By Daniel Cooper
We already know COVID-19 has changed the world. Businesses across the globe witnessed established digital trends evolve at an unprecedented pace – and they’ve struggled to keep up. The banking sector had previously begun to experience its share of the digital transformation with cloud computing, APIs, and AI coming into sharper focus. But COVID-19 supercharged these changes, increasing its reliance on meeting consumer needs and surviving new competitive forces.
Banking’s digital revolution was fast-forwarded and a new set of tools for innovation including a renewed customer experience, open banking, automation, and cybersecurity became essential. Reports claim 71% of consumers globally are now using these digital banking channels on a weekly basis (RFi Group, 2020), confirming that the revolution is still sweeping through. But what about when this is all over? What about when the New Normal settles into place? How will banking look when the digital revolution finally wanes?
Keeping up with the evolving trends can only take you so far. You need to prepare for how the future will really look.
The New Customer Experience
At the heart of digital transformation lies the customer experience. COVID-19 has lived up to these new standards, supercharging convenience and online services. Our daily activities now take place on some form of a screen – but the technology powering our devices is providing access to new innovations. Innovations powered by consumer demand.
AI and machine learning are driving a renewed interest in digital chatbots that can solve problems and support customer needs. Back in 2019, 54% of customers claimed chatbots had a negative impact on their online experience (CX Today, 2021). But now, they’re a staple of any website. They harness behavioural data to improve engagement and personalise the experience, a necessity in this digital day and age.
But what lies beyond these online assistants? These chatbots will soon adopt new capabilities such as providing 24/7 service, collecting information to pass onto employees, and helping guide the customer journey to a solution. With extensive banking knowledge built-in, chatbots will be able to direct a journey to an end-product as seamlessly as an employee.
Digital assistants are driving one side of the omnichannel experience. But as social distancing is stripped back, chatbots will be teamed up with physical-hybrid solutions. And balancing digital interactions with in-person ones is key to enhancing engagement by matching the flexible opportunities forwarded by COVID-19.
Beyond the pandemic, branch networks will be revitalised with a focus on customer-oriented services. The simple services that once required members to enter a branch have now been stripped back to niche activities that cannot be completed online or require specific advice. Daily transactions will take place online, leaving branches to become hubs that provide support and information from employees. A more personalised, customer-focused experience will thus be restored on both ends.
Personalisation is at the fore of digital transformation in banking: both innovation and engagement will come together to provide the new digital experience. To ensure the omnichannel experience meets these new demands, data and AI are being used to create tailored online experiences. 48% of consumers reportedly abandon online purchases when a website fails to personalise the experience (Accenture, 2018), confirming that predictive personalisation – the combination of AI and predictive analytics – will be central to redefining the hybrid, omnichannel experience.
The personal touch will only be amplified as online banking services customise offers and advice to users. Websites armed with specific financial recommendations will drive greater dependency on these digital channels than on bank branches. They will provide a more efficient and effective experience than working with a cashier and can be accessed around the clock, around the world. This changing balance of power will restore the personal experience across digital and physical channels.
The Acceleration Of Open Banking
At the crux of these digital innovations is open banking. But the use of open APIs is nothing new to the industry. Since 2013, open banking has been a staple of the industry with the agility provided by APIs allowing business models to evolve under the pressures of the pandemic. The move towards creating a digital ecosystem of technology-driven services and third-party offerings is vital to the digitalisation of banking. But where will this digitalisation lead?
83% agree platformisation is on course to steer the industry (Finextra, 2020). As larger banks seek to challenge fintech companies, they are strategising with platform giants to power more value into their customer-facing processes. Like the new entrants into the market, they are expanding into non-banking services via APIs (e.g. password management or charity marketplaces). The opportunities provided by this API technology will extend much further in the future.
The transparency promoted by platformisation could lead to the creation of a global financial platform. This, in turn, is predicted to influence the emergence of fintech companies as they move to adopt new financial infrastructures and banking databases. Their capabilities will improve, driving more competition amongst larger banks to meet their digital competitive advantage.
With greater access to customer data, personalisation will be at the fore, enhancing customer experience yet further. User experience will soon be the deciding factor of banking strategies as opposed to past product-centric thinking. As a part of this shift, many activities will become automated to streamline banking activities; this will become commonplace as we move beyond the basic optimisation negotiated by online banking.
The Future Is Automated
Banking’s digital revolution has pushed through automation in a variety of forms. The new business model dictating digital transformation in banking relies on elevating the efficiency of processes, namly repetitive tasks. But how will this automation take shape after COVID-19?
The answer lies with Robotic Process Automation (RPA): with customer satisfaction at the fore of this technology, its ambitions extend to lowering the cost of banking services and therefore opening up access to a renewed user experience. What is currently being used to streamline processes is predicted to generate revenue topping $900 million by 2022 (Emorphis Technologies, 2021).
It can collect and compile large volumes of data automatically, speed up customer-facing processes, and provide elevated risk management. Automation is yet another highly-connected change powering digitalised customer service and stronger cybersecurity. As digital banking continues to develop in light of the current crisis, automation will become the new benchmark of financial services.
Fintech companies introduced automation to the sector, streamlining processes such as account consultation, transfers, and savings management. Challenger banks will move to leverage this tool as smaller firms expand their role in the industry. And through this competition innovation will push through, creating a culture of digital transformation industry-wide.
Pushing Tougher Cybersecurity
Following closely behind this surge in investment in automation is cybersecurity. Balancing the potential of open banking with growing security threats demands greater protection for banks and their customers. But fintechs suffer from limited cybersecurity and long-standing retail banks are encumbered with legacy security systems.
The new advanced technologies forged by the digital revolution and COVID-19 will therefore drive a move towards enhanced cybersecurity.
Cyber attacks increased by 238% in the short window between February and April 2020, capitalising on the disruption led by COVID-19 (Infosecurity Magazine, 2020). They will only increase as open banking becomes a staple of the sector. Open banking requires a toughened approach to cybersecurity that secures confidence amongst customers. The API-enabled digital ecosystem needs to maintain consumer trust amongst the rising number of threats.
As the legacy systems are reshaped for the digital world and fintech firms adopt more security measures, the banking sector will be powered by competition amongst the individual banks. The industry – as dictated by the changes introduced by the digital revolution – will become a much wider playing field. What will divide established banks and the smaller entrants to the field will be the customer experience they can provide, something powered solely by digital solutions.
The digital revolution will end, but the iterations of innovation will not.
Banks have had a responsibility to their customers through these uncertain financial circumstances, evolving specifically to meet their new needs. Their customers’ expectations have changed; their services will have to, as well. As traditional ways of operating are swept away, new competition will further pressure established banks to alter their services.
Looking beyond this crisis and the digital revolution in its wake, we will see a diversified field powered by a new lease of competition from fintech companies. Where once established banks took the lead, a reliance on fintech’s digital approach will inform banking as we know it.
Daniel Cooper is a former trader, programmer and serial entrepreneur who streamlines businesses across the globe through the use of technology and automation. With a team of engineers, analysts and consultants working alongside him at Lolly.Co (the digital transformation company he founded two years ago), Daniel is on a mission to help as many business owners as possible ride the wave of technology turning sluggish companies into fast-paced technology backed enterprises. Go to: Lolly.Co.