In an increasingly digital world, consumers don’t expect innovation from their banks, they need it. This has profound ramifications for banks but also presents lucrative commercial opportunities for early adopters of new technologies. The banking industry is now starting to exhibit many of the characteristics and traits traditionally associated with innovative fintech start-ups. As consumer behaviours and habits rapidly shift with the proliferation of exciting new technologies, particularly in mobile, credit unions and banks are becoming increasingly comfortable with rapid innovation, use of big data, complex user analytics and the digitisation of paper-based processes.
One of the key challenges for banks adapting to this new era of aggressive technological change and shifting behaviours will be the ability to facilitate rapid innovation and understanding how to select the right development partners and resource projects accordingly. Today we’re exploring why consumers have become increasingly reliant on innovation from their banks.
What does the modern banking consumer expect?
Modern banking consumers require a wide range of attributes from their banking provider. These attributes often relate to service expectations, personalisation, the ability to self-serve and bank independently via personalised mobile apps, slick on-line banking and new in-branch experiences. These consumers can be segmented into three distinct groups: nomads, hunters and quality seekers.
In terms of service expectations, modern banking consumers expect the same level of digital awareness and service provision they’ve become accustomed to via large technology companies such as Facebook, Apple and Netflix. These customers are referred to as ‘nomads’ and expect banking services to be as slick and intuitive as the digital services that these companies provide. Nomads also expect that banks will offer high levels of real-time personalisation based on their own individual data sets and spending patterns and are constantly seeking new ways of accessing new banking products and services. This trend and shift in behaviour also relates to the in-branch experience as nomads increasingly expect digital offerings in physical retail banking locations.
Many banking customers still also expect a traditional level of service in that they appreciate human interaction and tend to be wary of non-banking providers. However, in most instances, these types of banking consumers, also referred to as ‘hunters’ are also seeking practical added-value services and are open to digitally defined offerings that can provide some form of practical value. Similar to nomads, these consumers are highly motivated to track expenses and minimise personal costs on an ongoing basis. It’s estimated that 38% of hunters would like their bank to help with major purchases by sending highly targeted information and advice in real-time.
Quality seekers differ from nomads and hunters in a number of distinct ways. Quality seekers view trust as being a critical component of the modern banking experience and value an exceptionally high level of service. Quality seekers are fundamentally motivated to bank with traditional banking providers who have a demonstrable track record of financial expertise. As such, quality seekers are less likely to trust tech companies such as Apple or Amazon to deliver core banking services (or any banking services for that matter). When it comes to developing digital products and services for quality seekers, banks must emphasise the stability and security of their offering. Traditional banks are at a serious advantage when it comes to marketing to quality seekers but also have to compete with an aggressive competitive landscape.
Innovative banking apps in a digital world
Against a backdrop of rapid technological adaptation and shifting consumer behaviours, global banking organisations are beginning to exploit some incredible strategic opportunities. As technology has evolved at lightning pace in the past decade, banks are increasingly transitioning their strategic focus and technological capabilities towards a more sophisticated setting that suits the ever-changing needs of the modern banking consumer. For many banks, this is not an easy proposition to contend with. For other banking organisations, this shift towards increased innovation and technological sophistication has occurred successfully whilst defending market share from new competitors and challengers.
In terms of innovation, there is a massive emphasis on banks’ ability to digitise core business services and processes and understanding how to adequately resource these types of projects is key to success. In many instances this process of digital transformation involves reassessing organisational structures, how decisions are made in relation to digital transformation and reskilling existing employees to be better equipped for incoming technological change. This entire process of transformation represents the desire of many banks to become truly digital in terms of expanding existing banking services, remodelling delivery channels, providing proactive guidance for customers and the application of blockchain technology.
“Recent industry research has suggested that 69% of all consumers want more innovation from their banks. The research focused on 5000 customers across six European countries including the UK, Belgium, Germany, France and Spain) and only 12% of respondents agreed that their bank was innovative. In addition, only 12% of customers agree that their own bank is different from competing banking offerings and 33% ‘somewhat agree” (Forrester)
The importance of innovation in banking
When it comes to rapid innovation in banking, one of the most consistent themes moving forward is the fact that banks will need to continue to innovate harder and faster than ever before. Banks will increasingly need to get to grips with how to develop new mobile prototypes and applications. This means banks have to dabble with new technologies such as artificial intelligence (AI), machine learning, augmented and virtual reality, blockchain, voice control, connected devices and the Internet of Things (IoT). Many banks are now increasingly aware that the customer must sit front and centre of the entire banking experience and that means experimenting with new technologies and deploying innovative development principles and practices.
