Banks are increasingly feeling the pressure to meet or exceed customer expectations. Delivering an exceptional customer experience (CX) has become exceedingly challenging for banks given the increasing customer demands, heightened regulatory scrutiny, rising fintech competition, cyberattacks & data breaches.
Clearly, banks need to reimagine their business - they can effectively address prevailing industry challenges by leveraging cutting-edge technologies. However, one thing that cannot be overlooked is the fact that the transition from legacy systems to new-age technologies hasn’t been a seamless exercise for banks – having said that, banks must think out a way to surmount the challenges to not just survive but also thrive in the hyper-competitive marketplace.
Top Challenges for Banks
Growing Regulatory Pressure
The heavily regulated nature of the banking industry throws up a multitude of challenges for banks. Keeping up with ‘constantly changing’ regulatory norms is never a comforting thought as banks are required to update their policies & procedures. Frequent regulatory changes also put a lot of pressure on bank staff, in terms of staying updated. According to a PwC study, 40% of business leaders voiced concerns over frequent regulatory changes that increases the risks of organizations not complying with relevant laws and regulations.
Banks are cognizant of the ramifications of not meeting regulatory standards. Non-compliance cost is very high, and no bank want to attract penalties as non-compliance has the potential to cause severe reputational damage. Banks are also required to earmark a large chunk of their budget for meeting regulatory standards. Clearly, banks must not get bogged down by regulatory pressures and look to strike a balance between keeping pace with rapidly evolving regulatory norms and simultaneously focusing on delivering customer value and reducing operating costs.
Rising Fintech Competition
Banks won’t do any good to themselves if they perceive fintechs as a ‘competitive threat’. Growing customer preference for online banking services has put a greater responsibility on banks to rejig the way they operate and focus more on delivering a digital customer experience, wherein customers can seamlessly carry out transactions and handle other banking activities online. Seamless omnichannel reach can help banks drive a greater degree of personalization and address fast-evolving customer expectations as well.
Banks can stay competitive despite the surging popularity of fintechs by making the most of Artificial Intelligence (AI) to anticipate customer needs & provide bespoke services, serve customers not just better but also faster (especially when customer demands & expectations are quickly changing), and reduce costs, which in turn, help enhance productivity and improve banking services. Banks can also harness the power of the cloud by evolving their current data systems that would help better manage the vast amount of consumer data they handle, increase data processing speed, and improve legacy system capabilities. Adopting a forward-looking approach is the need of the hour for banks, who should focus on migrating their systems or applications to the cloud. Further, banks must not miss out on immense opportunities that existing by collaborating with fintechs – both can leverage each other’s strengths and come out winners in the market.
Raising the Customer Expectations Bar
Customers are smarter, savvier, and well-informed than ever before – they demand a high degree of personalization & convenience, desire fast services that are tailored to their specific needs. Today, customers are less tolerant toward any negative CX because they have an array of options to choose from and would quicky switch to competitor brands. Banks must empower themselves with new-age technologies in their pursuit of delivering superior omnichannel banking services, which can go a long way in driving happier customers. And for this to happen, banks need to improve their staff digital literacy as well as top management digital expertise.
Banks must not lose sight of the different servicing patterns of customers. Millennials and Gen Z have a penchant for online services while the older generations would still be satisfied with an in-person branch visit. This makes it imperative for banks to adopt a hybrid banking model that integrates digital experiences into traditional bank branches. For instance, a customer visits a self-service station-equipped branch that displays the most cutting-edge smart devices, that customer can use to access their bank’s knowledge base.
If a customer requires additional assistance, he can use one of those devices to schedule an appointment with a branch’s financial advisors; during the appointment, the advisor will answer any of the customer’s questions as well as set them up with a mobile AI assistant, who can offer additional recommendations based on their behavior. This is where banking is heading in the near future wherein banks meet and exceed rising customer expectations. The future would belong to banks who are not just focusing on meeting customer expectations but also exceeding them.
Social Media: An Absolute Must for Banks
Banks may have been slow to hop on the social media bandwagon, but they are fast realizing how they can leverage the power of social media to deepen customer relationships. According to a recent survey, five out of six respondents expressed their desire to engage with brands through social media. Banks must understand that merely having a social media presence is not enough - they should devise a comprehensive, multi-channel customer engagement strategy that help banks offer customer solutions, build brand awareness, expand customer base, and solidify ongoing personal connect.
