The Future of Banking lies in Contextual and Immersive Experience
Banking will transform from ‘Product’ to ‘Experience’.
Post the global financial crisis, the world of Financial services has undergone a massive change. With the introduction of the first iPhone in 2007 coupled with low tariffs for data led to the personalization of services from music, movies to photography. Why the banking world would remain unchanged?
High-street traditional banks are in critical situation post the financial crisis of 2008. The main message from the regulators to banks is clear: Be conservative, take fewer risks whereas, the heightened expectations from customers ask them to be innovative. And banks cannot be innovative if they don’t take risks at all. Banks are under pressure to keep up with time. There are signs of margin compression and increased operational costs in their financials. So what is the secret sauce that main-street traditional banks need?
Well, contextualization is the key.
So what is meant by contextualization? How it can be achieved?
It involves restructuring organizations around the whole customer interaction journey. All the five stages- adoption, consideration, application, on-boarding and servicing get fully integrated with the digital services. It involves harnessing the opportunities given by new-age technologies such as AI, Blockchain, IoT, RPA and open banking.
Before the internet era, all the categories of customers were the same. But now the internet has given rise to the new distinct categories of consumers. They are as follows- traditionalists, online embracers and digital adventurer
To entice these new age Generation Z and millennials which falls under the bucket of Digital adventurers, banks really need to overhaul their existing business models, operational and technology systems. They need to embrace new technologies such as artificial intelligence, machine learning and other forms of automation.
Artificial intelligence is moving beyond risk, fraud prevention and compliance. Banks have the vast amount of data at their disposal. They can use AI to analyze these semi-structured and unstructured data and use it to generate actionable insights. It can help them analyze user behaviour, their spending habits through their transaction history and dole out the ‘contextual’ recommendations and custom suggestions.
For e.g. banks are increasingly deploying chatbots to resolve the client queries and Robo-advisors for advisory services. There has been a ‘rise of voice’ in recent years. Voice assistants or digital assistants will increasingly lead to the ‘Fersonlization’ i.e., personalization of Financial services.
Consequentially, Chatbots and voice assistants will free up human resources to pursue different value-added customer services.
From mainframe enabled banking in the 1960s to the Installment of first ATM by Barclays in 1967, technology has helped banking move ‘money’ effortlessly. From Mainframe to Core Banking solution, now banks are looking at Cloud services to handle their day-to-day operation.
The rise of Tech-Fin companies
But why Banks need to pamper customers today?
Because the banking value chain is increasingly being captured by Fin-Tech firms and Tech-fin giants.
Smartphones allow tech giants leverage which they can use it to their advantage. Our digital economy today can also be called the ‘attention’ economy where firms compete to attract the attention of customers. Fintech firms first ventured into the ‘payments’ segment. But signs of tremors in existing financial institutions led fintech firms to even try out the core functions of banking such as lending and deposits. For e.g. Zopa was launched in 2005 which was the first peer-to-peer online lending company.
Banking will transform from ‘Product’ to ‘Experience’.
It is because of the rise of ‘Tech-fins’ the term Alibaba founder Jack Ma coined in 2016, banks need to embrace the digital way. Established tech giants are foraying into financial services. And why not? They have already existing large user base, coupled with low acquisition costs and big data insights, it is inevitable that these tech giants such GAFA- Google, Amazon, Facebook and Apple in the United States and BAT- Baidu, Alibaba and Tencent in China will try to take away the lunch of banks.
Digital banking customers have been immersed in the digital experience by tech-companies like Google, Apple, and Amazon. The rise of the Internet finance in the form of giants such as Baidu, Alibaba, Tencent-BAT as they are pronounced signals the seismic shift in which financial services are delivered. Interestingly, they all had different roots, one started as a messaging platform, another as a search engine and now their subsidiaries are venturing into every possible space like payment, wealth management, crowdfunding or digital-only bank etc.
By 2015, it was clear that China made “mobile first” model to deliver financial services was going to be disruptive.
The global financial crisis led to the erosion of trust in these financial institutions. It engulfed the financial institutions on both sides of the Atlantic Ocean. And with the increasing use of smartphones across the world, it gave to the rise of mobile banking in the east.
Therefore, in the wake of such digital consumerism, customers have also started expecting such friction-less services from their banks.
What will be the future of finance looks like?
It will be an ecosystem of banks, Tech-Fin companies, Neo Banks and E-commerce/Social media platforms-all competing for the attention of its prized possession-customers.
Note: This document with all the information in it is shared here to boost our knowledge of blockchain and crypto ecosystem, the original document can be found in document source, I have on ownership right over the document.
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