According to Alan Donnelly, Head of Financial Services at Salesforce, this year financial services will continue to move towards a different way of doing business; one that harnesses digital services for the good of the customer, and that will increasingly lead to partnerships between new challengers and traditional banks.
Below, Alan explains for Finance Monthly that as banking customers increasingly expect highly convenient and personalised experiences, they are in return willing to commit to wider and longer relationships.
In 2020 we can expect to see the emergence of new ecosystems that will blur the old and the new, as well as examples of financial services organisations of all shapes and sizes working together.
Challenger vs traditional bank
The current financial services market has seen challenger banks pitted against traditional banks. The wider FinTech world cannot be ignored either. Challengers are growing due to the agility, flexibility, ease-of-use and convenience of their platforms. They are digitally native, and designed from the bottom-up for a customer base which is becoming increasingly reliant on mobile.
But these young organisations do not necessarily have the wealth of data that traditional banks do. Incumbents possess information from individual accounts, gathered over many years, and have insights into how entire households spend and save – including substantial financial decisions such as taking out a mortgage.
These young organisations do not necessarily have the wealth of data that traditional banks do. Incumbents possess information from individual accounts, gathered over many years, and have insights into how entire households spend and save – including substantial financial decisions such as taking out a mortgage.
Traditional banks are becoming more agile and incorporating mobile more. Some, such as Barclays, Santander, RBS and HSBC, are evolving towards banking apps in a bid to compete with the challengers.
Customer journey mapping
This backlog of data that the traditional banks have on both the individual and the household allows them to create a comprehensive picture of the customer. This customer journey map is a visual representation of every interaction a customer has with their finance services provider throughout their lifetime. It tells the story of the customer’s experience as they progress through all touch-points between customer and financial institution, from initial contact and purchasing, to the ultimate goal of long-term brand loyalty. Here banks can demonstrate how they are learning from customer relationships and engagement throughout their entire organisation thus bringing it to bear in a meaningful context for their customers.
Many banks now realise the need to harness customer lifecycles through data and agility. By identifying those “magical moments” that make up their customers’ life, such as setting up a pension, buying a home or planning for a family, they can offer seamless and personalised services for all stages of the customer journey.
Once these moments have been identified, banks can move from product to lifestyle services and so take the customer on long term financial journeys. Banks need to create a holistic view of the customer to pinpoint when a person may want to take out a specific loan, and so develop a personalised package before the customer starts to shop around, resulting in better services for customers, more pervasive interactions, and ultimately greater loyalty. Banks cannot afford to let conversations with customers lead to a dead end and so innovations in agile technology will capture, maintain and progress this dialogue.
Creating a future of partnerships
If financial services want to truly cater to the needs of the customer, we need to end this discourse of challenger vs traditional, and instead design services that are centred around the customer.
Ecosystems offer a marketplace of financial services that consumers can dip in and out of according to their needs, whether that be a mortgage or a student loan, to access the best products out of a large portfolio. This gives traditional banks the ability to be more agile through the need to stay relevant by enabling them to bring the best of these digitally-native apps and services to their customers, while in turn challengers get access to the data required to understand customer needs and habits. It also creates compelling new business partnerships as, for example, big financial moments like buying a home involve many complexities beyond financing.
We are already starting to see movement towards ecosystems with concepts such as Facebook Pay, which is consolidating payments across all of its apps. The focus now needs to be on providing platforms that consumers will go to for every aspect of their financial lives. Competition in financial services will shift from offering individual banking products to shared marketplaces with great services.
The next year will be a crucial time for the financial services sector. As banks begin to evolve their ecosystems, launch marketplaces and create new partnerships, it is the consumer who will ultimately see the benefit of agility and personalisation of financial services. The future is all about partnerships between old and new.