The importance of a digital experience
Prior to the pandemic, consumer perceptions of digital banking were already changing with younger generations placing importance on digital experiences. A 2019 Accenture report found UK digital-only banks were set to triple their customer base from 13 million to 35 million, in just 12 months.The research also shows consumers are no longer set on choosing their bank based on branch location and brand loyalty. The younger demographic values recommendations from friends and family more than from a bank, with over half of consumers under 35 saying they will open a primary bank account based on a trusted referral.
A catalyst for change
At the beginning of the COVID-19 pandemic and the lockdown measures put in place in March, we’ve seen an increase in the switch to digital banking. Social distancing measures throughout the world could continue to prompt customers previously less inclined to use technology, to move outside of their comfort zone and learn to use their bank’s services either online or via an app.
COVID-19 has become a catalyst for change in the switch to digital, accelerating digital transformation in the banking and finance industry. The necessity for digital services, personalised product offerings and remote accessibility has become the norm in the pandemic, with a significant uptake in the provision of digital technology solutions.
Post-pandemic we will see an increase in fears of transmission making consumers more aware of hygiene. It’s likely that this fear will accelerate the move to digital even further as individuals avoid the use of cash, as well as ATMs to minimise physical contact. Coupled with an increase of people who are now familiarised with utilising technology, we will see lasting effects in the digital banking industry. With the switch to digital already on the rise, COVID-19 has expedited the adoption of digitised services.
With the switch to digital already on the rise, COVID-19 has expedited the adoption of digitalised services.
Getting prepared for digital transformation
With the rise in demand for digital services, for traditional banks to remain relevant they must follow suit to cope with the increase in demand. The days of attracting a customer into a local branch when they opened their first ever account, and keeping them as customer for life, are over. Fintechs and challenger banks offering faster and cheaper digital banking, has altered customer perceptions forever. Coupled with the changes COVID-19 has brought about, digital services will become a focus for retaining existing customers and drawing in new ones.
For traditional banks to retain their share of the market, they must embrace digital transformation to offer the desire for a more personalised, digital only service. The only way financial institutions can place customer experience at the heart of innovation and champion satisfaction across all channels, is by making changes to their technological processes and their operational structure.
Changes to technology and culture
For banks to make the necessary adjustments, traditional banks need to harness the right technology to update their existing legacy systems. We’ve seen a number of banking outages in recent years as a result of using archaic technology which is unable to cope with demand for online services.
It’s not simply about rip and replace or adding technology on top of legacy systems. Cloud-native, core banking solutions is required to enable a personalised and seamless, digital-led user experience.
Banks need to draw on the vast volume of customer data they hold and use it to develop far more customer-centric and personalised digital services. By championing ‘Open Banking’ banks will be able to provide products and services at speed and expand their portfolios to align with customer expectations. Banks also need to draw on emerging technologies to stay competitive, including artificial intelligence and machine learning to keep up with the growing digital customer base.
In addition, traditional banks need to make a cultural change to the way they onboard customers, by ditching lengthily onboarding procedures that rely on paper processes and fully digitise their offerings. The ability for people to return paper forms in a COVID-19 lockdown environment is completely impractical. Indeed, a recent research report commissioned by five°degrees shows that 4 in 10 Brits (43 per cent) expect to be able to set up their bank account instantly. For banks to deal with this demand they must be able to provision for their services as quickly and efficiently, to compete with the challenger banks of this world.
COVID-19 has resulted in an acceleration of an irreversible change to a fully digital world post-pandemic. We will continue to see the adoption of digitisation, which is essential for the survival of traditional banks.