Insight

How Technology is Transforming Customer Experience in Banking

After centuries of slow evolution, the banking customer experience is experiencing an influx of new technology, bringing about radical change that’s long overdue...

January 16 2019

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Picture the scene: Siena, Tuscany. March 1472.

The Italian Renaissance is in full flow. Local merchants and craftsmen, in colorful tunics and tights, sell and trade their goods. Horse and cart is basically the only form of road transport, and the ‘money’ people use is totally unregulated, with coins differing widely in value from one place to another.

Meanwhile, a new bank - Banca Monte dei Paschi di Siena - is about to open its doors for the very first time.

This bank - now known more commonly as simply ‘MPS’ - remains open. It’s the oldest in existence and will celebrate its 547th birthday this March.

When you pause to consider the differences between the world of 1472 and 2019, the contrast could hardly be starker.

And yet, in many ways, the last 20 years have been more transformative in the banking sector than the previous 527 combined.

Banking has historically been an industry slow to change, certainly in comparison with other sectors.

But make no mistake - that change is here. The digital revolution has brought about a wave of technology which has fundamentally changed and continues to change, what people want and expect from their bank.

In this article, we’ll take a look at some of the ways technology is transforming customer expectations - and, consequently, the customer experience - in 2019, and beyond.

1. The In-branch revolution

Once upon a time, there was only one way to bank - in-branch.

The rise of tools allowing customers to bank remotely, both online and by telephone, has massively disrupted this model, to the extent that experts have debated whether physical branches even have a future at all. In the UK, research by Which? suggests that around 60 bank branches are closing each month - and similar trends are taking place elsewhere in the world, too, directly proportionately with the adoption of mobile banking.

If the physical branch is to have a future, the experience at least needs to change. And we’re already seeing those changes take root.

Customers increasingly expect the same convenience, service and seamless transactions they can access online. They expect a modern, relaxed experience. That’s why it’s interesting to see CapitalOne opening ‘Capital One Cafes’ which, it has to be said, look more like coffee shops than traditional bank branches.

They include sophisticated technology that empowers customers to take care of all their banking in one place - but in an environment that’s unrecognizable from the one bank customers once operated in, and one that’s much more suited to today’s laid back clientele.

This is symptomatic of Capital One (and other disruptive financial institutions) attitude. Part of CapitalOne’s brand positioning is to “break the right glass” because “nothing is too sacred to shatter” and it’s this kind of critical, innovative thinking that’s required in the pursuit of new opportunities that benefit the customer experience.

2. Seamless online experiences

Today’s tech-savvy consumers are often referred to as the ‘FANG’ Generation, an acronym taken from 4 of the biggest digital companies in the world - Facebook, Amazon, Netflix, and Google.

These platforms, and others like them, have set phenomenally high standards around digital user experiences. Accordingly, today’s consumers have been deeply conditioned to expect ultra-responsive service in their digital interactions.

This means that, as banks invest in technology with online and mobile banking tools, only the best will do. First-rate communication and functionality are non-negotiable.

Three in five Americans now use mobile banking, with 83% logging in at least once a week. And, given that younger people tend to have a greater hunger for digital and mobile solutions, the demand for first-rate mobile banking is only likely to grow as the years unfold.

What’s more, as the UX envelope continues to be pushed - customers will continue to expect to be able to do more and more things online - raising the bar for banking apps. Just because something is fit for purpose today, doesn’t mean it will be tomorrow; it’s mission-critical for banks to continue investing and innovating in their mobile tech.

To get a better insight into how you can offer a seamless experience read our Better Banking Through Better Communications eBook.

3. More choice = More churn

In the ‘old days’ people were limited to the banks with physical branches in their town or city. There was an accepted logic that most people were more likely to change their partner than change their bank!

Technology has, again, planted the seed for major change, here. Customers now have access to accounts and financial products with banks in far-flung destinations all over the world. Whereas in the past, a new account meant a customer for life - now the annual churn rate for bank customers is around 20-25% over the first year.

We’ve also seen the introduction (and impressive adoption) of ‘mobile-only’ banks. In the UK, for example, research shows that over a quarter of consumers have moved to an online or mobile-only bank already, with a further 26% considering the switch. This is creating a ‘David vs. Goliath’ situation where bold new startup banks are closing the gaps on their bigger counterparts and threatening to take away market share.

