Why tech partnerships are key to banks’ survival (Part 2)

In the first of our two-parter, we looked at why tech partnerships are key to the survival of the established banks. We explored the ‘say-need-gap’ and how there is a disconnect between what customers say they want from digital banking services and what they need so that they will effectively engage with them. Crucially, how banks can leverage the expertise and innovation of technology providers to fill this gap.

Ending the article, we contended that there is another benefit to be had from partnering with technology firms that might be the most important for banks’ long-term survival. That benefit comes in the form of tackling hidden attrition.

Banks need to know they’re losing customers

This might sound obvious, but the high street banks are currently losing customers and many know neither which customers they’re losing or how many. The cause of this attrition is fintech firms, big tech companies, and large financial institutions that have been not-so-quietly targeting high street bank customers with innovative digital services that are highly personalised, feature-rich and accessible via a few taps on an app.

Moreover, and most worryingly for the banks, new digital accounts can be opened and services accessed with such ease and speed without customers needing to close their existing accounts. This is why the attrition is hidden - traditional banks mostly don’t even know their customer relationships are being challenged, that their loyalty is being diverted to alternative providers they believe can offer them more value.

Unfortunately, this isn’t where it stops. As well as offering personal current accounts, some fintechs are moving into the payments and lending spaces and are even providing accounts to small businesses. Again, all of this is happening without the banks having any real idea of the extent to which their market share potential is slipping through the cracks.

Tech partnerships can help stem the tide

Banks have access to an abundance of analytics when it comes to how their customers are behaving. The obvious problem is that most players are only alerted to troubling trends when the behaviour is already underway.

By partnering with the right technology providers, banks can access sophisticated and powerful predictive analytics engines to assess likely behaviour patterns, integrate findings with marketing initiatives, and target these at the relevant customers. 

Only by having the right tools that structure data in this way will banks be able to realise and tackle this hidden attrition. Tools that let them understand the points at which customers defect to alternative providers, undertake different journeys, and use different products and services can help to plan roadmaps for their own product launches and properly enter the world of embedded finance.

It really is all about the customer (and the back-end)

Focusing on the improvement of customer experience results in more engagement, better relationships, and less attrition. Banks know this but what they are still in the process of understanding is that optimal customer experience requires more than providing responsive sliders and colourful calculators.

Banks need the next-generation tools that operate in the back-end, supplying them with the information that lets them see where customers need help, what services they could be drawn to, and how these services can be configured to stimulate meaningful engagement. Tools the banks themselves have neither the time nor the readily available inhouse expertise to develop.

In short, today’s high street banks stand before a chasm. On the other side is a path towards a recovery of market share, forged via an ability to offer customers what they really need, when they really need it, and to do so with full compliance. The bridge that crosses this chasm comes in the form of technology providers that can safely transport them to the other side.

The wait is now on to see which banks will cross that bridge first.