CREALOGIX UK Commercial Director, Jo Howes, says that for retail banks and private wealth managers to thrive in a new era, leadership need to understand the growing power of individualism that’s shaping the world’s economy.
It’s easy to feel overwhelmed by buzzwords coming out of banking technology conferences and analysts’ reports. Are we keeping up with AR, ML, DLT, and API PaaS? Do quantum computing, digital twins, NLP, and strategic tokenisation mean anything for our own business?
Fortunately I am not here to tell you about more hyped technology trends!
Quite the opposite: the true leaders in every industry think first about “why” before ‘how’. Technology is a means to an end, not something we have to chase blindly.
Let’s take a step back from specific technologies and consider the larger themes that are determining the future of financial institutions.
Open banking is a new era
Open banking is bigger than just a matter of technology or regulation. It’s a reorganisation of how the whole industry operates. Inside the industry we tend to think of open banking in terms of APIs, authentication, marketplaces, and compliance. But this is just the ‘how’ of open banking…
The ‘why’ of open banking is not about the industry, but about the individual.
Just like GDPR, open banking is about acknowledging that, as an individual whose privacy is enshrined as a human right, personal data belongs to a person, and anyone else who wants access to that data has to have informed consent. Ultimately as consumers we will be more empowered in deciding what we want to do with our own data, and what we want to get in return for sharing it.
Thanks to open banking, the financial industry is, for once, ahead of other industries in adapting to the new era customer-centric data management.
New generations of customers value convenience above face-to-face contact
Like me, you probably remember roaming around the neighbourhood as a child, forming friendships in your local space. At school, having your head in a book at break time was anti-social when you could communicate and have fun with the people around you. Social meant face-to-face.
But now ‘social’ space is digital by default. This is probably all too familiar to you if you have children: kids are now to be founds heads-down in their screens, either in networks like Instagram and Snapchat, or games which double as virtual hangout spaces like Fortnite or Apex Legends.
As older generations do we feel that the young are losing something of what it means to be social? Yes. Have they gained something in richness and reward from their new digital media? Absolutely!
Pre-digital generations feel resistance around digital banking services, and regret about the demise of branch banking, because a drive for pure convenience risks losing the intangible value of human interaction. Younger generations would simply call this nostalgia: they have no issues with mobile-only challenger banks, or even managing their money in apps which are not technically banks at all.
What matters to Millennial and Gen-Z customers are features, usability, and ease of use – not tradition, history, and bricks and mortar. Established financial brands need to define value as convenience, and not automatically assume ‘high touch’ experiences are also high value for the customer.
Personalisation is the measure of AI
The application of artificial intelligence in the financial industry is the third permanent global shift to consider, and it’s one in which so many other trends are interlinked.
Most products and service delivery methods in a retail bank are mass-market and standardised because the logic of business is to increase efficiency. Things that need to be done manually or in a bespoke fashion have to be eliminated because they create linear increases in staff costs. If customers have a more generic experience, the logic goes, at least more of them get that service at a sustainable cost.
But what if automation and scaling up didn’t have to mean everyone getting the same experience? This is where the AI comes in. While the industrial-era definition of ‘quality’ is equivalent to ‘identical’, this is being flipped in the digital era, where a high-quality experience for an individual is about how unique the business can make it.
The measure of progress in AI will be how successfully financial institutions can provide value through efficiency and convenience manner that is still highly tuned to the individual.
Conclusion: listen to customers, not buzzwords
The common idea linking the trends discussed here is the increasing power of the individual, and technology facilitating that. The mass market is now about catering to a massive number of unique customer preferences.
The way to navigate the noise and complexity of this new digital era is to remain focused on what your individual customers want: how they can be in command of their own data; how they can get necessary things done in an easier and more satisfying way; and how they can receive this service in an increasingly personal way.