Bye-bye, branch. Speeding-up digitalization is the hottest trend in retail banking today.
- Two-thirds of Europeans say that digital technologies have a positive impact on society, the economy and their own lives;
- Going digital, in a fast and hyper-personalised way, is vital for retail bankers to retain and gain customers in a reality that is being shaped by challengers like Revolut;
- CEOs in financial services feel constant pressure to gain more market share, reduce costs or get a better Return on Equity;
- Nowadays, digital journeys are a must. FintechOS calls it “a necessary emergency“.
When Jane, 32, started to use her mobile banking app, a few years ago, the most important thing she had in mind was to save time. If it can take her less than a minute to make a money transfer, why waste an extra hour to visit the branch, as she used to do in the past? “Branches are only open when I am at work, so I need to solve bank-related urgent matters remotely – and fast”, she said.
Jane, who works in marketing, accepted to share her customer experience with FintechOS, under this pseudonym.
“During a trip with my colleagues to the USA and Asia in 2019, I realized that my colleagues got better exchange rates than I did. They were using Revolut, while I was dealing with cash.”
So, on her return, Jane applied for a Revolut card to use it for some personalised services that her longtime bank had never provided. “If I owe some money to a friend who also uses Revolut, I can send the amount within seconds. His or her phone number is all I need”, Jane explained.
Is she now using mobile payments, too? “Not yet, I have some security concerns”, Jane admits having once lost her mobile phone. “That’s why I am reluctant to depend on one device exclusively”. Although, she does use contactless payments by card now.
At a fast pace
Revolut, a British financial technology start-up, is promising “a better way to handle your money”. It started in 2015 with a pre-paid card and app that allowed users spend abroad with decent foreign exchange fees. Revolut quickly gained a worldwide reputation as a ‘challenger bank’. “We’re not about hidden fees or rubbish exchange rates, and that’s why 8M+ people already use Revolut”, states the financial tech start-up on its website.
Despite its $40.3 million net loss, Revolut is expanding its financial services business and has embarked on an aggressive global expansion plan. Revolut’s development and marketing teams are already shaping customers’ expectations and choices. “Opening an account with us takes just minutes, and because we don’t believe in branches, you can set one up directly from your phone.”
Briefly, retail banking is changing at a fast pace, just like the media business did in the mid-2000s, when Facebook, a challenger back then, grabbed people’s attention all over the world. Rupert Murdoch, the famous media mogul, foresaw the revolution that was about to break in the media business.
“What is happening is a revolution in the way young people are accessing news: give the people control of media, they will use it. Don’t give people control of media, and you will lose them”, stated Murdoch in a memorable speech delivered to the American Society of Newspaper Editors, in April 2005.
Today, you can replace “news” and “media” from Murdoch’s speech and replace them with “banking services”.
Yes, that rings a bell.
How to deal with challengers
CEOs in financial services feel constant pressure to gain more market share, retain customers, reduce costs or get a better Return on Equity so as to please their shareholders. Hence, some retail bankers may see the likes of Revolut, Monzo, TransferWise or Alibaba – to mention a few of the most popular digital banking alternatives worldwide – as troublemakers.
Digital journeys, the kind of experience that Jane and millions of people already switched to, used to be wishful thinking in the past decade. Back then, customers still visited their branch to apply for new products and services. But newer technologies that have been emerging since then – such as Artificial Intelligence, Banking API, Internet of Things, Robotic Process Automation or Blockchain – dramatically changed the banking business.
Nowadays, “digital journeys are a must”, says Cătălin Dediu, Product Marketing Manager at FintechOS, a London-based tech company. At FintechOS, Dediu and his team are working to help banks accelerate the process of digital transformation. FintechOS calls it “a necessary emergency“.
“Our technology allows established banks and insurers to react as fast as a fintech. We create easy to deploy, affordable technology that puts automation and personalisation at the heart of innovation”.
