“It used to be quite simple. Customers arrived at banks through the revolving doors and opened accounts or applied for lending in-store. Banks owned the customer relationship by default and ‘see my bank manager’ was a common term,” says Mark Fitzgerald, Director – Government and Enterprise at FaceMe
Fast forward, and technology has altered the way in which business communicates with consumer. The new customer landscape, along with today’s technology, pose notable threats that outweigh the former challenges wrought by Web 1.0. What happens when a third-party website aggregates the best deals on current accounts for the consumer, much like the ‘get ten instant quotes’ websites that disrupted insurance – whose customer are they? What happens when that aggregation service is an app – does the owner of the app get a sliver of the relationship pie too? And then there’s what Forrester calls Amazon’s customer relationship ecosphere around tens of millions of customers. The group warns CMOs to learn from and even imitate Amazon, but to “stay tethered to their consumers as Amazon envelops their shared customers in a cozy cocoon that will influence their use of every possible service.”
In today’s banking environment, connection is up for grabs – but when owning the customer relationship is anyone’s game, how can banks make sure it’s theirs?
Fintech, meet banking
Investment in fintech sector is seen as an investment hot ticket. While the 2015 edition of the EY FinTech Adoption Index estimated that fintech was still in its infancy, the 2017 edition found that adoption had risen dramatically to one in three. “But while it’s clear that digital start-ups and first round investments in fintech are growing and that the digital revolution in banking is well and truly here, what hasn’t yet been mapped is the impacts on banking’s biggest players,” says Fitzgerald.
In its report, Banking disrupted, Deloitte suggests that the future of European retail banks is looking rather grim. Rocked by the wake of the financial crisis and the ongoing shakings of re-regulation, retail bankers face the threat of today’s “de-banked consumer”. Open Banking in England is demanding that Britain’s nine biggest banks crack open their customer data to third parties upon customer consent, with the aim of improving price comparison and boosting account switching.
Through platforms like WhatsApp, cash can be transferred by way of instant message (as opposed to the multi-layered authentication process required by your bank app.) Beyond financial transactions, Open Banking will integrate services from third parties, allowing lifestyle choices to be made quicker and easier – for example, the same interface will help you find and finance a new car.
The new breed of customer
“In short, the silos of traditional retail banking are coming down, giving way to a more personalised and self-regulated form of financial management. Today’s customers expect to engage directly and immediately with their retailers. Needs are not only to be met, but to be anticipated before they arise, and service must be a fluid, intuitive and integrated extension of their lifestyle,” says Fitzgerald.
Previously banks were able to make small, incremental changes to meet the first internet-based challenges. But today’s ongoing digital disruption and re-regulation offer a tsunami of change that has chipped away at the competitive advantage banks used to enjoy. Deloitte believes the challenge “is not that any single new entrant or model will emerge to dominate their market. Rather, the risk is that the combination of attackers across the banks’ eco-system will steadily erode their core competitive advantage, resulting in a much smaller banking sector.”
If banks want to win the game, they’ll have to win the customer relationship. If they don’t own that relational space, someone else will.
“FaceMe encourages banks to take a few steps back – enough time to extract themselves from the hamster wheel of optimising short-term profitability – to consider a longer-term vision that can buffer future uncertainty and innovation,” he cautions.
The future of banking is cryptic, and fintech is rewriting the rules as we go. But the more we can capture the unchanging power of human relationships and prize the customer experience, the greater chance we have to outwit disruption.
Edited by: Daniëlle Kruger
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