As covid-19 accelerates the take-up of digital banking services, banks have a unique opportunity to address two of the biggest problems facing the sector: customer satisfaction and trust. 

When the coronavirus struck, banks reacted like every other sector, by focusing on business continuity. They had to keep their infrastructure going and sustain their business, while also supporting customers, many of whom were struggling financially. They also took the lead in distributing government backed financial assistance.

An unavoidable consequence of the pandemic was the closure of branches, some of which might never reopen as customers adopt digital alternatives. To facilitate the shift to digital, many banks had to expand to new channels – chat applications like WhatsApp, for example – while also adding capacity to ensure that existing options, such as call centres, were not overwhelmed.

Most of those initiatives can be seen as reactive and short term, but are a step ahead in the right direction. The reality is that this digital shift has laid the foundations to address the need for greater engagement with customers to improve their experience, which was already banks’ top strategic priority, according to a recent report by the Economist Intelligence Unit (EIU). That experience is increasingly shaped by technology giants, and banks know that their customers expect the same kind of seamless, contextual, compelling service from them. The technology now exists to enable banks to be able to deliver on that, although some obstacles remain.

Products are out, advice and support in
To make the transition to a customer-centric business model, products are out. Advice and support that allow customers to meet their goals are in.

Talking about ‘products’ immediately marks out a bank as being old school. Instead, banks should focus on offering services that allow them to forge closer partnerships with customers.

The EIU study analysed over 10 million conversations in online personal finance forums and found that the new generation of ‘challenger banks’ were associated with financial empowerment capabilities, such as tracking spending and advice on better budgeting. Traditional banks, on the other hand, were much more likely to be referred to in conversations about credit-card points and reward programmes (25 per cent), compared with 2.4 per cent of those involving challengers.

Building trust
Banks that have supported their customers during the pandemic have an opportunity to change the relationship with their clients to build deeper trust, which is the most valuable asset for banks, old or new.

But fragmented and siloed systems between business lines can undermine these efforts. For example, it might be easy to make a loan application online, but calling the bank with a query could mean being transferred to three different operators. Even those with slick websites and mobile apps can find that things fall apart behind the scenes.

Challenger banks have challenges of their own. They must overcome concerns about safety, security and privacy. The EIU found that online conversations about challenger banks were twice as likely to touch on such worries, compared with those about traditional banks. Some of these concerns might stem from the fact that many of these banks are pre-profit, so customers might be concerned about their long-term viability. They need to scale quickly to reach profit and build strong customer relationships.

But it isn’t just a matter of traditional banks competing with challengers. Open banking regulations in Europe and elsewhere, which require financial services companies to make it easy for customers to share their data, have allowed other brands to enter the market, building on their own customer loyalty.

Turning customers into partners
To clear these obstacles banks must empathise with their customers and find ways to anticipate and meet their individual needs and goals, such as buying a car or saving for their children’s education. For example, retailers and telecoms companies are good at offering personalised deals when a customer is unhappy with the standard offering. Banks could do the same. The financial institution should focus on providing value to their customer, help them achieve their financial goal such as buying a house, and in this instance view them as a home buyer not just a borrower. This involves a different approach, it means reinventing processes and unifying the bank around the customer.

Banks need to implement an event-driven technology architecture to make every interaction smart and contextual. What’s more important, they need to integrate relationship with transactional capabilities to provide the best possible service in an omni-channel and consistent way. Technology can enable banks to build a ‘customer funnel’ that allows them to analyse how many customers might benefit from a service and how many drop out at each stage of the process. Banks can use AI technology and advanced analytics to approach their customers with hyper- personalised offers.

With the right digital tools to analyse risk, it’s possible today for a mortgage application to be approved in minutes. Yet too many financial institutions still don’t offer even this and open banking can deliver so much more. Banks should be aiming to integrate with third parties to provide a suite of services – not only a mortgage, but also help with finding a property to buy, home insurance, transferring utility accounts to the new address, and so on.

In the aftermath of the covid-19 pandemic, many industries want to ‘build back better’, rather than return to business as it was before. Banks should do the same. Their customers have been forced by circumstances to embrace digital banking. It’s up to the banks to compete on experience making it as personal, engaging and rewarding as it can be. Get that right and banks can truly turn customers into partners.