEOs. The reason being that younger consumers have a different view of the value of banks than those of previous generations and are much more inclined to embrace innovative, digital-based banking services. The success of services such as N26, Atom and Monzo seems to confirm this prediction.
For several years now, the Silicon Valley giants have been gearing up to jump into financial services, offering a whole new concept of banking. When and if this will happen remains to be seen. But what we do know is that most people, particularly among younger generations, would be willing to switch to a new generation of financial services.
For now, the transformation of Google, Amazon, Facebook, or Apple to actual financial institutions doesn’t seem to be imminent. However, we could easily expect the four leading IT companies to start offering new digital payment services in the coming years – such as free transfer of money through mobile apps (like Paypal’s Venmo is doing in the US).
Like in every fast-changing scenario, the current players in financial services need to be able to adapt quickly in order to survive. And it’s not just about technological innovation. Traditional banks have taken crucial steps forward in the last decade, although with some delay. Home banking services are now the normality for the majority of account holders, who less and less visit bank branches in person. However, if traditional banks want to compete and resist the new wave of competition that seems to be behind the corner, they need to take the customer experience more seriously.
The evolution from simple service providers to experience enablers (by the way, we talked about engagement marketing here) is a process that has long been in force in multiple business sectors. However, financial services (particularly in Europe) seem to have been lingering in this regard. In fact, the experience that traditional banks offer to customers seems widely homogeneous, with no substantial difference between one provider and another, and an evident lack of innovation.
If banks are to compete with the innovative services that will emerge in the years to come, they need to focus not only on technology, but most and foremost on the customer experience.
To transform what are simple, traditional services in a true experience that is able to attract new customers and foster customer loyalty, banks need to rethink their way of interacting with users–and what touch points are critical for meeting objectives. In other words, innovation must be a key ingredient of the communication recipe between banks and account holders. Who says, for instance, that the “good old” bank statement needs to be a boring, ten-pages long PDF (or even less engaging an actual paper letter), versus an interactive and mobile-friendly micro-website? (For a valid example, see Doxee’s eDox services, already used by several banks.) And who says that a bank can’t interact with its users with Personalized Videos that refer to every client by name and deliver highly relevant messages able to maximize the user experience?
If it’s certainly true that the future of banking is digital, this doesn’t imply that the importance of physical branches needs to be disregarded. On the contrary, banks that still count on in-person interaction with account holders do have a competitive advantage. However, the notion itself of a bank “branch” needs to be reinvented. By adding simple counters for transacting traditional banking operations using the bank’s and customer’s own digital devices, branches could, in the future, enable a better customer experience (akin to the exceptional Apple store experience). A smart re-use of traditional off-line branches and sophisticated ATMs to leverage innovation could be the perfect strategy to successfully compete in the emerging era of digital banking.
Only time will tell how the banks of the future will be. If, in ten years, our bank will still be the same, or if it’ll be called Facebook or Google, can’t be said. What looks certain is that the way we communicate and “transact” with a bank–and the overall customer experience–will be very different.