It’s been almost 25 years since Bill Gates famously called traditional banks ‘dinosaurs’ in an interview with Newsweek. The software billionaire may have been right in his prediction that technology companies were going to dramatically change the financial industry, but the evolution has taken far longer than most people anticipated. And, that evolution has focused less on replacing established banks, and more on augmenting how banks interact with and make their products available to their customers. Today, the banks that are resisting fossilisation are becoming more digital, and more personal, as quickly as possible.
The Future of Banking is Digital
Banking used to be viewed as an industry that was impervious to the digital revolution. Stalwarts argued that in-person services offered inside of a branch could never be replaced by computers, much less a hand-held device. Fast forward to 2017 and we now know that over ¾ of millennials, who are quickly becoming the most important consumer demographic in the world, prefer to interact with their bank digitally rather than in a branch.
Consumers are clearly ready for purely digital banking experiences, but are businesses? Fundera, an online lending fintech company, recently conducted a survey and found that 60% of small business owners indicated that they would prefer to apply for loans entirely online. That number is astounding when compared to the fact that only 9% of business banks have true digital sales capabilities. McKinsey found that just a few years ago, European banks were only investing .5% of their total budgets on digitisation efforts, which shows that there is still a huge opportunity for banks to align with the digital demands of their customers.
For banking customers, digital has become the new normal. And for traditional banks and financial services organisations to survive, they must weave digital into every aspect of their business.
The Future of Banking is Personal
In 2015, The Financial Brand reported that 47% of banking executives rate their institution’s ability to deliver personalised customer experiences as “excellent.” Unfortunately, their customers would largely disagree, since only 8% would even describe their banking experiences as ‘average’.
That statistic clearly illustrates the growing disconnect between banks and bank customers. 50 years ago, very few consumers had the educational background (or time) to invest in the stock market or complex financial instruments. Instead, financial advisors, most likely located at the nearest local bank, helped customers walk through a financial plan based on their personal goals.
Over time, investing in financial instruments became more accessible. The internet generated a boom in day traders who were able to buy and sell stocks, futures, and commodities from anywhere in the world, not just on Wall Street. As a result, today more than 15 million people in the U.S. are trading stocks personally using an online investing or stock trading service.
The internet also made it much easier to find advice on investing, which significantly reduced the cost of becoming financially literate. As a result, banks are no longer just competing with other banks—they are also competing with customer self-reliance.
To continue adding value, banks must change their approach by becoming truly omnichannel and offering consistent experiences across in-branch, online, and mobile interactions. Consumers also want to be able to start an application in one place, and pick up where they left off in another. By sticking to a branch-first approach, banks risk becoming those dinosaurs that Bill Gates predicted.
It’s impossible to predict just what the future has in store for the banking industry, but we know two things for certain, banking will respond to consumer demand, and that means becoming more digital, more personal, and delivering a superior digital onboarding and service experience.