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Sustainable experiential banking – are banks ready?

Elias Ghanem

Pandemic. The most used term of the past 18 months has permanently changed the banking landscape. Within a sector already facing low interest rates and intense competition from new-age players, the global health crisis brought struggles to a rapid boil. So, in H-2 2020, traditional firms quickly closed branches, optimized their workforces, exited non-core businesses and geographies, reduced discretionary spending, and hit the transformational reset button faster than ever. Early results looked promising.

By H-1 2021, banks reported high profits, thanks to an extensive injection of public money and record-low corporate bankruptcies. However, customer satisfaction, engagement and, retention rates remained lackluster at best − not a good sign for future revenue.

Banks continue to lose customers to agile competitors as they fail to sync their strategic priorities with customer demands for convenience and personalization.

There is simply no way around it. Banks must deliver superior customer experience (CX).

  • Capgemini’s 2021 World Retail Banking Report found that more than four of 10 customers face medium to high friction while engaging with their bank (loan application, problem resolution, advice, information queries, and more.)

What is stopping banks from delivering empathic banking? The report found that only ~30% of banks take periodic steps to understand their customers’ needs.

Fewer than half of banks periodically capture Voice-of-Customer insights

Sources: Capgemini Financial Services Analysis, 2021; World Retail Banking Report 2021 Executive survey, N=122. Question: How frequently does your bank take the following steps to understand customer needs? The figure above represents the % of executives who responded “not periodically” or “not in a planned way.” Percentages do not total 100.

Capgemini’s report found that bank-customer perception gaps are widest around omnichannel experience, environmental, social, and corporate governance (ESG) initiatives and product/service fees.

So, are banks prepared to adapt, lead, and thrive in the Banking 4.X era?

Long-term sustainable growth powered by efficient platforms and customer centricity make up the foundation of Banking 4.X. Success enablers include data, embedded finance, and an intuitive digital CX layer.

The roadmap to this new banking era includes mileposts such as adopting Banking-as-a-Service (BaaS) solutions. This way, banks can monetize their business expertise by sharing their regulated infrastructure and distribution network while leveraging FinTech innovation to boost CX, last-mile delivery, and efficiency.

  • In fact, 70% of banking executives we interviewed said they believe BaaS will help them innovate faster, expand their customer base, and diversify revenue streams.

Let’s not forget that customer sentiments and preferences toward banking with BigTechs, retailers, and mobility service providers are changing.

To prepare technologically for Banking 4.X, banks must evolve legacy systems toward core modernization and, in parallel, embark on a fast-paced cloud-first API-enabled digital transformation journey.

Begin with a robust and resilient digital foundation

Source: Capgemini Financial Services, 2021.

A single, 360-degree customer view is essential to hyper-personalize services at the right price and through the right channel. Timing is ideal, as customers have matured about the use of their data.

  • 86% of customers say they are ready to share their data.

And, by leveraging open banking, firms can enrich their customer knowledge by accessing alternate data. The ability to leverage data is a Banking 4.X competitive differentiator.

Customers will share data to personalize their banking experience

Sources: Capgemini Financial Services Analysis, 2021; World Retail Banking Report 2021 Voice of Customer survey, N=8,559.
Question: As a customer, how willing (or open) are you to sharing your data to receive better and personalized services?

Building an intuitive, data-centric, and intelligent digital CX layer is fundamental for an interconnected ecosystem. Banking will be invisible in the future, and as we transcend to Banking 4.X, banking transactions will happen seamlessly, with much emphasis on value-added financial and non-financial products and services.

In addition to generating efficiencies, BaaS has the potential to address financial inclusion, as banks can leverage ecosystem synergies to make banking universally accessible. For instance, banks can become agents of change and reach a broader range of customers by innovating existing credit risk models and using behavioral and contextual customer data.

Banking will be ecosystem-integrated, customer-centric, invisible, and socially responsible. So again, I ask, are banks ready to lead and thrive in the Banking 4.X era?