2020 has been a historic year. The COVID-19 pandemic and ensuing economic downturn forced the banking industry to reset, reimagine and reinvent itself practically overnight. Banks were forced to close branches while employees switched to working remotely
and customers could only bank online or via the telephone. Where the 2008 banking crisis caused an immediate impact on robust global financial markets, the COVID-19 crisis has wreaked havoc across advanced as well as emerging economies.
To really recover and ensure prosperity, banks must take control of their own destiny. Many have made great progress in their digital transformation initiatives this year, but if they are to employ a truly customer-centric banking model in 2021, they need
to closely examine their data and analytics capabilities, how they deploy innovative technology, and what role they play in upskilling their relationship managers and back-end teams. Here a few aspects banks should consider to ensure success, drive loyalty
and create a compelling customer experience in 2021.
Digital onboarding will become the new reality
Financial institutions will come under increased pressure to provide digital functionality that is both simple and fast, particularly due to rising customer demand set by big tech companies. For example, bank accounts or loan applications must be processed
and authorised almost instantly. That means banks will need to focus on their internal processes, procedures and data flows to meet these real-time requirements
If banks can’t provide this level of customer experience, they risk losing both new and existing customers who will turn to challenger banks that have already reconfigured their legacy processes for a new digital reality. This must go beyond simplifying
account opening to enhancing user experience (UX) across the entire customer journey.
Customer relationships will be re-evaluated
Banks will need to take a closer look at their customers to stay ahead of financial crime and identify custom products and services. With more customers moving online—an
estimated 14% of US adults banked online for the first time since the COVID-19 pandemic—the stakes are high for banks. They must adapt, be agile and respond to these changing customer preferences with new products and services.
Given the uncertainty in the global job market and existing job losses, banks must also re-evaluate their loan exposure to customers. Credit decisioning will be re-assessed and customer due diligence – both retail and corporate – will be carried out before
fresh disbursements begin. If not, banks may struggle to recover these funds.
Rejuvenating trust will be key
The role of the bank branch will change post pandemic as branches become highly personalised experience centres that provide immediate service and convenience. Banks have an excellent opportunity to re-build trust with their customers, deliver enhanced support
services and position themselves as a value-add, trusted partner that can help their customers weather this storm as well as any future crisis.
As an example,
Truist Financial deployed an AI-powered chatbot to answer frequently asked questions (FAQs) at the height of the COVID-19 outbreak in the US. The bot—which re-routed tens of thousands of calls from the contact centre—began with basic functionality to answer
FAQs, and evolved through Natural Language Processing (NLP) capabilities. It now allows customers to phrase questions in their own words and can even interpret misspelt words. New services like this present a significant opportunity for banks to strengthen
and build long-term customer relationships and act as a source of stability during challenging times.
Open banking will drive revenue opportunities
We can expect a low appetite for loans in early 2021 as many investment projects are delayed. As banks hold cash reserves (increasing liability), and with the prospect of negative or near-zero interest rates grows, banks will find it difficult to generate
revenue and profit unless they look for alternative revenue sources.
Many financial institutions see great promise in open banking technology that allows customers to access data from multiple organisations and opens the door to innovative services through open APIs. Open banking users are expected to double from
18 million in 2019 to more than 40 million by 2021. In addition to open banking, additional new banking services and solutions that offer seamless customer experience at the front-end and multiple interconnected providers in the background will become the
norm in 2021.
DOP will further replace ERP
forecast to spend more on technology in 2021, with enterprise software spend growing by as much as 11.4%. Digital operations platforms (DOP), which combine back-office business tools into a single product, were popular in 2020, and will continue to be viewed
as a replacement for legacy enterprise resource planning (ERP) software.
New DOP offerings will become AI-based and ecosystem-oriented, tailored to industry and even micro-vertical use cases and requirements.
As banks digitally transform and if it’s to be a success, there has to be agreement at all levels, starting at the top. The risk of showing a lack of commitment to such a gigantic transition would equal pouring investments down the drain while customers
experience suffers. There’s no doubt that the foundation of any digital transformation journey must be on data, analytics and technology, but the human element cannot be ignored. As more and more banks adopt digital, legacy skillsets will have to be replaced
with fresh skills, and the time has come for us to bid adieu to the legacy culture.
5G will revolutionize banking and promote real-time personalisation
The razor-thin latency 5G offers will make banking staples such as payments and transactions instant and promise tighter security. Consumers will continue to interact using data-laden apps and services connected by APIs to various other databases, allowing
5G to pave the way for a more real-time, customised user experience. In 2021 virtual reality (VR) agents and/or chatbot advisors will become increasingly common and accessible even when travelling on high-speed trains. This may further reduce the need for
customers to step into physical branches for traditional services.
Collaborations will gather steam as new partner ecosystems emerge
As technology evolves, so do customer preferences, and the pandemic has altered customer behavior towards online channels. Come 2021, platformification will become more relevant, particularly to offer customers credit and flexible payment options as brands
try to help boost financial wellness given the macroeconomic circumstances. One partnership example is between popular online furniture store
Wayfair and Citi, who have launched co-branded and private label credit cards to offer seamless financing options to their US customers. Another good example is the partnership between
Chase and AmEx. With fewer people dining out during the pandemic, these companies collaborated to offer bonus rewards for food delivery services. E-commerce will continue to surge in the coming year, and private label credit cards will grow in number alongside.
Going forward, financial institutions may separate their external presentation layer from their back-office data layer to create enhanced digital consumer experiences. This trend is already gathering steam with the collaboration between Google and several
financial institutions. Slated to roll out in 2021,
Google Pay recently launched its “Plex” bank accounts in partnership with 11 banks and credit unions in the US. The service will give users a chance to open digital bank accounts with traditional, trusted financial institutions. And payments processor Stripe
Inc., which aims to be the internet economy’s financial supermarket, recently announced it will join forces with banks including Goldman Sachs Group Inc. and Citigroup Inc. Stripe will soon give its customers the option of offering insured, interest-bearing
bank accounts, debit cards and other cash-management services to merchants and vendors that do business with Stripe’s customers. Stripe customer Spotify will begin offering the service to its merchants early next year.
In the years ahead banks will continue to embrace innovation and collaborate with other industry players to unlock the power of their respective ecosystems, deepen their existing relationships, and design ways to serve a new generation of customers.
Tighter regulations will drive customer value
For many, the current economic situation has been worse than the Great Recession, yet the financial system has shown resilience. Regulations set up in the aftermath of the global financial crisis have helped economies weather the COVID-19 storm.
Governments around the world are now enacting policies and regulations to protect e-commerce and digital transactions, which have increased tenfold as remote banking becomes a new norm. In 2021, we can expect a much more stringent and cohesive approach that
will ensure customers are protected, financial crime is reduced, and banks can focus on delivering exceptional customer experiences and operational resilience throughout and beyond the pandemic.