Financial education through insight and analysis: banks should help customers gain more insight into their own finances, and equally advise them on which choices are the wisest ones. For banks with growth ambitions, this has become a critical factor. Customers expect an analysis of their spending behavior that shows them potential problems in advance. Banks can provide their customers with insights that help them make smarter financial decisions and identify where expenses can be reduced or shifted for better economic and sustainable outcomes.
The Internet and social media are full of ads offering enticing "no-risk" investment opportunities that promise a quick return on investment. When banks raise their customers' awareness with sound information about safe investments, they give them a better understanding of the seriousness of different financial products. At the same time, many customers miss having contact with an advisory person they can trust. Financial institutions should take this need seriously to gain a competitive edge by providing solid, helpful information and show their customers that they care.
Sustainability: corporate ESG reporting requirements are becoming more stringent, and banks should feel obligated to share data that meets sustainable disclosure requirements. Banks can reward customers who show they are in control of their own financial spending, such as buying merchandise from companies that place a high value on sustainability and source their products accordingly. Customers also appreciate the opportunity to compare their own spending with their social responsibility goals.
Data to protect customers: Today we give large amounts of data to those who offer free services through apps. The question is whether it will be possible to obtain customers' consent to share data on a larger scale. This allows banks to offer more personalized products and services. It is increasingly up to banks to show their customers the added value for the extended use of their data. The purpose, of course, must be for banks to protect their customers from expected and unexpected financial surprises or provide access to smarter and cheaper services. Wherever this "value exchange" of data works for customers, adoption is higher.
The platform-based business model: as banks become the linchpin between customers and third-party providers, a new attractive model for all emerges. With the bank as a marketplace, customers will be able to have a better everyday financial experience, providers will be able to tap into an attractive segment, and the bank will be able to open up new revenue models. A relevant example is for a service company to pay for access to the bank's platform and perhaps receive a share of the profits. This increases the incentive for the bank to get customers to sign up on its platform. Customers, in turn, get a broader and potentially more attractive offering for services they would normally have to buy elsewhere.
Simpler and smarter financial services: New providers are constantly popping up with smarter loans and new financing models. New opportunities also arise from Open Finance, a data sharing model that allows users to share their financial data with third parties. For example, data about customers' financial lives can form the basis of offers based on their respective financial histories, benefiting secure payers over time. For individuals, for example, this can mean a lower interest rate based on sound financial behavior. For businesses, overdrafts may become cheaper or easier to access, improving cash flow. Banks need to take advantage of these opportunities now, before the new entrants do, using the data they have collected about their own customers.
Shift to customer-centric interactions: As in all other industries, banks must constantly deliver more service with fewer resources. Back-end services tasks are automated and ensure that employees can move into more customer-facing roles. Compliance and risk management, for example, is an area where processes are increasingly standardized and solved more quickly with algorithms. This, in turn, increases regulators' confidence that policies are overseen by systems, not just people.
Access to talent: Companies across industries are struggling to find workers. The attractiveness of banks, wealth managers and financial intermediaries to highly skilled professionals still suffers from a poor reputation. Responsible for this is the global financial crisis of 2008. Since then, attracting and retaining talent has posed significant challenges for the industry. Addressing the industry's shortcomings in terms of its environmental impact and diversity and inclusion would help make it more attractive to determined younger talent, but would not be enough on its own. Banks are also asking themselves whether they should develop their digital expertise internally or whether it is best to outsource their technology development to external partners. In-house data analytics experts who can process insights and analyze patterns are likely to become the key differentiator of banking services in the future.
New types of competition: banks have faced competition from new players for many years, but few of the new entrants have managed to capture large market shares. What the new FinTechs have in common is cooler services and simpler and more intuitive user experiences – it's exactly the agility that the more traditional players are striving for. The really big disruption will take place when the platform giants from California or from large markets in Asia make a real stab at the market for financial services.
The bank as a software house: it is not surprising that the most innovative banks can make money with their research and development. New services and technical solutions can be of great value to other banks, and access to smart new features can easily be turned into services sold to others. However, with this opportunity comes the additional burden on banks to act as guardians of their customers' identities and data.
Trust is the key word. Banks will take a much more important position in people's lives than before. 30 years ago we stood with the hat in the hand, if we spoke with the bank director. Today the roles are reversed. Banks need to recognize that they need to be on the supply side, and the solution is technology, smarter processes and better use of people.
Operating models that don't allow companies to respond quickly to change exacerbate deficiencies in critical areas of talent, ESG and technology deployment. Progress on all these fronts is needed to ensure the industry is ready for the future. Banks that want to make an effort in the coming months and years must not forget that ultimately it's about personalization and being more than just a bank – a trusted and reliable partner that helps us stay safe and make better decisions online.