I don’t remember that Bill Gates once called retail banks ‘dinosaurs’, but I was reminded of his statement by a recent article in the Harvard Business Review. The article explored the glacial progress in improving the customer experience for most bank customers and laments that only 7% of credit products can be processed end to end without human intervention.
I’m sure that 7% figure varies from one market to another, but the underlying truth is that retail banks have found it very difficult to change their business model. They have large legacy technology systems that underpin their business processes and services provided online need to be mirrored across a physical branch network. It’s not easy to be agile when one new service may require training for thousands of employees.
But now the banking industry is changing faster than ever before. The HBR research points to financial technologies (fintech) presenting banks with an existential threat. How can they possibly compete with fintech startups that can design their service entirely around customer needs?
But a trusted brand and a large existing customer base still count for something so it’s not over yet. It’s true that the fintechs have an enormous advantage in agility, ability to design services around customer needs, and the lack of legacy systems or branches, however there are steps that the banks could take to leverage on the fintech approach. This feature on the American Marketing Association website highlights three key areas where banks can focus:
- Integrate apps and humans into an intimate customer experience: if banks can offer great apps, but always allow the option to reach a human at any time then the service will be seen as more helpful.
- Design a personalised digital customer experience: using information on the customer to create a highly personalised experience.
- Achieve an automated customer experience: automating as many simple and basic procedures so customers only need help with complex queries.
This advice may sound obvious, but I think that it does strike at the heart of what banks need to do to fight their more agile competitors. Banks have trust, they have experience, they have a large amount of existing customers, but they face an uncertain future because the fintechs are designing services that customers really want.
However, if they can follow these basic rules and automate anything simple, use their knowledge of your banking history to create a highly personal service, and tightly integrate the online and offline experience they have a good chance of retaining many existing customers. It will all be about the customer experience.
I do remember reading The Road Ahead by Bill Gates in 1995 and he accurately predicted Spotify and Netflix long before anyone could imagine what a streaming service would look like, so perhaps it’s worth going back to see what else he said in the nineties. He got it right for music, movies, and banks. What else did he say back then? If you have any views on my article then please do leave a comment here or get in touch directly via LinkedIn.