The post-COVID-19 era will be defined by fierce competition, causing banks to rethink their priorities and realign investments in growth areas to meet higher customer expectations.
Retail banks are faced with the choice between aligning their offerings with customer expectations or running the risk of losing those customers altogether, say it Global Retail Banking Report 2021 (WRBR) published today by Capgemini and Efma. As the economic fallout from COVID-19 continues, the post-pandemic disruption has sparked a new era of customer-centric banking, which the report calls Banking 4.X. To be successful in Banking 4.X, banks must embrace digital transformation and implement cloud-based Bank as a Service (BaaS) platform models, which use APIs to integrate banking into daily life, making it more accessible and inclusive for banking customers.
Over the past 10 years, the neo- and challenger–banks have attracted over 39 million customers. The report finds that currently 81% of consumers said easy access and flexible banking would motivate them to switch to a new-age financial service provider, instead of their traditional bank.
Meanwhile, many traditional banks are looking to retain and grow their customer base and have already started their journey of digitization and cost optimization as the COVID-19 pandemic has forced them to dramatically step up their efforts. Additionally, retail banking customers facing pandemic realities now expect fully digitized on-demand experiences, hyper-personalized services, and 24-hour support. However, among those surveyed, 46% of bank executives say they don’t know how to embrace an open bank, orchestrate ecosystems, and become a truly data-driven organization. These actions are essential components of the new way of doing banking, identified by Capgemini as Banking 4.X.
“By overcoming outdated mindsets and embracing banking as a service, financial institutions will go beyond their core banking products, create new offerings and deliver personalized experiences to their customers.” says Anirban Bose, CEO of Capgemini Financial Services and member of the Group Executive Board. “Banks need to focus on how they can add value to their customers to retain and retain them. Thanks to the platform and the exploitation of data, banks can better meet the needs of modern customers and create new sources of revenue. “
The platform defines a new era for the industry
Incumbent banks can unlock new value in open ecosystems through BaaS platforms, which provide access to new data sources and monetization opportunities. Banks must quickly turn to experience-based, platform-based approaches that integrate banking and other services into consumers’ lifestyles. On a positive note, 66% of banks say they already use a BaaS platform, while 25% are in the process of developing one.
Incumbents have several strengths in their business that they can easily monetize (e.g. reports, KYC, licensing, transaction processing, connectivity to global systems, etc.). They can also call on a range of external providers to improve their offering and best meet consumer demand for a more integrated and personalized experience. Traditional banks have recognized that accessing the capabilities of their larger ecosystem is at the heart of their new journey, and 80% of bank executives said BaaS would help them cultivate open ecosystem synergies to innovate and create new ones. banking products and services. This will allow banks to bridge the gap between their current situation and the expectations of tomorrow’s customers, which will be amplified in the era of 4.X banking. This new way of doing banking will also allow banks to become more inclusive in integrating unbanked and underbanked segments of the population through on-demand, digital and easier-to-use channels.
“Banking and non-banking businesses have the opportunity to come together and provide better customer service. ” says John Berry, CEO of Efma. “These strategic partnerships enable new, creative offerings that reflect the lifestyle, needs, wants and even the personality of customers. Banks should focus on improving support, reducing the costs of banking products and services and delivering sustainability initiatives. a solid digital base and a flexible attitude to innovation. “
Data-driven approach will prioritize hyper-personalization and ensure long-term growth
As the bank enters an era where financial services are integrated into the daily lives of customers, collaboration will be the path to success. BaaS offers unprecedented opportunities to collect data across ecosystems, with over 86% of consumers saying they would share their data for a better and more personalized experience. Incumbents must develop digital capabilities to harness these data ecosystems to create, maintain and increase value in the age of 4.X banking. Big banks will keep customers at the center of their transformation journey by tracking behaviors and sentiments through intelligent data analytics.
Banks must act quickly, however. The Capgemini and Efma report found that 61% of companies do not have a dedicated Customer Experience (CX) management team to set customer roadmaps. Banks can dramatically improve their customer experience by deploying a digital CX layer and reinventing branches as experience centers, to deliver a consistent and secure omnichannel experience across all touchpoints.