Previously, Cătălin Dediu worked as an advisor in financial services in London, in the Fintech industry and was a business consultant for companies including Boston Consulting Group and Roland Berger.
Dediu, 37, noticed that “banking customers, especially young people, required the same level of personalised digital services delivered instantly as they experienced with Netflix, Amazon, Google or Facebook.”
Going digital, in a fast and hyper-personalised way, is vital for retail bankers to retain and gain customers in a reality that is being shaped by challengers like Revolut.
How radical is “radical transformation” for the big banks?
To understand what the future of retail banking looks like for established retail banks, let’s look at Deutsche Bank (Germany) and JPMorgan Chase (USA), and the steps that those two giants have made in digital transformation.
In 2019, on July 7th, Deutsche Bank announced “radical transformation” to become more profitable, improve shareholder returns and drive long-term growth. Headquartered in Frankfurt am Main, Germany, Deutsche Bank is the largest bank in Germany and one of the largest financial institutions in Europe and the world. Its total assets were worth €1,348 billion as of December 31, 2018.
Investing €13 billion in technology by 2022 was a highlight of Deutsche Bank’s new strategy. Expected outcome? “To drive efficiency and further improve products and services.”
USA-based JPMorgan Chase sped-up digitalization earlier. They built a digital strategy for retail banking that is essentially “making the bank singularly hyper-relevant to a wide cross-section of customers”, Accenture Consulting noted in a report released in 2018.
What did that American bank exactly do to go digital? JPMorgan Chase built their strategy around customer experiences to deliver “a clear economic benefit”.
The bank showed they could be “hyper–relevant in the moment and not just with personalized product features (such as sign-up bonuses or rewards programs)”, according to Accenture Consulting. “ChasePay app users can order food through an ahead function and redeem personalized offers from participating merchants. Such examples of the bank’s personalized and hyper-relevant customer experiences help work to convert these interactions into clear economic benefit”.
Given that half of the world is connected to the Internet, there’s no doubt about it: going digital is a burning priority for decision–makers in retail banking.
It makes sense. Digital technologies bring along increasing amounts of data and information that are transforming the way we travel, shop, work, communicate, make new friends, share the bill and so on.
Is this better or worse?
The Deloitte Center for Financial Services explored this further. In May 2018, Deloitte surveyed 17,100 banking consumers across 17 countries to measure the state of banks’ digital engagement. How frequently they use different channels and services? What are their expectations and perceptions of digital banking capabilities? How likely are they to use additional digital banking services in the future?
“Restructuring organizations around different stages of customer interaction will be the next frontier for digital banking”, was Deloitte’s belief. “Specifically, this will require integrating digital services across five stages – adoption, consideration, application, onboarding, and servicing – to drive holistic engagement”. You can explore more of Deloitte’s key findings here: http://bit.ly/2QSlwIF
As we all notice, the debate around digitalization is keeping everyone busy. One thing is obvious amid the increasing noise. The digital revolution is here – and it’s unstoppable. Who’s ready?
Disclaimer: This article was compiled based on publicly available information released by owners*. It is not intended to be viewed, nor treated as an official source of information.*The sources consulted for this article: McKinsey&Company – “Rewriting the rules: Succeeding in the new retail banking landscape” (2019); European Parliamentary Research Service – “Digital Transformation” (2019); The World Economic Forum; The Economist; CNBC; The Guardian; The Deloitte US Center for Financial Services – “Accelerating digital transformation in banking” (2018); Adobe Digital Trends 2020; Virtusa Corporation and Finextra – “The Top Global Banking Technology Trends” quoted by Business Insider Intelligence, 2019; Accenture Consulting – “Maximizing Revenue Growth In Retail Banking” (2018); World Bank Group quoted by Capital Banking Solutions & IBS Intelligence – “Emerging Trends in Digital Banking”; Deutsche Bank newsroom (2019); Revolut website; FintechOS competitive intelligence analysts (2020).
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