2019 is the year in which some of last year’s – many still valid – trends will interlock and thus deliver a much greater impact than in 2018.
This will significantly improve the digital offerings of financial service providers – but beware: benefits will only impact those that interplay trends together.
Customers are increasingly benefiting from digital progress and increased digital competition in the financial industry.
If a bank continues to hesitate or procrastinate in 2019, it may well lose its digital connection, drastically restricting its room for manoeuvre. The phenomenon of the “late follower” arriving late but unburdened to the party does not occur in any digital banking scenario familiar to us.
These five trends will interlock over the coming 12 months:
1) Open is the new Banking
Open banking has long ceased to be a first-mover topic. Financial ecosystems based on Open Banking are entering a new phase: Banks, third-party providers and technology companies are developing applications and connecting them into a seamlessly networked banking environment that is integrated into the customer’s environment.
However, we are still at the beginning of this path. Those who are in a position to do so are now building their own ecosystem, whereby the customer perspective must always serve as a yardstick. In order not to overtax customer patience, it is high time for banks to bundle the confusing multitude of individual applications. Banks often underestimate the demanding task of orchestrating applications, delivering attractive digital services securely and, in particular, aggregating bank data.
2) Convenience is the new Loyalty
This newly coined slogan from the digital world is also gaining acceptance in banking. So-called “low-effort” experiences help to achieve higher usage or higher turnover per customer; quite the opposite of “high-effort” experiences, which increasingly deter customers and motivate them to change banks. Regular activation and impulses from the bank are becoming increasingly important, because the customer wants to be connected with their bank.
Making it as convenient and pleasant as possible for customers to conduct their banking business, like Amazon or Alibaba, remains one of the largest challenges in the industry. This means not burdening the customer with the complexity of the interplay of different applications: The front end must be simple and seamless, and not give any hint at the sophisticated architecture behind it.
3) Smartness is the new Personalisation
AI technologies are now so mature that they support banks in serving individual customers in a bespoke manner – smart, rather than schematic, personalization. Self-learning algorithms predict the customer’s needs at a certain point in time, in a specific situation, and suggest suitable products. Financial institutions simplify the customer journey by using intelligent and proactive data usage. They strike the right note and – thanks to communication at eye level – make it easier to understand financial products. AI makes this possible without the need for additional personal advice, which is instead reserved for complex situations.
4) Digital is the new Revenue
Investment in digitisation must pay off. Banks need to use digitisation to not only reduce costs, but to also generate additional digital revenue from their ecosystems and redesigned customer journeys.
The use of APIs by and for third parties opens up new potential for the so-called “platform economy”, which to date has hardly been tapped by banks. It is important for a bank to follow a new philosophy, namely active cooperation with Fintech partners.
This is the only way for a financial institution to benefit from the new opportunities that open up for it when it understands “banking as a platform” instead of building a defensive wall against the digital world, as was often the case in the past.
5) Time to Market is the new All-you-can-eat
The industry cannot afford long durations for huge “Big Bang” digital projects – predominantly for financial and risk reasons, but especially from the customer’s point of view. Customers do not want to wait long for something new, but rather wish to be positively surprised with incremental and regular improvements to the service they receive.
Agile process models make it possible to bring these visible improvements to the market within weeks in an early development phase under the framework of manageable expenditure (minimum viable products) and to test their acceptance. If something is not successful, it can be replaced by new ideas within a short timeframe and at little expense.
This agile approach, which is also associated with uncertainty, contradicts conventional notions of “the big throw” that can be planned to the last detail. On the way to the digital future the direction is given, but the result sometimes only begins to take shape along the final steps of the journey.
A focus on the time-to-market also ensures that a financial services provider does not fall behind in the digital transformation, and gets a timely foot-in-the-door to the corresponding digital market, because rest assured: competition is fast on its way.
We recommend to our customers a policy of small steps: nothing hectic, but incessant and without hesitation – one step at a time. If a financial institution follows these guideline for a short while, management will in a very short time be amazed at how far it has come.