As technology changes, and thereby so does the customer, a banking revolution is at hand. Here Peter Veash, CEO at The BIO Agency discusses with Finance Monthly the sector’s adaption to the internet of things and the constant need to be ready for change.
High street bank brands have remained largely set up to cater to that customer who joins as a teen or young adult, who pops into the branch to pay in a cheque or withdraw some cash and once every few years might nervously make an appointment to plead for a mortgage. That customer doesn’t exist anymore.
That customer has diverse needs. They are used to transacting online and can’t understand why you wouldn’t do it all via smartphone. They also have some very pressing questions about why you won’t give them a credit card if you’ve been trying to sell them the very same credit card all over their social media. That customer knows you have their data and is baffled as to why you’re not using it.
Digital transformation is happening, the customer expects it and they’re not about to wait for you to catch up.
Customers don’t have to wait because there’s too much fun choice among new entrants. So, perhaps the newcomers don’t have bricks and mortar branches or they only offer a limited range of products. That’s not a problem for the consumer. They can just pick and mix their products and their providers and run it all off their phone.
It’s going to be challenging times for traditional banks but quitting isn’t an option.
For a start, legacy brands do have a lot going for them. They remain large, national and even international institutions. They are able to deliver a wide range of products and services that are trusted and competitive. Certainly fewer customers are using branches but the branch network is still vital and most legacy brands already have a physical footprint – it’s just about rationalising its size and purpose. For most legacy brands the building blocks of their response to digital transformation are there, they just have to use them.
Lloyds Bank plans to overhaul hundreds of branches as it attempts to cope with the rise of internet banking, which has seen fewer customers visiting high street sites. The bank is radically shifting its operating model and following the customer – which, in this case, is off the streets and towards the increased convenience, efficiency and improved user experience that online banking brings. The company plans to rollout high-tech micro-branches (these smaller branches will be run by just two employees equipped with tablets).
But this is just one approach which alone isn’t enough to stem the tide of competitive threat from fintech and startups. Online-only banking startup Atom has begun to popularise the ultra-low interest rate flash sale. It’s not necessarily intentionally marketed as a flash sale. The simple fact is that its operating model is lean enough to offer a limited number of very low cost deals. Customers flock to them, ergo, they’re sold out in a flash.
To reengineer decades of legacy process would take too long. Traditional banks need to find ways of bolting on innovations while working on the much longer term process of internal transformation. Whether this is through creating disruption task forces internally to brainstorm and boostrap solutions; buy in consulting, data and tech power or just buy up these entrepreneurial startups to become the fast-response arm of the existing business, each legacy business will have to decide for themselves.
Even if banks choose to retain their core brand behaviour while trying to respond quickly to changes in customer behaviour, they will eventually have to evolve. Creative thinking has to become part of the banker DNA. Too much is said about the agile organisation without taking into account the agile mindset.
It is often asked of agencies, consultants or experts – ‘what will the next big change be?’ No-one can predict the future beyond saying that those companies who fail to adapt to today’s changes will surely become obsolete. And we can say with relative certainty that companies who react to today’s challenges without keeping one eye on tomorrow’s are only putting off their fate.
By maintaining an agile mindset, companies – even traditional retail banks – can become agile and responsive to change. Being an innovator is good but being a fast follower is just as relevant to consumers. Organisations can only follow fast if they are primed and ready for change.
Disruption has always been an inevitability for the banking sector. The financial revolution is happening before our eyes. But what these large heritage institutions do next, however, will determine whether they survive this next wave of innovation by fintech players such as Atom and Monzo, or whether they become relics of an antiquated past.