What trends are shaping the banking sector?

The pandemic has supercharged the issues traditional banks have been wrestling with for years. The biggest of these is how to make a profit from consumer banking while providing an excellent customer experience.

Driven by the open banking revolution, retail banking has become an ultra-competitive sector. There’s a huge demand for digital, easy-to-use services and fast processing of important documents like mortgage applications. People are more than willing to turn to other services if they feel they aren’t getting the best service from their bank.

We’re only going to see these trends accelerate as the pandemic begins to wind down.

Trend 1: A renewed focus on customer experience

Traditional banks are still battling with consumer perceptions that customer experience isn’t a priority for them. Thriving in the new normal will require banks to go beyond simply providing an excellent level of customer service – they’ll need to find innovative ways to revolutionise the customer experience.

People want easy ways to manage their money. They want apps. They want personalised services and banks that are approachable, and not intimidating.

Savvy banks are already looking at ways to use automation and AI to improve the customer and employee experience. They’re starting to use automated services to help customers self-serve, while freeing up their teams to concentrate on where their skills can add the most value to the customer (in areas that need an empathetic and creative touch).

The best way to do this is to start thinking in a ”customer-first” way. Banks that churn out the same old mortgage products, for example, will be at a disadvantage to those who set up a service that supports customers through the various stages of buying a home, and use AI to give instant approvals on big financial decisions. One is about selling a product; the other is about becoming part of a customer’s journey through life.

Trend 2: We’ll continue to see increased competition in the banking sector

What’s clear is that banks can’t rest on their laurels anymore; they need to fight to attract and retain customers. With the advent of open banking, the rise of digital-native challenger banks and tech companies getting in on the payments business, traditional banks are operating in an increasingly competitive environment.

Payment services provided by brands like Apple, Amazon, Google, Venmo and PayPal are not just on people’s phones, but easy to use at the click of a button on a website or app – instead of the hassle of finding your bank card and typing in the details while you’re on the move.

Banks that introduce technology to make financial management easier across the board will find themselves in a good position to keep pace with these challengers.

Trend 3: Banks will continue to hunt for talent that will drive digital innovation

It’s not just technological innovation that’s important – banks also need human talent to get value from technology. They need brilliant people who can interpret and apply the insights derived from the massive amounts of data banks hold on their customers. There will continue to be an intense battle for talent, especially in technology departments.

We’ll see tremendous potential for growth through innovation and investment in the right people, skills and technology. Attracting these people means the banking sector will need to evaluate its working practices.

The pandemic has shown that, in many sectors (and often against expectation), productivity can increase when people work from home. The new generation of workers, especially, are starting to expect more flexibility from their employers; there’s no reason to believe that the banking sector will be different.

Banks that want to attract top talent – the people who are powering banking innovation – will need to look at how they can offer a more flexible workplace, or they’ll lose these people to their more agile competitors.

Trend 4: The continued drive to increase revenue

The retail banking sector has flatlined since the massive crash of 2008-10. They’ve gone through the cost-cutting process, but most have been less focused on how to grow their top line.

They need more customers, but they also need to earn more money from existing ones. The challenge is how to do this without alienating people.

One way to do this is by personalising products, understanding the individual customer’s goals and how the bank can help them get there.

For example, a standard current account package may come with travel, passport and device insurance. But does everyone use these benefits? Instead, by offering a loyalty programme that gives people money back for each banking product they use incentivises them to be loyal in exchange for money they can spend as they choose.

Banks will only get the new customers they need (and see existing customers take out more products) if they prove valuable to the person behind the account number. For this, they need to focus on revolutionising the workplace to attract and retain the top talent in the sector. They need to work with emerging technology that these employees can use to provide the best services to their customers, and they need to focus on digital, easy-to-use systems that allow them to quickly help people achieve their goals.