December 6, 2023

The revolutionary impact of digital technologies on banking has given the industry both a responsibility and an opportunity to provide customers with better products and services.

As evidenced in the world of eCommerce, a fundamental key to customer loyalty and retention today is the additional value a business can provide.

Being cash-free now means that e-commerce consumers can make purchases with just a few taps, no matter where they are.

So it’s no surprise that banking customers expect the same level of convenience and service from their banking providers. Whether it’s an individual or a business – they all want a more personalized and consistent experience.

For traditional banking, capitalizing on the increasing value of digitally active consumers will be key to its future relevance.

Future banking model:

With the intrusion of fintech capabilities and challenger banks, most incumbents have now realized they need to reimagine their business models to offer more than just financial products.

They have realized that by focusing on their clients’ needs, they can strengthen and build on the strong relationships they have always had with their clients.

Most services that require a visit to a bank can now be done online. User-friendly mobile banking apps are closing the distance between customers and their money, whether it’s a new account, extending an overdraft facility or a short-term loan.

Personalization and Customization

But most customers now want more, and the way banks deliver that is with personalization.

Doing so is critical if they are to compete with forward-looking competitors.

  • Consider Amazon, whose Amazon Cash and Amazon Loan products mirror prepaid debit cards and investment services.
  • Or British challenger bank Revolut, which has launched QR code-based contactless payments for business customers in Europe.
  • Or Monzo, which doesn’t charge fees for spending abroad and doesn’t mark up exchange rates — unlike most other banks.
  • Or Square, a payments company with point-of-sale dongles. It’s broadening its appeal by adding traditional services like small business loans through Square Capital, as well as a host of add-ons like email marketing and payroll support.

Client-centricity is their secret to sustainable growth by helping clients apply for financial products that suit their needs at the point in time they need them.

Its effects are well documented. A McKinsey survey shows why this approach is so important for banks looking to grow:

  • Loyalty: Digitally active consumers are twice as loyal as non-digital consumers.
  • Purchasing activity: Digitally active consumers purchase banking products twice as much as non-digital consumers

So how do banks achieve this goal?

Data is often trapped in legacy systems. But new technology can help organizations gather customer insights while preserving privacy.

The balance between safety and efficiency is challenging. But the adoption of new AI-driven technologies that can identify and eliminate false positives in risk management processes such as anti-money laundering and fraud is paving the way.

Data-driven personalization enables banks to analyze valuable data on customer demographics, product usage and credit behavior in real time. To this end, they can apply machine learning and artificial intelligence algorithms to identify important factors that provide personalized insights and services.

That could be:

  • Provide customers with a financial view from spending habits to savings opportunities
  • Recommended actions to better manage day-to-day banking
  • Offer point-of-sale personalized loans
  • Provide a digital receipt
  • Allows access to stock and trading platforms.

In terms of banking, it could be:

  • Provide salary support
  • Tax-saving electronic invoice
  • cash flow management

By integrating useful services into their products, banks can transform their relationship with customers far beyond the standard transactional nature of money transfers and balance checks.

The future will look at banks and their customers very differently than they do today. We are witnessing a transformation, and banks have a unique opportunity to become innovation hubs across the enterprise.

Done right, they will become an even more important part of our everyday lives. Successful banks in 2030 will provide us with products and services that improve our entire lifestyle, not just our finances.