The essence of banking in the 21st century is digital.
And by digital I really mean mobile, since most studies show that web traffic will become residual as mobile takes over as the "primary screen" among digitally connected consumers. By 2020, research estimates only around 6% of users will access services via PC.
The bank branch in your smartphone
Due to rapidly changing consumer behaviour and the ubiquity of smartphones (the first and only way for many people to access the Internet and/or financial services), your device is perfectly poised to become your most convenient bank branch.
This mobile branch is not necessarily confined within an app, but is actually dispersed throughout multiple interaction points or "touchpoints" within a myriad of social media applications.
If you're thinking, "Hey, my bank doesn't have anything close to that yet!" you're not alone. Even the most established banks are struggling to adapt to this new reality, and mobile-only challenger banks like Starling and Number 26 are quickly disrupting and reshaping the financial services industry.
Mobile-first: THE STRUGGLE IS REAL
Mobile banking does not mean simply launching an app - it requires banks to operate with an entirely different business model.
The reasons for this struggle vary, but first and foremost is the limited capacity of traditional banks to generate revenue outside the branch. Today, 24% of banks report online channels as their main source of revenue, but in 2020 that number is expected to drop to 6%:
So, until banks come up with a way to onboard customers and deliver their products digitally - that means without requiring some sort of physical action (signature, branch visit etc) this trend is likely to continue. That's why biometric technology and its incorporation into financial services will play a pivotal role in the road to digitalization.
Secondly, banks are finding it hard to build an actual relationship with their customers. The average customer might interact with her bank twice a week, checking a balance here or making a payment there - but even the biggest commitment-phobes among us would hardly call that a relationship! Building a conversation means growing the number of meaningful interactions, moving from engagement that happens on a weekly basis to several interactions a day.
The third difficulty is banks' limited capacity to handle all these touchpoints outside the walls of the new mobile branch - providing the same or higher levels of service while simultaneously leveraging all the additional insights generated by the customer's digital life and data, which are heavily driven by social media and sharing.
DATA: SUNKEN TREASURE ON SHIFTING GROUND
Not only do banks face huge obstacles in creating truly customer-centric business models, but also face internal barriers such as product or organizational silos or legacy core banking systems, which prevent them from extracting sufficient value from their current data (never mind being able to enrich incomplete customer profiles with social interaction breadcrumbs!). Without leveraging that data, however, it will be increasingly difficult for banks to stay relevant, and therefore profitable, in the future.
And beware again, for the ground itself is mobile! The expression "mobile banking" is based on a narrow view of the term, where mobile = smartphone. What the device really provides is connectivity, which is now being extended to... well, pretty much everything. The arrival of the electronic SIM (eSIM), will be a key enabler in triggering the explosion of the internet of things (IoT) by making anything from wearables to cars to household appliances financially enabled.
The next logical step is interacting with multiple smart devices woven into our world rather than exclusively with a single device in our pockets, which will require banks to redefine and rethink entitlement models, security models and yet again the customer journey (with even more touchpoints added to the picture).
And what about virtual reality? VR is maturing quickly as we saw in the last MWC and research shows that retail companies already consider VR as the key interaction mechanism with Generation Z, so perhaps branches might make a comeback. Imagine a virtual branch in your living room?
Being competitive in mobile banking requires banks to do the following:
- Grow your digital revenue: a great way to do this is by implementing biometrics (and possibly regulatory changes). If your customers cannot onboard, buy or transact digitally, your bank is not digital. Your mobile app is still a mere communication channel, no matter how you spin it.
- Start building Relationship Banking: you need to turn mobile into a platform where this relationship can be nurtured, rather than just another channel competing for attention in an ever-growing number of life moments across all interaction points.
- Be customer-centric: build an intelligent, insight-driven financial management platform and you need to have a know-your-customer-data-driven, context-aware, anticipatory UI that will proactively anticipate customer needs and suggest a next best action, making every interaction meaningful.
- Prepare for IoT: Perhaps you don't have to redefine your entitlements model just yet, as IoT is not here yet, but do so at your own peril - technology has that old pesky habit of not waiting around for anyone!
To put the above digital strategy into action successfully, you need to be a bit like Captain Nemo, from Jules Verne’s 20,000 Leagues Under the Sea (or for all you millennials, think Steve Zissou); use the best technology at your disposal to navigate "mobilis in mobili”: the changes within the change.