In recent years, banks of all sizes have seen a fundamental shift in how they do business. Traditionally, banks leaned very heavily on a business model that relied on stability and predictable outcomes. Generally, when having to choose between a potentially volatile but highly profitable investment and a less lucrative but more certain one, banks would historically choose the less risky, more stable option. This preference for the sure thing has turned the banking and financial services industry into the juggernaut that it has become in recent years, with a global evaluation in the trillions of dollars.
Unfortunately, this preference for stability has also translated into an aversion to change, and in today’s digital, always-connected world, the inability to adjust and adapt is akin to a death sentence. Simply put, banks that are unable to deliver a successful digital banking customer experience are likely to go the way of the dinosaur or the dodo. They’ll either be eliminated by environmental factors they were simply unable to adjust to, or overrun by newcomers with technology and tools they couldn’t deal with. Just look at the revolution undergone in the brick-and-mortar retail industry, thanks in large part to Amazon’s emerging dominance.
If you’re a member of a bank’s leadership team and are looking for ways to avoid these fates, you’ve come to the right place. Here are some tidbits of data you should be considering when preparing your client relationship management strategy over the next few years.
Your Younger Clientele Expect to Be Catered to
In the past, banks seemed to have so much power over people’s access to capital. In order to procure a loan in the days before online banking, borrowers had to build up both a sterling credit score and a long-standing, personal relationship with a single bank. If they engaged a national chain of banks, more often than not, they would have to restrict their banking activities to a single branch. While these conditions made relationships between banks and their clients very intimate, they also restricted clients in terms of options and loan opportunities they could have taken advantage of.
Fast-forward to today. Based on recent estimates, around 4.6 billion people, or about half of the world’s population, access the internet on a daily basis. Of these, around 2.4 billion get online from a smartphone or similar mobile device. Immediacy is the byword of millennials and GenZers, which form an estimated 65 percent of potential banking clients. If legacy banks want to win this important market segment, they had better step up their service game.
To do this, banks must first decouple from their obsolete and largely irrelevant legacy banking platforms and must move instead to a cloud-based banking software. This will break down information silos that had been present in the bank’s core systems, finally allowing them to leverage the most valuable and underutilized resource that they have: their clients’ personal information. Most current-generation banking software can use client data to allow banks to generate new investment products that are more bespoke and more attuned to what clients want and can reasonably afford. This will result in a positive uptick in potential clients and, eventually, subscriptions.
Expect More Engagement Via App than Over the Counter
If the global COVID-19 pandemic has taught us anything, it’s that any operation that’s completely dependent on in-person transactions is likely to fail. An unfortunate consequence of the coronavirus is the effect that it has had on many businesses that are dependent on in-person transactions: restaurants, movie theaters, ice cream shops, and so on. The most agile of these quickly pivoted to ecommerce platforms and delivery in order to stay afloat.
The same goes for banks that do not have a digital component and who expect their clients to visit their home branch in person regularly. Indeed, these organizations are likely to see a mass exodus of their clients in favor of their more tech-savvy competitors. Today’s clients want an online banking experience that closely mirrors an in-person one because, as mentioned above, they expect to be catered to. That being said, they also view an inability to access their accounts online as a potential personal safety risk. This is yet another argument for why banks should invest in current-gen banking technology.To keep up with FinTech trends, companies in the finance industry hire Python developers. These specialists help businesses to implement online banking, mobile banking, and digital wallets.
Banks Need to Rethink Their Relationships with Their Competitors, Too
While in the past, banks may have taken a more adversarial approach vis-a-vis their competitors, that simply isn’t an option in today’s tech-driven landscape. The arrival of application protocol interchange technology has led to the rise of open banking, wherein banks openly share client information amongst themselves and newly established financial technology companies. This development creates an ecosystem of open information and engagement among all stakeholders that simply could not be conceptualized in the past. And here’s the important part: clients expect to be able to travel throughout this ecosystem seamlessly and with minimal friction. Any bank that is not part of it will probably quickly lose clientele to those that are.
While digital transformation and changing consumer requirements have definitely shifted the way banks do business, they still have a vital role to play in ensuring and safeguarding an economy’s flow of capital. The aforementioned insights simply have to be accounted for as banks continue in this role into the future.