Jon Seal
Jon Seal 27 February 2019

Who Will You Be Banking with in Five Years’ Time?

Price, trust and brand are no longer considered the ultimate differentiators in banking. CX has become the new battleground for banks. As customer expectations of simple, personalised experiences grow – and digital banks evolve their offering to better compete with the traditional lenders –the race for market share is on. Who’s poised to win?

High street banks, hampered by legacy technology, have struggled to keep pace with growing customer expectations, and the experiences being provided by a wave of agile, digital disruptor's who have recently entered the market. 

Digital bank Monzo has been the quickest to grow; reaching a million customers earlier this year and accounting for 15 percent of new current account openings in the UK.With much wider product sets, physical branches and long-established brands, high street banks still dominate the market.

Digital tools and experiences that customers want more of

Customers no longer just want access to their information. They want insights from their data, tools to help them manage their finances and personalised service from their bank.

It’s what’s given rise to digital banks like Monzo, Starling Bank and Revolut. They offer customers far more than a pre-paid contactless card or what many high street banks can offer. 

Customers enjoy an accompanying mobile application, which provides real-time spending notifications, insightful money management tools to help users budget, tools to help users split and pay bills and information personalised to them. As it stands, 55 percent of banks in the UK offer an iPhone app, per Episerver data. Plus, 67 percent of people in the UK use smartphones to manage their finances, with Londoners the most likely of any region (74 percent). 

According to Accenture’s UK Financial Services Customer Survey 2018, when customers were asked why they’ve switched to a new current account provider, their most common response was ‘lack of personalised services’, with 26 percent putting this in their top three factors. 

The Help screen on the Monzo app for instance is personalised to customer’s needs. Monzo has a section of answers that are ‘Suggested for you’. It shows customers’ answers that it thinks will be the most helpful, based on how they’ve been using Monzo recently. New users are shown tips on how to get started. Customers abroad are shown the exchange rates in that country. And customers who have ordered a replacement card but haven’t activated it yet, will be shown how to do it. By adding this level of personalisation and making it easier for customers to find answers themselves, Monzo has managed to decrease the number of customers that need to get in touch by 33 percent, proving customer experience impacts top-line revenue.

Meanwhile, anyone logging into the app of a high street bank will likely be served generic information or calls to actions for products and services that aren’t right for them or that they are already using. High street banks continue to be hamstrung by data silos that prevent them from providing meaningful interactions with customers. 

Vulnerable customers

Barclays recently launched a tool to enable customers to block certain categories of spending to help them take control of their finances.

Whilst it’s the first of the high street banks to offer any such tool, it’s still simply following in the footsteps of Monzo and Starling Bank. 

Monzo launched its tool about six months earlier, which actually goes a little further and requires 48 hours' notice from customers to lift the restrictions. It’s reported a 70 percent decline in spending on gambling as a result.

This, like many of the innovations from the challenger banks, is simply a result of its engagement with customers. Monzo and others don’t just guess what customers might want to see more of, they ask and facilitate a response. 

The communities they have created ensure the customer is at the heart of everything they do, because of a lot of what they do has been suggested by the customer.

Bricks and Mortar

With visits to retail banks set to drop 36 percent by 2022 and many big banks closing branches and shifting customers online, digital banks are arriving on the high street. 

This year, Starling announced customers can now withdraw and deposit money at any of the 11,500 Post Office branches.

Starling Bank chief executive Anne Boden, said the deal would help bring the start-ups banking services to 1,500 communities with no local bank branch.

Figures from the Office for National Statistics (ONS) show nearly 6,000 local bank branches have shut since 2010, a fall of a third. 

Meanwhile, Monzo has made a deal with PayPoint that will allow customers to deposit cash directly into their accounts in a single transaction, at any of PayPoint's 28,000 convenience stores nationwide.

Whilst the importance of bricks and mortar declines, there are still customers heavily reliant on physical stores, and it is the digital banks again that spot an opportunity to meet what appears to be a growing gap in customer needs.

Big tech

One thing digital banks and the high street banks certainly have in common, and could scupper the race, is the threat of tech giants like Amazon, Google or Facebook entering the market; 31 percent of consumers would now consider purchasing banking services from these companies.

In the wider financial services arena, Amazon is already sounding out plans for a UK insurance comparison site, and it isn’t difficult to imagine a world where people bank with Amazon. 

Its ability to match customers with products they might be interested in based on their purchasing history is second to none. Plus, customers are increasingly expecting to be served mortgages, loans, credit cards etc., that are contextually relevant to them.

None of these tech giants have announced plans to enter the banking sector yet, but with Open Banking being introduced nearly a year ago – requiring the big banks to allow their customers to share their own transaction data with third parties – it’s a looming threat.

It’s difficult to know who exactly we’ll all be banking with in five years’ time, but it’s looking increasing likely that it won’t be one of the high street offerings. Unless, of course, they really start picking up the pace to drive customer experience right now.  

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