2017 was a year of uncertainty for the banking industry – and while there was a pervasive, universal feeling of transformation and disruption, the result of these changes still remain unclear.
As such, looking ahead to 2018, companies will be looking to ensure their survival in this shifting landscape, while at the same time searching for that ‘special something’ that will help them not only survive – but thrive.
This special something is the customer experience.
We’ve seen other industries fail because they allowed customer experience to fall by the wayside – retailers from Blockbuster to JCPenney, to taxi companies in the face of Uber and Lyft. While the banking industry has the benefit of decade-long relationships with its customers (and in that sense, more patience from them), the marketplace is unforgiving to slow movers. Incumbents that have failed to reinvent themselves against new competition are likely to never regain their former market share. The banking industry is now sitting at such a crossroads and faces both internal and external threats.
The time for them to create differentiated user experience is now.
Internal Threat: Physical to Digital
Over the past few years, we’ve seen a decline in foot traffic to physical bank locations in the same way we’ve seen the decline of retail stores. What once served as headquarters and hubs are emptying shells, with customers preferring to do their banking online and on their mobile devices. While banks have taken action to re-imagine physical branches, from adding cafes (Capital One) to incorporating more casual meeting areas (TD Ameritrade), 2018 will usher in a new age that takes this one step further – something I like to call branch transformation 2.0.
The idea is not to close more branches, but to rather think strategically about the existing physical footprint and use the physical space to optimize and maximize customer experiences. If positive customer experiences are based on in-person advice, then branches should become financial education centres with private meeting rooms. The idea is to shed the public’s perception of what a branch is and to recreate it based on what customers today need most. Thinking broadly, even the idea of ATMs can be re-imagined. If customers prize mobility and convenience, then perhaps ATMs can be placed on trucks and driven around to the customer, as opposed to the other way around. The important thing to remember is this: when everything becomes digital, then the differentiator will actually be physical.
In 2018, we’ll likely see a consolidated push by major tech and consumer players into banking. Mega-companies such as Amazon, Google, and Apple have immense data, resources, and unparalleled customer bases bigger than most banks could ever achieve. Many of these players have made initial strides in financial services, from the ability for users to send cash through iMessage to the integration of PayPal payments in Facebook Messenger. More importantly, though, they already have earned the trust of these customers through loyalty programs. By being at the end of consumer spending, they offer natural synergies connecting expenses with income, or in other words, how people spend their money (retail) and how they manage their money (banking).
Without the baggage of legacy banking systems and armed with new technologies such as cloud, these consumer technology companies have the ability to offer consumers a more seamless, connected, and intuitive process that banks are only now striving to do. While it’s uncertain how exactly these consumer players will make their first foray into the industry — perhaps by acquiring smaller banks and credit unions, or perhaps by offering an independent service altogether — we can be sure that gaps in customer experience left unfilled by banks will be their entry point. And by then, it might already be too late.
Customer experience can feel like a deceptively simple concept, but true competition can all be traced back to innovations that meet the demands of customer experience. As banking institutions and financial firms head into 2018, an end-to-end review of their customer’s journeys, and strong action to refine and optimize those journeys, will be critical.