What do banking customers want and who do they want it from? Is invisible banking the ultimate survival strategy or a recipe for disaster for traditional players? Ahead of our upcoming webinar, we sat down with Bruno Macedo, head of delivery implementations at cloud-based core banking platform developer five°degrees, to discuss what’s next for the industry. Here’s what he had to say.
Do you think always-on, invisible banking is the next step in the industry’s evolution?
Absolutely. It’s pretty clear that technologies like AI, advanced analytics, IoT and voice banking are here to stay. The only thing that might cause a halt every now and then is the issue of privacy.
The way I see it, more and more banks are adopting a ‘phygital’ approach and converging towards something that I call cognitive banking. In essence, that means a new mindset where banks rely on data analysis to predict, respond to and give advice on customers’ financial and life situations. Phygital, of course, refers to a blend of physical presence and digital interactions that offers an always-on service across channels.
This new breed of banking is based on the idea that managing finances shouldn’t require having to constantly ask for customers’ consent and information. Which is logical since the bank, by definition, already has access to transaction details and spending behaviours. So if a customer agrees to their bank handling their finances in their best interest, they won’t mind if, say, it moves money into their savings account each month.
Should banks embrace or fight this trend?
What customers need is a blend of digital and physical experiences. We’re all spoiled by Amazon, Apple and other big tech companies who know exactly what we want and when. No wonder that more and more customers demand the same from their banks. They don’t want generic marketing messages. In fact, hey they even expect their banks to know when they have had a new baby and advise them accordingly. To stay relevant, banks should go beyond the digital frontier and create seamless experiences that make people feel that their bank understands them, whether they’re sitting in a branch or logging into online banking.
To stay relevant, banks should go beyond the digital frontier and create seamless experiences that make people feel that their bank understands them.Bruno Macedo, Head of Delivery Implementations at five°degrees
Do you think consumers really want digital banks – or simply better digital experiences, no matter who offers them?
Humans are complex beings. We want certain things but we never want them black or white. Customers do love frictionless banking that lets them pay with their watch if they like. But a part of them also needs the human touch that comes with talking to a financial advisor. Especially when it’s about long-term life decisions, such as taking out a mortgage. This is why I think branches are here to stay, too. Take Virgin Money Lounges, for example. They even have a kids’ zone and a bowling alley! These have nothing to do with what banks traditionally do. So, consumers want to be heard, engaged and delighted. And yes, they’re gravitating towards digital because it’s easy and seamless but that doesn’t mean non-digital will disappear. This is what banks have to respond to.
Can personalisation be used as a secret weapon in this? If yes, how?
It definitely can. Imagine that you agree that your bank can track your location. In turn, it will be able to detect when you’re on holiday and how much you spend during your trip. Then sends you a recommendation on where you should go next, based on your activities and budget. There’s so much to gain from personalisation with the right technology. If a bank has the capacity to look at data and adopt a customer-first approach like challengers and big techs do, a world of opportunities open up.
What are the biggest digital transformation hurdles for traditional industry players?
Before we get into this, you should remember that banks have been around for more than a millennium. Meaning that adapting to rapid changes does not come easy to them. That said, I think it’s time for a change of mindset in four key areas.
The first is people. We live in a world of APIs, Scrum and agile development, and fintechs where banking means young people in t-shirts doing magic on computers. So having 1,000 years of experience is only an advantage if you’re able to combine it with new knowledge and technology. Then there’s security. Big clouds bring big rain, as I always say. More and more banks move to the cloud in an effort to improve their capacity to turn data into business results. But that also means they’re more exposed to malicious cyberattacks.
The third factor is regulation. Even in the face of the most disruptive changes, banks still need to be heavily regulated because it’s people’s lives and livelihoods we’re talking about. So if a bank wants to deploy a shiny new app, they must answer some 3,000 compliance-related questions first. And by the time that’s done, the app is already long outdated. Which brings us to the issue of technology. There are so many options but it’s not easy for banks to just ditch their core systems they invested tons of money in, to churn out new digital solutions from one day to the next.
In other words, what banks need to do is move on to agile and cloud-based approaches, and do so securely. Plus, hire smartly. And finally, find the best way to collaborate with other fintechs.
What’s your advice for banks on how to navigate the current market and technology landscape?
Reimagine how you operate, starting with your enterprise architecture. Then make sure you hire the right people with the right skills and team up with the right vendors to drive your strategy and goals. Otherwise change is going to be very, very hard.