Bottom line - today’s customers have more choice than was imaginable 20 years ago. That choice represents both an opportunity, and a threat, for banks. Offering a great experience, with first-rate technology and communication, is more important than ever -  both to attract new customers, and reduce customer churn.

4. Personalization at scale

One thing that’s becoming abundantly clear is that ‘One size fits all’ doesn’t work anymore when it comes to banking. We expect offers and messages that are relevant to our unique circumstances. We want our bank to know and recognize us, in order to demonstrate their ability to serve us better than anyone else can.

The numbers suggest that banks which invest in personalization can expect a return on that investment. Research suggests that a 30-40% lift in sales is possible simply by delivering messages to customers that are relevant to their aims, rather than a broad, unilateral burst of advertising.

Fortunately, technology is once again on hand to help. Automation is increasingly sophisticated and able to help deliver tailored messaging at scale - without the level of time-consuming work that would have previously been necessary.

This applies to everything from the most simple steps - dropping ‘Dear Sir/Madam’ and using the customer’s name - through to enterprise technology like mGate from Infobip, which allows you to build tailored, targeted communication workflows using simple, powerful drag-and-drop functionality.

To learn more about the importance of personalized communication get our Better Banking Through Better Communications eBook.

5. AI and chatbots

Artificial Intelligence is one of the dominant technological trends of our time, and its potential is genuinely exciting.

Take chatbots for example. In the era of social media and real-time communication, customers expect great service, and - crucially - fast responses. If it ever was acceptable to spend half an hour on the phone listening to Greensleeves, then it definitely isn’t now!

Sophisticated AI tools are increasingly able to interpret customer messages and serve up the most relevant reply. In a banking context, this serves a few important purposes; firstly, it gives customers a better chance of being able to resolve their problems and answer questions independently and quickly. There’s less time on the phone, and may save them the inconvenience of a visit to the branch.

But secondly, and no less importantly for banks, it also frees up your bank staff from the ‘busy’ work - repetitive, easy tasks that can be automated, giving your team more time to offer personal treatment to those who need it. They can spend more time on higher-value transactions, without diminishing your service.

It’s important, then, to consider investing in this sort of technology - while being aware of its limitations and making it easy for customers, where necessary, to bypass the AI and get to an actual person.

6. No compromise on security

While consumers are happy to do more business online - that doesn’t mean they’re willing to make sacrifices around security, particularly when it comes to sensitive financial data.

The effects of data breaches and attacks remain disastrous. There are plenty of examples. Take credit bureau Equifax, for example, whose profits plunged 27% following a major data breach in 2017. They commented that the breach cost around $87.5m but, factoring in reputational damage and time spent rebuilding, it’s almost impossible to quantify the full extent of the harm inflicted.

Essentially, any changes you make to your service offering and the way you handle customer data must keep privacy and security at the front and center of the conversation. This is particularly pertinent for all the reasons we’ve discussed elsewhere in this post, and our Better Banking Through Better Communications eBook

7. Diversification of communication channels

For many years, the focus for businesses was on ‘multi-channel’ - the idea of being available to interact with customers across a variety of different communication platforms.

Increasingly, though, banks must move away from the idea of ‘segmenting’ those communication channels, and instead look to bring them together.  The future, without a doubt, is omnichannel. What does this mean? Quite simply, SMS, voice, notifications, email, chat, IoT and chatbots all need to be used - but a) they need to take into account how the customer prefers to communicate - being available everywhere, all the time - and b) they must tie into one single source of truth to avoid customers having to repeat information, or information and data getting lost between the cracks.

Thanks for reading

Today’s banks are experiencing an extraordinary period of change. Customer expectations are changing at a dizzying pace, which creates challenges and opportunities.

Equally, as the American captain of industry Henry Ford famously said: “If I’d asked what my customers wanted, they’d have told me they wanted a faster horse.”

A similar spirit of innovation is required for banks moving forward; yes, it’s crucial to respond to customer needs and expectations in the here and now, but also forecasting and anticipating changes to ensure the business is primed to meet new and exciting challenges moving forward.

Check out our free eBook, “Better Banking Through Better Communications” for a detailed look at how communications can help improve the banking experience for your customers.

Download the Better Banking Through Better Communications eBook