The pandemic fueled digital banking, requiring forward-thinking banks to invest in digital to meet the competitive challenges while balancing their customers’ needs for branches and advisers.
FREMONT, CA: While the pandemic led to a permanent shift in digital behaviour for most customers, some are returning to a preference for in-person banking. However, the preferences for digital channels, primarily mobile, remain strong as banks seek to service the divergent customers’ demands, such as few online, offline, and a mix of these two.
Consumers’ use of digital channels was elevated during the pandemic, with the increasing preferences for digital channels. Currently, there is a slight decrease in digital usage across most European countries, indicating that few populations are returning to pre-lockdown behaviours, reducing digital channel preferences. This also highlights that digital transformation needs to accelerate.
Financial institutions should focus on developing end-to-end digital capabilities across all products, making them intuitive and easy to use, and offering new services to compete with digital native neobanks. There should be faster progress and only emphasis on simple journeys like opening a current account. In addition, face-to-face advice is essential, especially for more complex products such as mortgages and wealth management.
Regardless of the shift to digital, personal interaction is still highly valued. There will be instances where FAQs and chatbots cannot help customers, making a face-to-face discussion crucial in a branch or via a video call.
Embedded finance is also becoming more significant. Consumers are embracing embedded finance options’ convenience and simplicity. For example, buy now, pay later (BNPL) options. The streamlined access to financial services received through the digital shopping experience will continue to fuel their growth. Retail banks will have to take a better position on if and how they will participate in this growing field and focus more on their strategies for open banking and accelerating trust levels with their customers. Embedded finance enables better financial product monetisation, aiding the stagnating topline retail banks' results.
Along with these factors, the disintermediation risk is regularly growing. Although personal interactions are highly important, the rise of embedded finance and the continued price comparison websites' growth threaten banks’ conventional role in the ecosystem. This puts both the ownership of their customer relationships and revenue streams at risk, especially in light of the ongoing digital adoption growth and e-commerce.
Banks strive to become more digital in customer interactions and daily operations. However, considering the continuous pressure on costs, they will need to prioritise their digital investments, understanding which aspects of the customer journey should be fully digital. Moreover, the advisor’s role, either in person or remotely, should be managed thoughtfully within future operating models.
