By Alan Donnelly, Head of Financial Services, Salesforce
We have seen huge disruption in recent years across all sectors, but nowhere is this more prevalent than the financial services industry. Challengers such as Monzo, Revolut, and Starling, have caused shock waves in a sector that is steeped in tradition, and IT outages have called security practices into question.
One thing has become particularly evident as we begin a new decade: customer loyalty is a thing of the past and convenience is king. While challenger banks gained an upper hand in the move to mobile, they too are realising that the financial services industry needs to change. This transformation will come in the form of forging ecosystems and partnerships between old and new.
Financial services organisations of all shapes and sizes need to begin to work together to bring a more personalised and targeted approach to the customer experience.
The old vs new
Our world is now more connected than ever before, meaning that agility and data have become incredibly valuable assets. While traditional banks, such as, RBS, HSBC and Barclays push to become more agile and mobile with banking apps, other new digital channels and ways of working, they recognise they are competing in a digital world while still working with and maintaining huge legacy infrastructure that is made for a different era.
Challenger banks on the other hand, have enjoyed the advantage of being digitally native. This enabled them to tap into a customer base that is increasingly using mobile as its primary medium. This has made them more relevant, but also provides the agility to scale and adapt. The user experiences these companies provide has shaken up the customer loyalty paradigm.
However, because these young organisations have only been around for a short amount of time compared to their traditional counterparts, they don’t have access to the same wealth of data on their customers. Many people have used some kind of service or product from a bank for decades, and so data on their banking histories have been formed over many years. Every decision that an individual or household makes, from taking out a student loan to a mortgage, has been documented. It is in this knowledge, as well as their heritage, where the power of the established players lies. Therefore I do feel existing banks have a real opportunity to combine vast amounts of data and long standing customer relationships with new digital channels and capability to strike back.
Creating a holistic view of the customer
In an ideal world, traditional banks would be able to use this vast array of information on both the individual and household to create a holistic view of the customer and their habits. However, these organisations still have significant data silos that prevent them from truly catering to their customers’ needs.
Customers can find themselves in frustrating conversation with a mortgage adviser who doesn’t know that they have a current account with the bank, making for an inefficient interaction. A lack of agility can impede the flow of data and information between departments, and keep it siloed between different functions of the business. Instead, banks should empower that same mortgage advisor to connect the dots by accessing data that resides in systems that have otherwise been difficult to navigate or reach. Most importantly, this will make the customer feel valued.
Removing these data silos will allow banks to create a comprehensive picture of the customer. This customer journey map is a visual story of every touchpoint a customer has with their finance services provider, from initial contact to big ticket purchases. Banks can use this data to learn about those “magical moments” where they can play a vital role in the customer lifecycle. Leading edge banks have developed many customer journeys on routes and decisions their customers might take and hence choices they might make.
Once these moments, such as buying a home, have been identified, banks can move from product to lifestyle services and so take the customer on long-term personalised journeys. This will create better services for customers, more pervasive interactions, and ultimately greater loyalty.
Creating a financial system based on partnerships
Challenger banks and traditional banks both have their positives and negatives. Challengers’ digital origins give them an inbuilt advantage when it comes to being agile, whereas blue chips have a wealth of data that can plot a lifetime of financial decisions. But if financial services companies are to change for the better, then we need to enter into a future of partnerships that puts the customer at the centre.
Ecosystems offer a solution to this issue. They present a marketplace of financial services that consumers can pick and choose from according to their needs, whether that be an ISA or a credit account, and access the best products out of a large portfolio.
For ecosystems to work, we need to see partnerships between all financial services. The benefits for these companies will also be obvious. Traditional banks will be given the agility to stay relevant through digitally native apps, and challengers will have access to the data needed to plot the customer journey.
Open Banking has been a positive step in the transition towards an ecosystem structure. The framework of open APIs enables a system of virtuous data sharing across financial services. Whether it’s saving people money through monitoring spending habits or using open data to recommend the most appropriate services, Open Banking is a prime example of how data can be used to add value to customers.
We are also starting to see movement towards ecosystems with concepts such as Facebook Pay, which is consolidating payments across all of its apps. The news that Goldman Sachs is partnering with Amazon is also evidence that blue chips are waking up to the benefits of partnering with all forms of businesses, furthermore, Google and Citi may launch a new debit card soon.
This year, the focus needs to be on providing platforms that consumers will go to for every aspect of their financial lives. As banks start to evolve their ecosystems, launch marketplaces and create new partnerships, it is the consumer who will ultimately see the benefit of agility and personalisation of financial services. The future is all about partnerships between old and new.