The Future of Digital- Banking without Banks- #8
Let’s face it- Banks have not been the epitome of customer experience in the digital age.
Few pain points that stand out:
Compliances issues: Banking is the only industry where over the last ten years alone, over ~370 billion USD was paid out for regulatory, compliance-related violations, settlements. Regulators imposed USD 27 billion in penalties on European and North American banks in 2018, an increase of USD 5 billion from 2017.
Cost and legacy system pressures: Banks must stop thinking like banks; they must be willing to go back to the drawing board to- challenge existing processes, paperwork, KYC (kill your customers). Revamping your mobile app after every few months is not going to make you the next “Alipay” or “WeChat.” Observe the innovations in the financial services and tech industry.
Lower returns to the customers: Branch banking model is expensive, and the agency model is also not efficient in the digital age. 3rd party sellers do not care about your brand much. Loan and insurance agency relationships need to be re-imagined, keeping in mind the quality of customer experience.
User experience is full of friction: Fintech, and platform players do not take consumer behavior for granted. Fintech knows that we are moving to a world where customers only want to press a button (no forms, no branch visits, no calls, no waiting).
Hidden charges: Banks can be much more transparent in their cost of offerings and commission charges. Most of the non-banking
products/services customers buy from the banks; they get lost in the web of commissions, fees, and other expenses. Fintech platforms are ensuring “100% transparency” on charges or are making most of the traditional banking/non-banking products like trading, investing, currency exchange free.
Banking in 2030
Financial services as an industry will no longer be dominated by big traditional banks- It will be disrupted by ecosystems coming from telco, mobility, social, e-commerce, big-tech, or platform-based-fintech. The unbundling of banking products has already started and platform players are literally taking away the high-profit margin business from banks.
Vertical banking models will emerge.
Superior Customer experience and personalization- All banking functions will be processed by a press of a button, voice, or facial recognition. Ecosystem and a one-stop solution for clients at competitive pricing will be needed.
No KYC (Kill your customer with paperwork) harassments or big applications.
Banking will be universal: The banks will have tie-ups with their ecosystem partners globally. You will be able to use your smartphone/wearable with no friction to move your own money nationally and internationally.
Digital-only banks will grow: Over the next couple of decades;
branch banking will be completely redundant with banks just maintaining a corporate office for their employees or a fully automated branch if at all needed. Digital-only bank models, most agile banks, and platform companies will fulfill most of the banking needs. Every profitable or high cost bundled offering of a bank will be unbundled and serviced by the most efficient financial services provider in the market. Branch banking may eventually fade away as the non-smartphone generation, and consumers become a minority, branch banking will become unsustainable due to real estate and people cost pressures.
Robotics adoption and automation of branches that remain- The ones that remain will be manned by robots. AI and ML will automate tasks. IoT and 5g powered computer vision devices will ensure a speedy resolution to branch customers' requirements as well as the safety of the branch assets.
When was the last time you visited a bank and why? Was it really necessary or just because your bank policy made you do so?
Gamification or content value to earn mind share, the timeshare of banking customers may be a necessity for banks to survive. We are living in the attention economy- and banks will need customer engagement and attention too.
Open banking is the only way Banks can compete with super-apps.
Venture funds and Innovation labs- A lot of banks are thinking about the future and are opening- venture funds and innovation labs. This is futuristic thinking and will help. Explore a few examples below and study the innovative portfolio.
FinLab by UOB , SC venture , Citi Ventures D10X
Banks may not die, but they will face a lot of consolidation.
Time to act is now. Banks do not need more banking talent- they need new-age digital thinkers. Inculcate customer centricity, build killer products and do not just focus on internet banking apps.
Bank branches have been in business for hundreds of years, but now the banking needs to go invisible- data, AI, automation, user-experience, and ecosystem strategy are the pillars that will hold the future of banking.
Read my other article — What banks can learn from Fintech players?
Strategy Leader, Author and Expert
View are personal
