Are You Ready for a Revolution in Retail Banking?
Regulation and technology set to bring unprecedented change to retail banking customer experience By the end of this decade a raft of new...
I’ve written previously about the wave of “challenger banks” sweeping the UK banking and financial services market. There is a great opportunity for new brands to focus on improving service to the customer and taking market share from the big established brands.
But change in this market is coming from beyond new brands on the High Street alone. Digital banking is changing the banking sector in several ways:
Payment by phone
Services such as Apple Pay are now commonly accepted and stores with low-value items – like coffee chains – are experimenting with their own phone payment systems that connect into the loyalty programme. No more lost cardboard loyalty cards!
Niche services by app
Individual apps for individual banking services are here. Want to transfer money overseas? There will be an app offering this service. Want a loan to buy a car? Why not use a peer-to-peer app? Niche players are using the app store to offer almost every kind of possible banking service.
Location based services
Banks are already using location-based advertising across social networks so it’s only a small leap of the imagination to assume that they will use the same customer insight to directly offer their own services soon. For example, sending an offer on a loan if they can see you are spending more than usual in a month and are currently out shopping again.
The data available on customers is now so complete that behaviour can be predicted before it takes place. For example, customers that will have trouble maintaining payments on their Visa card can be contacted before the problems become critical.
It goes without saying that customers today expect the service at their bank to blend seamlessly between the branch and their online experience. But think about the reality – are most banks anywhere close to what customers expect? If you check out a new mortgage online and walk into a branch the next day, how would it affect your impression of the bank if the in-branch team were already aware of the type of mortgage you are interested in without you needing to explain all over again?
I think there is a potential existential crisis for the entire banking industry if they do not pay enough attention to these changes. Niche players offering individual financial services via apps can usually undercut the major banks because they do not have the overheads of a national branch network, so in theory these niche service providers should be able to win an enormous amount of business from the traditional banks.
Customer loyalty and inertia will prevent much of the potential business loss, but if customers are increasingly dissatisfied with the service they receive then they will look for an alternative. Why give customers a reason to go looking for a new service provider?
I think that a focus on how to deliver an omnichannel approach to customer service is now critical for all the major banks – as a way of retaining existing customers and for attracting new customers with a combination of their established brand and great service.
Image courtesy Ken Teegardin.