How Americans view their banks and their faith in the US financial industry changed significantly after the 2008 economic crisis. A survey by Gallup last year revealed only 27% respondents expressing quite a lot of confidence in the banking institutions and not so surprisingly, the level of confidence has been below 30% in the same poll for the last eight years now. In fact, it wont be incorrect to say that banks are facing a severe branding problem.
Banks are stuck with the image of being giant bureaucratic institutions that for decades have been operating in silos and are considered too big to change. Add to it their desperate and highly frequent marketing emails and calls offering credit cards, or loans that are not helping to boost their image either. An average customer is wary of these big banks who they view as trying to fleece them with products having high interest rates, or charging for dubious services like identity theft protection on credit cards.
A Customer First Attitude
Todays consumers have a number of attractive options to explore when looking for a bank or a financial service provider. There are, for instance, digital-only banks like Simple and Moven. While many major banks try to make consumers spend more on their products, Simple and Moven encourage their customers to help them save more.
In fact, Simple doesnt believe in advising customers on how to spend their money since thats too Big Brotherly. Aided by machine learning, the Simple app keeps a tab on a users income and routine spends such as house rent or mortgage, bills, groceries, etc. and instead of just showing a balance it suggests how much is Safe-to-Spend.
Recently, a digital-only branchless banking platform, MemoryBank, was launched in the US targeting generation-X customers born between 1965 and 1982 a customer segment often ignored and pushed aside by the mighty millennials.
Inevitable Alliance with Fintechs
In an effort to stay abreast with the fintech world and understanding the agile start up culture, many banks have come up with accelerator programs that are mutual learning and mentoring initiatives between banks and financial startups. These also act as in-house labs for developing products in controlled environments. Wells Fargo is one such bank which has a program that focuses on facilitating dialogues with startups, understanding startup culture (and vice versa i.e. startups understanding banking work environments), mentoring fintech companies for six months and providing up to $500,000 of equity investments for selected companies. Barclays Accelerator, a program for fintech startups giving them access to mentors and investors, is organized in many different cities across the world.
With the help of these accelerator programs big banks are able to identify innovative solutions that create value for their customers and nurture out-of-box thinking which may not have been possible in a typical banking environment.
Innovation in Existing Banking Products
Owing to the increased attention and investment in digital transformation initiatives, many banks are making use of disruptive technologies to create relevant customer experiences and services . Take for instance Erica, Bank of Americas new digital assistant designed to help customers make smart financial decisions through a mobile app. The chatbot, enabled by artificial intelligence, predictive analytics and cognitive messaging, helps customers make payments, check balances, save money and manage debt. Erica can also direct customers to look up and improve their FICO scores and check out educational videos and other relevant content.
Similarly, in an effort to create a seamless mobile baking experience for customers last year JPMorgan Chase introduced a no cards ATM feature that allows customers to access the machine by inputting a code from Chase mobile app. Future upgrades of ATM machines will allow customers to use cell phone’s near-field wireless communication feature to access accounts.
Banks still have the upper hand over new entrants in a highly regulated industry when it comes to resources and budgets for creating transformative customer experiences. For example, in 2016 JPMorgan Chase spent over $9.5bn on technology, including $3bn on new initiatives. Todays digital consumers expect a seamless, hands-on banking experience and instant gratification, as provided by Uber or Airbnb, regardless of the critical security challenges faced by banks.
The tsunami of digital technologies and competition from fintechs is forcing banks to embrace digital transformation and adopt cloud, mobile, and analytics technologies. The banks that will thrive are the ones that take a customer-first approach, explore new alliances and focus on innovation.