The pandemic proved that traditional banks have what it takes to adapt quickly. Forced to shift into high gear, many firms sidelined routine processes to develop digital services in shorter time frames. In some respects, incumbents became disruptors. But to truly outpace FinTech and meet changing customer needs, larger banks must take more calculated risks, more often.
Yes, there’s a lot on the line. When a firm swings and misses, the consequences can be devastating. “If Uber’s system goes down, you can hail a taxi. If your bank fails and you can’t make your mortgage, that’s a big deal,” says Simon Murray, Practice Lead FSI, Digital Strategy Group at Adobe. However, there’s also real risk in not transforming. So how do you “move fast and break things” while balancing legitimate concerns about security, fraud, regulation, and compliance? Let’s explore what it takes to do trial-and-error right.
Get out of your comfort zone
Why take any risks, and why now? The shift in customer expectations and the adoption of digital channels has been building in recent years. The change in physical interactions caused by pandemic lockdowns has simply accelerated what was already there — the move to transact digitally and predominately on mobile.
Embedded finance and Banking-as-a-Service (BaaS) are two key harbingers of change. A number of non-financial companies are integrating financial services within their product offerings, turning complex exchanges into something that can be done on a smartphone in just a few clicks. With these services, you can get a ride-share without fumbling for your wallet, buy a bed online and finance within the checkout experience, or tick a box to add insurance to your new car purchase. Customers increasingly expect such valuable and friction-free experiences and will take their business elsewhere if you can’t deliver.
Of course, quick transactions are only part of the equation. Customers also want strategic support and expert guidance to make smart financial decisions, especially after a year of economic uncertainty. Now customers are looking to banks to deliver answers to their finance-related questions, not just the completion of banking tasks.
According to Adobe’s 2021 Digital Trends: Financial Services & Insurance in Focus, “the primary goal for financial services is delivering meaningful digital interactions to improve the financial health and wellbeing of the customer.” Through a more complete picture of the customer, financial services and insurance firms are in a better position to offer content, products, services and support that are truly helpful.
Make sure you have the proper insights to engage with customers in a meaningful way. Any future success in integrated technologies or automation depends entirely on data. By understanding the customer as a unique individual, you can meet their needs and gain the added benefit of building trust and confidence. Just 33 percent of financial services and insurance companies have “significant insight” into the journeys of new customers. This might explain why only 31 percent of customers who use a traditional national bank believe they are getting unique banking benefits, compared to 50 percent of customers who use a digital bank.
Go beyond basic mobile banking
With good data, you can not only market more effectively but actually create better products for customers and prospects.
For example, after realizing customers didn’t feel they got enough value from their products, Goldman Sachs created a consumer lending platform that provides highly competitive rates, delivered without the branch and back-office infrastructure that often hampers legacy financial institutions. Launched in 2016, Marcus by Goldman Sachs became even more user-friendly as a convenient mobile app in 2020. The brand image is centered on the goals of helping people achieve financial well-being and be smarter with their money, with the tagline, “You can money.”
Customers can act as partners in innovation, too. In fact, you can gain incredible insights by inviting customers to tell you what they think.
In Australia, Sydney-based neobank, Hay, invited the first 10,000 customers to test, trial and provide feedback on updates to the mobile app. These early adopters, or Hay Founders, essentially co-create new features. Hay pairs this explicit user input with data-driven insights to continually focus resources and improve experiences. By actively listening and responding to customer needs, the company is successfully reimagining an age-old industry.
The secret to these banks’ innovative moves is simply a willingness to take incremental risks.