When it comes to digital culture shocks, they don’t come much greater than that experienced by the gentleman pictured below in recent years. For what seems like an eternity, the traditional banker has had the run of a financial sector dominated by a handful of big players who thrived on restrictive barriers for anyone else wanting a seat at the table. While some smaller banks and credit unions managed to grab a foothold on the ladder, many came and went as customers continued to flock to the financial security offered by the multibillion-dollar monoliths known as ‘the big banks’.
Well, times have changed for our friend in the top hat. While traditional banks continue to dominate the market, an increasing number of consumers are embracing digital or neobanks and other fintech companies for both basic banking activities in addition to other value-add services. This is particularly common among digitally savvy younger generations, who may never set foot in a physical bank branch given their preference for real-time, 24/7 solutions over traditional, fully fledged banking products. With one study finding 46% of people exclusively use digital channels for their financial needs, it is little wonder fintech is among the fastest growing industries in the world.
The pressure for traditional banks to respond to such change is immense. PWC has reported that 88% of incumbent financial institutions believe part of their business will be lost to standalone fintech companies in the next five years. Agility is the key and fintech companies hold the upper hand on that front. Given their monolithic legacy systems and a reputation for slower innovation, 81% of banking CEOs are understandably concerned about the speed of technological change.
The modern financial environment is one where traditional banks battle for market share with unknown digital or neobanks and fintech brands that can register a few million downloads before incumbents even work out how they did it. It is a world of open banking and marketplace banking, where online-only banks can successfully compete for customers with those built on decades of tradition.
And that is why it should come as no surprise that a 2020 global survey found 75% of banks are investing in developing a more customer-focused business model to give them the opportunity to act on their clients’ needs in real-time.
Global professional services network Deloitte summed it up best when they wrote: “The bank of the future will not succeed without a smart, cost-effective (customer) acquisition strategy, whilst also delivering trust and awareness.”
A key component of this transition for legacy banks is developing and leveraging digital platforms as a new go-to-market strategy, which will help ensure they are not tied to the constraints of a traditional operating model that relies on a physical network of branches. While the big banks could previously afford to hold off on updating their long-proven systems, their siloed structure is not suited for the digital age.
Change is clearly afoot though, with 77% of incumbent financial institutions declaring they will increase their focus on internal innovations in the next three to five years to boost customer retention. Many traditional banks are pursuing an array of digitization and innovation initiatives to ensure a customer-centric perspective rather than their traditional emphasis on product. By embracing cutting-edge technologies such as augmented reality, blockchain, robotic process automation(RPA) and artificial intelligence (AI), they are giving themselves every chance to keep pace with their more agile online-only competitors.
As traditional institutions, newcomers and fintech companies strive to become ‘banks of the future’, they should consider leveraging current trends including:
The modern banking customer journey does not begin and end at a branch location, with the most successful customer acquisition strategies based on multiple touchpoints, diversification and personalized methods of engagement. To bolster bank customer acquisition, consider these cost-effective tips.
It has never been more important for the banking and financial sector to create and roll out plans that facilitate seamless experiences for their customers. Learn how to achieve such success in the omnichannel space.
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