Banks and Financial Services companies are thinking BIG – around how to transform to meet the needs of the new digital consumers that exist in the shared economy of today. These digital consumers span five generations, each expecting to be communicated to in slightly different ways. In order for financial services companies to meet expectations of these consumers – new and exciting topics are being explored. Last week at the Consumer Bankers Association Live conference in Dallas, these topics were discussed in detail. I’d like to take some time to recap my thoughts on the conference and explain exactly how financial services transformation is beginning to take place.
Simply put, transformation for banks needs to happen in three main areas – organizational transformation, branch network transformation, and overall digital transformation.
Organizational Transformation. Economies are changing. Businesses that exist in these economies are being forced to change to keep customers. What is valued by consumers today – transparency, authenticity, quick and easy interactions, co-creation, social good, and great customer service. The result – banks that are siloed (often by LOB) and do not embrace a holistic approach to customer interactions are going to fall behind. Siloed approaches result in siloed data, analytics, and insights. Meanwhile, banks that are customer centric from the top levels of the organization down, and consider the holistic customer experience first in things like mobile app design and channel interactions (call center and web) are winning now and will continue to win in the future. Banks that are taking this holistic approach are already transforming and can reward loyalty, understand consumer migration, and achieve excellent promoter and lifetime value metrics. According to a CBA LIVE survey of conference attendees, the top issue facing the financial services industry over the next three years will be attracting a new generation of consumer and employees (27%). This surpasses new product innovation (25%), privacy concerns and data security (19%), changing organizational cultures (14%), regulatory environment concerns (9%), and gaining customer trust (6%).
If banks can transform organizationally to reflect the values that these new consumers and employees value – while meeting their customer experience expectations – they will have no problem attracting this new generation.
Branch Network Transformation. A second large topic was the future of the branch network, or physical branch location. I had the fortune of navigating a roundtable discussion on this topic during the conference. And as with most topics, there were pundits that emerged during the discussion on both sides of the topic. On one side, many believe that as physical and digital channels, the digital experience will take over and the branch will disappear. Total branch counts in the US have dropped by 10,000 plus in the past 6 years. According to a CNBC survey, a third of all millennials claim they won’t need a physical bank branch in three years’ time. But on the other hand, many believe that from a community reinvestment (CRA) perspective, underserved and lower socio-economic regions will always need a physical branch in order to transact. They believe that government and industry regulations will not let the branch network completely die out. Branches certainly are already transforming, with organizations like CIBC, HSBC, and CapOne opening concept branches – but the question really is will bank branches transform to the point of extinction? Only time will tell.
Digital Transformation. Probably the largest and most important topic I saved for last, that of digital transformation. How are banks transforming to use new digital channels and technologies to improve business outcomes? More importantly, how are traditional banks transforming to compete with the 8,000 plus Fintechs that exist globally today. During the conference, it was highlighted that alternative channels (fintechs) are selected primarily for the speed of service that they provide. How do traditional banks compete with this – so that things like the mortgage process – are not so excruciatingly painful and slow? The answer is new technologies like artificial intelligence (which is rooted in predictive analytics), which envelop machine learning, cognitive computing, and deep learning techniques. The fact of the matter is that convenience is the new loyalty in the financial services world, and this lack of convenience is causing 55% of millennials (PWC 2020 Global Banking Survey) to use fintech apps instead of banks for basic payment activities. Organizations that leverage artificial intelligence will undoubtedly see a competitive advantage from a convenience and customer experience perspective. The largest traditional banks are already starting to use artificial intelligence, for things like predicting loan payoff times, detecting fraud, voice and facial recognition for customer service purposes, and product recommendations. The concept of predictive marketing, which is enabled by artificial intelligence, will assist traditional banks to transform into the new, agile organizations that consumers expect today.
As famous physicist, author, scientist and educator Stephen Hawking once said – “intelligence is the ability to adapt to change”. Transformation at the organization, branch, and digital levels requires the intelligence to transform and adapt to the changing world around us. Banks and financial services organizations realize this – now let’s watch as they transform from thoughts shared at the conference last week into tangible action. It should be very exciting to see!