Technology consultancy firm Capgemini and banking association Efma have warned banks that customers could ditch them for fintechs and large tech players such as Amazon, Facebook and Google in pursuit of a better experience.
According to their World Retail Banking Report 2018, retail banks are facing “new forms of competition”, including open banking, emerging technologies and evolving customer expectations.
The research, which involved surveying more than 10,000 retail banking customers and interviewing 60 senior bank executives worldwide, found that barely half of respondents feel their banking experience across different channels have been positive, despite the banks’ ongoing investments in “updating and improving their customer experience models”.
The in-branch experience has been positive for 51.1 per cent of respondents, while 51.7 per cent said their internet banking experience has been positive. The mobile banking experience was regarded as positive by less than half, or 46.9 per cent, of respondents.
Further, nearly a third of respondents, or 32 per cent, said they are open to using financial products from big tech firms, with 43 per cent of that third being Gen Y respondents.
The dissatisfaction is due to other sectors raising the bar when it comes to customer experience, according to 70.8 per cent of the senior executives that were interviewed. They acknowledged that customers now expect more from their banks.
Other “disruptors” to retail banking, according to the senior executive respondents, include regulatory pressure (58.3 per cent) and increased demand for digital channels (54.2 per cent).
According to the Capgemini-Efma report, the common denominator in the next wave of banking is a “commitment to place the customer at the centre of the value proposition”.
“The retail banking industry is at an inflection point and needs to determine its role going forward in the open banking ecosystem. There is opportunity to innovate through collaboration as well as reinvention,” Vincent Bastid, secretary general of Efma, said.
“It is an exciting time to be in banking as regulation, innovation, competition and collaboration merge to form the bank of the future.”
The research suggests that banks are eager to treat tech firms as colleagues rather than competitions, with more than seven in 10 executives, or 70.8 per cent, saying that they can “generate non-traditional revenue” via collaboration with such firms, such as jointly developing a new service or distributing third-party products via a marketplace.
The senior bank executives largely believe there are untapped opportunities to improve the customer experience through the use of data, with 87 per cent saying they plan to use customer data to create better customer journeys. Further, 75 per cent expressed their intention of using data to develop relationship-based pricing, while 58 per cent plan to use it to build personalised loyalty rewards and 54 per cent plan to create life cycle-stage products and services.
Banks as providers of non-banking services
One area of focus in the research, according to Capgemini’s head of financial services in the ANZ region, Philip Gomm, was around Australian customers’ likelihood of purchasing non-banking services from their banks.
“These once far-fetched ideas are now in experimentation. For example, the bank is one of the first places you let know you are travelling; we increasingly rely on our cards working overseas. So once consent is provided, why can’t they broker additional products and services based on your data?” Mr Gomm said.
“We acknowledge this is early days, but we might not be that far off from this.”
He added that C-suite executives need to be prepared to position their banks as “an owner of the future customer relationship, not a participant”.
“They need to be able to talk to the bank’s strengths and identify new revenue streams and identify who they are best positioned and willing to partner with,” Mr Gomm said.
The head of financial services cited NAB’s ongoing work with cloud accounting software provider Xero and REA Group as examples of collaboration within the industry.
“NAB working together with Xero as an SME/ERP financial manager is a great indication of a major being on the front foot in terms of embracing the emerging model,” Mr Gomm said.
“A couple of recent acquisitions and strategic partnerships, including ANZ/RealAs and NAB/REA are also indications that both are thinking creatively around how they can position an ecosystem of service partners in support of the critical mortgage marketplace.”
The head of financial services also suggested that Westpac needs to simplify its architecture as it is struggling with managing multiple brands, while the largest of the big four, Commonwealth Bank, has the scope and scale to remain unaffected by the challenges identified in the report.
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Tas Bindi is the features editor on the mortgage titles and writes about the mortgage industry, macroeconomics, fintech, financial regulation, and market trends.
Prior to joining Momentum Media, Tas wrote for business and technology titles such as ZDNet, TechRepublic, Startup Daily, and Dynamic Business.