Banking today is long beyond your grandfather’s experience. Banking is 24/7, ATM, online and branches are shrinking in number. What might the next decade bring?
The experts weigh in on where they see banking headed.
Adapt or die
Accenture’s Banking 2020 report says there are three new business models that will emerge to take market share away from traditional, full-service banking institutions that don’t change with the times.
They describe a Niche Digital Provider as a highly agile bank that offers extremely specialized products at scale. They will have a flexible infrastructure and shine when it comes to social media and mobile technology. How will they compete? Deep product offerings, including advice, according to Accenture. They offer the example of a technology provider collaborating with a large wealth management firm to create a new joint venture that offers money management services and advice through digital channels easily and cost effectively across borders.
Next they see the rise of the Digital, Full-Service Bank, institutions that rely on technological solutions to deliver a range of products. How will they compete? Their digital experience will be a standout and they will offer an array of products with the depth common among today’s traditional full-service banks. Accenture forecasts that these institutions could be today’s full-service banks that ramp up their investments in digital platforms and use that opportunity to retire existing legacy platforms, or new players could enter the scene, such an established technology firm that moves into the banking arena. Accenture projects that digital, full-service banks could make up about 15% of the market in 2020.
Lastly, Accenture talks about the Big Box Banks, those providers that will compete primarily on price and offer commodity products to mass-market customers. These could be one of today’s top four banks or new competition, like a large retailer. How will they compete? They have the benefit of immediate market share and low pricing across a range of products, giving them much appeal to existing customers.
Banking technology isn’t going to entirely replace the need for traditional brick-and-mortar bank branches, says Jaime Dominguez, market strategy director, Bank Solutions, Fiserv. "Consumers have come to expect digital and online banking options, so flashy technology alone will no longer attract and keep customers, rather technology will transform the branch into an interactive service and advice center, where customers can seek out new experiences with integrated technology across platform," says Dominguez.
In an effort to keep and attract customers, especially in the increasingly millennial generation, banks will likely leverage the use of big data and data analytics to cultivate and personalize the customer bank relationship.
The real innovations in digital offerings, says Dominguez, will be in the seamless experience required of more in-depth services. "Consumers demand hands-on engagement and ‘try-before-you-buy’ opportunities with new technology, and banking is no different. The bank branch, then, becomes a showroom of sorts, where consumers can turn to a bank representative for advice or further information."
The significance of increased data harvesting and analytics is not lost on banks. With more opportunities for customers to engage with technology and provide feedback, banks can amass a wealth of information on their customers’ needs and preferences, and used in the right way, this data can provide the model of customer experience that banks seek to capture, says Dominguez.
"The integration of automation and experience is crucial. Increased availability of self-service technology means bank tellers have more time to spend one-on-one with customers, providing small business assistance, investment advice and loan counseling," adds Dominguez.
Video, video, video
The use of video ATMs will increase. A two-way video screen permits customers to receive direct assistance from bank personnel at non-branch terminal locations. This technology makes it possible to conduct in-branch transactions outside the bank branch in remote locations or when the branch is closed.
With videoconferencing, "People will get personal time that they need and it is a plus for banks. Maybe they don’t need a commercial real estate lender in every branch, but a customer can still access the person who has that expertise without driving two hours to the branch where he or she is located. The technology allows banks to have less of footprint and reduce costs," says Joshua Siegel, CEO and co-founder of StoneCastle Partners, which invests in community banks.
The most successful community bank of tomorrow is going to be the one with the most accessible staff, says Jeff Chandler, president and CEO of American Technology Services, but not like today, "Tellers, will be talking through something like Facetime or Skype sessions, instead of behind a bullet-proof window," says Chandler.
Loan origination automation
Customer experience sets the best financial institutions apart from the pack. Innovative technology helps lenders achieve this through automation that enables accurate and instant results. "When a customer gets instantly approved for a home equity loan from their existing lender and the lender tells them once they apply, ‘Hello Mr. Smith, thank you for coming back to us. You’ve been approved and we can close immediately,’ that turns them into a hero," says Mark Deese, product manager, Lending Solutions for Fiserv.
Advanced loan origination systems allow lenders to establish their own business standards, including operating procedures, conditions and limits, automating virtually every transaction and promoting consistent processes.
As there will be greater importance and reliance on customer and prospect segmentation, offers for products will be more targeted and dynamically packaged and priced. Automation and analytics that support delivering the right product at the right time at the right price will be essential, says Troy Bradley, senior vice president and chief technology officer at FIS.
Bradley also foresees mobility, security and efficiencies driving optimization and deeper automation of traditional automation channels such as ATM and enhancing card-less cash access and point of sale and mobile wallet and mobile payments.
However, all the advances in technology will mean ever increasing security for banking online. "This is likely to become more invasive for end users. Security processes and procedures will take more end user time and effort (both for bank employees and bank customers)," says Bradley.
For sure, the banking landscape will be anything but boring. As for key themes – think digitization, self-service, faster banking. The question though, will it be better?