Let’s take a look at some of the banks that are challenging the status quo of how banking services and products should be delivered to keep up with the changing expectations of the modern banking consumer:
The award winning B Currency application is a great example of how banks can leverage innovative tools, technologies and services to cater for the requirements of banking consumers. Launched by Clydesdale and Yorkshire Banking Group in 2018, the B Currency app provides a simple and fast way for customers to convert prices in real-time using augmented reality and optical character recognition. B Currency is super simple to use – users can open the app, hold up their smartphone camera to the price they want to convert, and watch the converted price appear in real-time.
Barclays are one example of a major bank intent on crafting a richer and more immersive experience for their customers. Rather than opting for major innovative strides that could potentially be too disruptive for quality seekers, Barclays have focused on introducing regular slices of innovation and taken an iterative approach to rolling out new features. One example of this iterative approach is the introduction of iconography in bank statements for customers. Barclays system pulls through specific brand logos into each transaction detailed in every bank statement based on actual expenditure. This provides users with a more personalised banking experience and enables ‘at a glance’ awareness of spending patterns and behaviours. Whilst this may not seem like a major innovation, it underlines Barclays intent to provide a deeper experience for online customers and reinforces their commitment to innovative development practices.
Market research from Barclays also revealed the true cost of admin for small to medium sized business users. Traders indicated that invoicing costs them approximately £2,000 a year, while 32% of those surveyed suggested that they have to work at weekends due to a backlog of paperwork. In response to this research, Barclays was the first major high street bank to launch free mobile invoicing within its mobile banking app, helping hundreds of thousands of business owners create and send invoices in real-time on the move. Another great example of a major bank staying in tune with rapidly evolving consumer tastes and habits.
Meet Cleo is an innovative banking service driven by artificial intelligence (AI) and machine learning (ML). The application enables banking users to better manage their personal finances. The AI is deployed via Facebook Messenger, text messages, Amazon Alexa and Google Assistant, where banking customers can ask the personal assistant spending related questions relevant to personal account and spending habits. Users can then receive instant feedback and guidance in terms of how to optimise spending behaviours. What’s very cool, is the fact that Meet Cleo utilises emoji/gif friendly imagery and adopts humour and a relaxed, friendly tone which offers a fresh perspective in terms of personal banking and money management.
Mint is an awesome example of how new banking products are bringing increased personalisation to existing banking products and processes. The Mint app enables banking users to manage all of their core services in one place and enables them to easily create budgets, whilst the Mint app uses ML and predictive analysis to make recommendations on how to optimise spending performance. Users can track when bills are due and receive notifications in real-time as to when bills are due to be paid, reducing the potential occurrence of unwanted fees and charges. The Mint service also provides advice and guidance on personal credit score and makes suggestions in terms of how users can improve the quality of their score. Again, this is a great example of a banking service that is committed to better understanding user behaviour and providing a highly targeted and personalised experience, utterly focused on the core requirements and needs of each individual customer.
With the advent of sophisticated new technologies and digital products, there has never been so much opportunity for banks to move fast, innovate and gain serious competitive advantage by focusing on the delivery of a highly personalised banking experience that caters for the needs of individual users. For banks that are committed to innovation, one of the major challenges is resourcing software development capability and expertise. Whether it’s a case of extending the functionality of an existing paper based process into a responsive web app, or extending an existing web app into mobile (it could even be a case of extending an existing mobile app into new and emerging technologies such as AR, IoT or AI/ML), resourcing is always a key consideration in terms of being responsive (and committed) to rapidly evolving consumer needs and shipping the highest quality software to market in the shortest possible time scale.
If you’re keen to better understand how you can respond to changing consumer behaviour through agile and rapid digital product innovation, we’d love to hear from you. Contact Waracle today to kick-start your journey.