What traditional financial services can learn from emerging banks and fintech companies

The pandemic has exposed gaps in nearly every industry while accelerating transformation, and banking is no exception. Faced with surging demand and the need to rapidly advance digitalization over the past year, most traditional financial service providers have viewed customer experience as a secondary priority. But that hasn’t been a loss for customers. According to a recent Salesforce study, “Trends in Financial Services,” only 27% of customers believe that the financial services industry is customer-centric, while only 23% believe that the industry has handled the pandemic well. At the same time, nearly 70% of customers said the COVID-19 pandemic has increased their expectations for companies’ digital capabilities.

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Becoming a customer-first industry

Until now, the financial services industry has been slow to embrace innovative technologies. Concerns about security and regulatory compliance have led many institutions to ignore the move to the cloud and instead build their own internal data centers. While this may have enabled certain functions in the past, it has limited banks’ agility, scale, and ability to meet the changing needs of their customers. Disparate data sources in legacy systems add red tape and prevent businesses from connecting the dots to provide seamless services, personalized and complete experiences, and avoid hidden compliance issues. At the same time, customers are more connected than ever before, with countless choices at their fingertips, and are willing to choose to trust other companies if they are not satisfied.

Today, moving to the cloud has become a necessity to achieve the personalization and refined interactions that customers want—expectations that have risen over the past year. Having a unified, secure view of customer data is key to improving efficiency, building stronger relationships with customers, and avoiding regulatory missteps. When it comes to technology, the question facing financial services organizations is no longer whether to build or buy; rather, it’s a trade-off between building solutions in-house and organizing around the customer.

Five lessons from emerging banks and fintechs

The pandemic has created an opportunity for traditional financial institutions, including corporate and investment banks, to innovate to improve the customer experience. In doing so, they may learn from emerging banks (i.e. pure digital banks) and fintech companies, and even from D2C retail brands. These digital native companies know the importance of cloud computing and innovative technologies, and through these technologies, they can provide more intuitive, personalized interactions and easy services, thereby improving customer loyalty and increasing the number of customers. Today, it is not enough for banks to focus on digitalization alone - just putting existing services and processes online. Instead, they need to undergo a true digital transformation and rethink the way they do business in a digital-centric and customer-first environment.

Following in the footsteps of industry disruptors, traditional institutions can take the following five steps to adapt their digital services to meet customer needs and expectations.

1. Migrate to the cloud

According to Accenture, banks have slowly been moving away from using internal data centers, with the average institution now hosting 58% of its workload in the cloud. Their research found that this move has clear benefits for banks, reducing operating costs by up to 20% and reducing time to market and service provisioning by up to 50%. Moving to the cloud is also the first step in integrating data sources to achieve agility and better customer experience.

2. Shift from omnichannel to “best channel”

Banks have been doing their best to reach customers wherever they expect them to be—at the same time, using the same message. During the pandemic, 45% of wealth managers have expanded their footprint to support new channels. But simply offering services through each new channel is not enough. To follow the lead of the disruptors, banks should move from this standard omnichannel approach to a “best channel” engagement approach. This means optimizing communication channels to reflect each customer’s unique needs and preferences, and then delivering personalized interactions in the moment. This requires an intelligent, real-time engagement platform that leverages customer data and interaction history across all channels.

3. Provide a holistic experience

Customers of corporate and investment banks are not much different from those of retail banks and D2C brands. At the end of the day, we are all people using some services on some device. Customers expect the same personalized services that they expect from consumer brands—a fact that emerging banks and fintechs have already accepted. To catch up, traditional financial institutions should focus on using data to proactively provide products and services that are relevant to individual customers' lives. They should connect key business processes (including customer onboarding, account creation, and business provisioning) to build a holistic customer experience.

4. Expanding financial services portfolio to support financial operations and achieve better results

In addition to providing products and services, the banking industry is doing other work to promote financial business - helping customers achieve their goals and supporting their financial well-being over time. According to research from Salesforce, more than 70% of retail bankers and wealth managers said that focusing on their customers' financial well-being has become more important since the beginning of the COVID-19 pandemic. Technology can not only help financial advisors provide investment advice, but also become financial coaches, providing personalized guidance on insurance, estate planning, family dynamics and more. Moving to the cloud can help financial advisors use insights from AI to create customized experiences, such as customized risk predictions and personalized investment portfolios.

For example, in investment banking, AI can not only help bankers discover or predict opportunities to provide innovative services, but also discover and deepen various relationships. The intelligently driven research assistant in AI technology can crawl the web, data sources, news articles, emails, and social media to discover and analyze relevant information. This helps bankers gain deeper insights to cultivate potential customers and enhance relationships with each other.

5. Invest in AI automation

AI tools can improve the customer experience at traditional banks in a variety of ways. Automating repetitive back-office processes can improve efficiency while freeing up financial advisors to focus on using creativity and a human touch to engage customers. Automating front-office services can also help banks create value in new ways. Both of these scenarios are examples of autonomous finance, which Forrester Research defines as “algorithm-driven financial services that make decisions or take actions on behalf of customers.” According to research from Salesforce, 60% of financial services executives say better personalization is the top benefit of autonomous finance, which can improve the customer journey at scale.

Becoming a customer-first, digitally-centric company

Over the past year, we’ve all heard that leading organizations must innovate to serve digital-first customers. That’s true. However, the most promising businesses will be customer-first businesses that prioritize digital innovation to enhance the customer experience and invest in a variety of ways to create new value.

The financial services industry has lagged behind other industries in adopting technology to improve the customer experience. The pandemic has widened the gap between what customers want and what banks offer, while also creating opportunities to accelerate innovation. To better serve customers, banks are turning to technologies that provide a real-time, unified view of the customer and AI-powered insights. As customers learn about their options, traditional financial institutions can reasonably follow the lead of emerging banks, fintechs, and other innovative companies and prioritize connected customers in their digital transformation.