The increasing focus of fintechs on offering innovative digital value propositions and their ability to develop a better understanding of customer buying processes by engaging with them via social media has created a compelling reason for banks to rethink their customer relationship strategies.
Banks can get more people in their doors by engaging in activities such as conducting customer contests, event promotions, deploy staff in running social media campaigns that feature real employees, giveaways, and user-generated content accompanied by a unique hashtag - for example, come up with helpful information on a YouTube channel with tips or advice on a particular topic. Such initiatives can not just communicate bank’s customer-first approach but also stimulate audience engagement.
Security Concerns
Banks have always remained vulnerable to rising risks of cyberattacks that are focused on targeting customer data as well as banks’ core systems, which can result in down-time for websites and apps as well as fund and data theft. The increasing threat of cyberattacks on banks is driving a major focus on cybersecurity.
The growing focus of banks on adopting a mobile-first approach has left itself susceptible to security breaches. Although banks have capabilities to offer secure authentication for self-service solutions in their physical branches, they need to drive same degree of data security across their mobile platforms, which is critical in instilling customer trust.
Security breach is not just a challenge but a big concern area for banks. The need of the hour for banks is to invest in cutting-edge technologies such as machine learning and predictive analytics ensuring banks and their customers stay protected in the digital age. Leveraging these technologies can empower banks to detect network intrusions, enable secure user authorization, analyze a company’s cybersecurity, and predict hacking. Further, banks can deploy biometric technologies to address security and privacy issues with greater efficiency - this can go a long way in preventing fraud and money laundering. There is no doubt that bad actors are becoming increasingly sophisticated - he more people transact online, the more risk rises. This makes it imperative for banks to stay ahead of cybercriminals and stay cyberattack-free by embracing security initiatives powered by new-age technologies.
Seamless Mobile Banking Experience
Customers of today are accustomed to doing almost everything from their phone - they desire digital banking over in-person branch visits, which presents a huge challenge for banks to deliver a superior mobile banking experience. Not having a digital presence would mean that banks would substantially lag behind. Of course, banks are embracing mobile banking in a big way but merely having a mobile application would count for nothing if an effective mobile banking strategy is not put in place.
Thus, the onus is on banks to deliver a mobile experience that is fast, intuitive, feature-rich (live chat, voice-enabled digital assistance, etc), secure, and regularly updated, which is crucial in driving happier customers. Some banks have taken their mobile experience a few notches up by rolling out mobile payment functionality thus paving the way for customers to treat their smartphones much like secure digital wallets - instantly transfer money to family and friends.
Banks need to accelerate a streamlined mobile experience if they are to stay relevant in an exceedingly competitive marketplace - they can either develop best-of-breed mobile banking capabilities in-house or collaborate with software experts to design it for them. A well-oiled mobile banking strategy can help banks not just drive profitability but also drive customer satisfaction and retention.
Data-Rich & Information-Poor (DRIP) - A Missed Opportunity
Banks need to get it right on the Data-Rich & Information-Poor (DRIP) front. Banks have access to unparalleled quantity of data and not leveraging it for meaningful purpose is like a missed opportunity. To cite an interesting statistic, 90% of the world’s data has been generated in the past two years alone. According to Forbes, 2.5 quintillion bytes of data are generated each day and only 10% of banks frequently harness data to drive their marketing. Banks must take cognizance of mining transaction data and converting it into usable intelligence that can help deliver meaningful messages and strengthen customer loyalty.
Growing Popularity of Buy Now, Pay Later
Banks would have reasons to stress over the rising popularity of Buy-Now-Pay-Later (BNPL). BNPL is no doubt attracting increased regulatory attention, but its boom is not lost on anyone. BNPL is becoming a hit with customers as it allows payments to be made in installments over time, without interest and does not impact consumer’s credit score. According to a Lending Tree survey, adoption of BNPL is up. A big cause for concern is increased customer loyalty to their BNPL accounts that is eroding loyalty to their banks.
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