At the start of a new decade, the banking industry faces a turning point as digitization changes business models and processes in new and better ways. In 2021, banks will need to innovate and invest in cutting-edge technologies to stay in the market. It is no longer about gaining a competitive advantage. These are table chopsticks.
In the future, banks that survive and prosper will use these cutting-edge technologies to move from providing financial services to financial improvement. To that end, we see several areas of priority that banks need to focus on in order to be successful over the next decade.
1. Innovation in customer experience
Customers increasingly expect personalized products and services, delivered in real time and tailored to their mood and behavior. To do this, banks must combine artificial intelligence (AI) and human judgment to turn their wealth of customer data into actionable insights that will help customers improve their financial well-being.
Bank capital over the past decade has been spent primarily on compliance, risk management, and stress testing, rather than on developing new experiences for customers. However, some banks recognize the importance of providing their customers with an engaging experience when new entrants challenge them. In 2021 and beyond, banks must focus on innovation in the customer experience.
This applies to retail and commercial banks. Growing competition and changing demands mean that banks need to focus more on the customer experience. However, a recent survey by Genpact found that 41% of top business customers believe increasing customer satisfaction is a top priority, yet only 35% have followed the customer journey through cash lines and loans. This is despite the fact that commercial bank executives have identified growth in these areas as the first and second priority for their business.
2. Switch to an ethical approach
Going forward, banks will need to become more partners with their customers and use artificial intelligence and analytics to create helpful suggestions and interventions to encourage healthy spending habits and make recommendations to help achieve earlier life goals. This approach forces banks to restructure their services and products based on the short- and long-term effects of financial decisions so that customers can invest and buy more efficiently.
So far, banks have been licensed and operational, but this perception is starting to change as they need to play a more supportive and emotional role in the lives of their customers. Therefore, they need to retrain their employees and adjust their hiring process to create a workforce that will take on a more consultative role and work with technology to add an empathetic human touch to interactions with customers. The ethical approach relies heavily on artificial intelligence and analysis. Therefore, more emphasis needs to be placed on the morality behind decisions made by machines to ensure that the decisions they make are fair, impartial and in the best interests of the customer.
3. Look at the whole system
In today’s climate, consumers, especially millennials, demand that businesses play an active and ethical role in their communities, moving from economic growth at all costs to sustainable goals that put people and the planet first. Proof of this is the mandate provided by the European Union for financial advisers to inform clients about investment options in the environmental, social and governance fields. In addition to having a positive impact on individuals and communities, banks can also have a positive impact on global issues such as climate change.
With Aspiration for Emerging Banks, for example, customers can compare their spending against the bank’s ethics index, which provides a “planetary score” based on the sustainability of a brand’s processes and practices. Banks also need to think about how to protect their own ecosystems by exploring new strategies to diversify and mitigate risk. This could include partnerships with companies that were once considered competitors to create a stronger and more secure banking ecosystem
4. Added value with data
The only thing these topics have in common is the data. Genpact examined these trends that will affect banks going forward. To be successful over the next decade, financial institutions must focus on connecting, forecasting and adapting quickly, putting data first, and integrating AI into their organizations. As competition increases daily, incumbent banks must consider new business models and potential partnerships in order to develop strategies to compete with agile fintechs and stimulating banks.
In the years to come, putting the customer, the community and the planet at the center of the services provided by banks will be of vital importance.