Retail banks are currently lagging in their ability to offer true omnichannel or personalized experiences. To regain the customers’ favor, they had better take a page from the FinTechs’ playbook. That is the conclusion of a recent report, ‘The customer-engagement imperative’.
The report was published as a joint effort by Efma and Capgemini and is the latest installment in their ‘World Retail Banking Report’ series. In last year’s report, the authors coined the term ‘Banking 4.x’ to describe the transformation that retail banks need to undertake. This year they continue in the same vein, again stating that banks need to embed themselves in customers’ digital journeys in ways that are inclusive, invisible and sustainable.
Better customer experience
“Customers today expect their phygital journeys – those that bridge the digital and physical worlds – to be relevant, engaging, and frictionless across channels,” says the report. “Orchestrating those experiences with data-driven insights, user-friendly technologies, and customer-centric business models has emerged as a key to customer acquisition, retention, and loyalty.” For traditional banks this means a switch: customers, not products or business lines are the center point of strategies and business models today.
Improved customer experience can be achieved through better use of data in order to deliver personalized services. The report points out that neobanks and FinTechs excel at getting more personal and urges traditional banks to take the same data-driven approach. “Banks must pivot to platform business models that leverage data and new technologies. The formula for growth today sounds simple – provide customers with the right product whenever and wherever they’re at in their digital journeys – but it is challenging to execute.”
Digital ecosystems and embedded finance
Besides providing better customer experience, the report also recommends investigating the use of digital ecosystems to tap into new revenue sources. For example, by adding extra services to their own platforms, as CaixaBank did with its imagin lifestyle banking platform. imagin is a platform filled with a range of non-financial services such as games, videos, music, educational content and shopping that complement its core offerings. Within a year, the mobile-only digital bank acquired over 3 million customers. Another option is to offer banking services through nonfinancial third parties. The report does point out that this type of embedded finance, or Banking-as-a-Service (BaaS), must be carefully controlled to avoid platform leakage or cannibalization. “What starts on a bank’s platform should stay there.”
We can only agree with the road ahead that the report sets out for traditional financial institutions. As last year’s commissioned study with Forrester Research showed, many banks have embarked on a digital transformation journey and are moving towards becoming connected companies and ecosystem extenders. Their ultimate goal is to monetize third-party services in order to tap into new revenue sources. As companies are moving up this maturity curve, they will come across security issues and hurdles that Identity and Access Management (IAM) can clear. Embedded finance is a win-win for both banks and other digital service providers, as our close collaboration with Monizze demonstrates.
We also firmly believe in making customers’ digital journeys as seamless and secure as possible. Our IAM solution covers the entire user journey, from onboarding, identification and registration, through to authentication to give users access to applications and services. We make life easy on consumers by allowing them to use a vast array of Identity Providers and letting them manage their user profile and consent through self-service capabilities. On top of that, we deliver valuable insights into users’ needs based on their profiles and behaviors.
For retail banks that want to make the move, both the technology and the best practices are available. And as the World Retail Banking Report 2022 points out, “banks still have advantages, including customer trust, regulatory imprimaturs and product expertise.” It’s up to the banks to capitalize on these assets when migrating to the next digital maturity level.