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How banks can thrive in the era of frictionless banking

Today’s consumers have a propensity for laziness, or to put it more positively… ease and immediacy! But who can blame us? Technology now allows people to bank on their phone instead of visiting a branch, with a most transactions being possible without needing to leave the sofa. So, to survive and thrive, what is the next step that banks must take to consistently give consumers what they want: easy, frictionless banking?

Accessing financial services has changed a lot over the last 20 years. It’s gone from individuals having to travel to a bank branch and talking face-to-face with their bank manager, to using an ATM, to using a computer at home, to tapping on a mobile, to not even having to touch anything with voice assistants. In August 2019, NatWest began trialling voice banking, enabling them to ask their Google assistant for their balance, recent transactions and more.

But technological advancements have made consumers lazy. They’ve made them keen to find and go about a task in the easiest way there is. This trend will continue, so banks need to be thinking about what deals on additional services or insights on services their customers are using. This includes things like broadband, entertainment and utilities, in addition to deals on their own products. Finance is a means to an end, so to remain competitive there is a need to see what banking enables a customer to do as opposed to a pure product view. It needs to be as easy as possible for customers to take advantage of this, such as by asking a voice assistant to switch them onto a new deal that the bank could suggest. If they don’t prepare to do so now, they will fall behind the competition and lose customers down the line.

It’s not a big leap to suggest that soon, consumers will be able to ask Alexa or Google something like ‘I want to switch my broadband. Check with my bank what I spend and what the best deal available is right now’, and their assistant will tell them, and then ask if they want to switch. Yet I wonder how many banks are already working to make this a reality? If they don’t someone else will. Banks already in their physical branch format are already less relevant except for the most complex, high value, advisory or emergency situations, so how to stay relevant in this world is critical. Banks need to be thinking broadly in terms of what they are offering and providing the convenience consumers desire. This will encourage customers to stick with their bank and entice non-customers to switch and enjoy greater benefits.

To maintain customer loyalty and grow sales they need to make sure they are offering the best offer or the most comprehensive deal, both for their own products and those for other services in the marketplace. They also need to capture the attention of consumers shopping around with something enticing enough and as simple as possible to switch to, whether it’s good service, good product, good range, good price or something else.

The banks that do best will be the ones that can truly personalise service and build trust to secure more business. For example, they could advise a customer asking to take out a personal loan that it would be better for their financial situation to take some extra equity out of their mortgage instead, so it will save them money. As it happens, 86 400, a new challenger bank in Australia, is doing something similar, texting customers messages like ‘if you deposit an extra 167 dollars you’ll get your bonus interest rate this month.’ That such banks are willing to take a hit on profit margins in the short term to improve their customer experience will reap the long-term benefits – customer loyalty and retention based on trust – the essential building block of any bank. Most banks wouldn’t bother telling them, and focus their strategy on offering teaser rates and not reminding customers the rate will change, causing customers to lose out, but by being transparent, proactive and upfront they can develop relationships that last.

In China, WeChat has forged its own digital ecosystem where nearly any digital transaction can be performed. It isn’t inconceivable that we will see the rise of a similar ecosystem in the UK too, whether that be from Amazon, an existing bank or one that doesn’t yet exist, where one platform becomes a central portal to perform all transactions for whatever a customer chooses. This panders to consumers’ desire for a truly easy, one stop shop and frictionless experience. 

But what barriers will there be to the rise of frictionless banking in the UK? Consumer concerns over data privacy and security (neither of which are as important in the Chinese market) will be two big ones, but the main one will be banks’ hesitance to offer customers the best, broad based and personalised deal possible for each customer, as if they don’t provide decent, relevant offers today’s savvy customers will decline it in favour of something better.

Banks are adapting to the customer demands, as well as technology and data options available, but not as fast as these changes feel like they are moving. Naturally some are waiting to see and are taking a ‘fast follower’ approach. But it’s clear that to succeed the definition of ‘making excellent customer service a priority’ is shifting fast as we have more online immediate non face-to-face interaction. Defining personalised actions and offers and continuously reviewing these against the competition is becoming more important to keep that trust that you are delivering the best and most sought-after deals.


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Steve Morgan

Steve Morgan

Banking Industry Market Lead


Member since

04 Sep 2019



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