Why Banks Need To Accelerate the Move to Digital Services

The COVID-19 pandemic has galvanised consumers into becoming more familiar with technology and placing a greater reliance on it – including online banking.

The lockdown around the world has led to an explosion in the use of virtual meetings and a dependence on online shopping and digital banking.

The dramatic changes have led to a seismic shift in the banking industry from the reliance on high-street branches to online services, transforming the way it operates both now and in the future.

One out of every two UK customers (54%) are less likely to attend a bank office after the pandemic, according to the 2021 retail banking survey from iResearch Services; and that sentiment is echoed by research in other countries.

Stronger trust in banks

But far from weakening trust in banks, most customers (63%) believe their banks have acted in their best interest during the pandemic and have a high level of trust rising to 97% in young customers that their data is safe.

The question for banks is now how they should respond to the dramatic changes in customer demand and how far and fast they should move towards digital banking and automated customer services.

Samir Agarwal, Vice President of Banking Compliance Solutions at leading information services company, Wolters Kluwer, explains in the Thought Leaders Voice podcast for iResearch , many banks need to accelerate digital services.

The challenge of serving customers

Samir says, “The challenge is how to best serve banking customers now. Whenever there has been a change in the industry it has been ‘I have Product One or Product Two and my delivery mechanisms are ‘A’ or ‘B’. Banks are traditional coming up with the way of thinking of how to serve the customer, and not necessarily always speaking to customer input. What the last 12 months has dictated to a lot of banks is that this is not going to work in this situation. The pandemic has put more burdens into how to operate from both physical and digital means.”

With lockdowns in places, customers cannot visit branches – the traditional distribution model. ‘It takes an open ear and a higher listening level of ‘how does the customer want to transact?’ How can they physically transact?

“A lot of banks have now gone into the digital world where they are saying, ‘This is the place where I can offer a product and a customer can interact with me and conduct business. So a lot of it is about listening to the market. There are so many different types of context that are showing up in order to assist banks in it that the comfort zone isn’t there? A lot of banks need to get comfortable and start to understand how to change and transition into serving their clients through a digital means.”

New partnerships and products

To do this, fintech companies are increasingly turning to specialist consultancies and aggregators to advise them or partner with them in creating proprietary bank technologies to help them operate more effectively in the digital world.

At the same time, as the banking sector evolves, they are looking for ways to diversify and differentiate and create a new set of products and services based on changing customer needs.

But this transformation to digital banking is complex. It needs a great deal of strategic thought and commitment, as it changes the way the fintech operates and serves its clients.

“It’s not just ‘let me buy some technology and put it into play’. You now have to have an operations manager that will also stretch capability and experience into a new world where customers are very demanding and we want instant gratification and problem solved right away.”

The role of AI in digital banking services

Taking the process one step further is the role that AI plays in business operations and growth and the application of auto decision making. This brings up all kinds of issues about governance and compliance and what is the most effective use for artificial intelligence at the moment.

As Samir explains, “AI has a role in that in terms of structuring data and how it’s used, but I don’t know if it’s going to be a true artificial intelligence piece of the puzzle. I look at predictive analytics as a method to really forecast or tell us what to look out for in terms of risk.”

Greater use of AI can be a positive step for customers as well as banks, as it means decisions are based on pure data rather than emotive feelings of team members. “Right now, today, we’re kind of going with, with a bit of human decision-making or, you know, gut. So for lack of a better way to kind of put it together, we use analytics and we use our own intuition to make those decisions. And this makes it more fact-based around data and data driving function.”

Banks will also be looking to better monitor customer experience and provide help and support in digital banking.

Automated bots can step in and ask if customers want any help and advice or provide the option of human help if they are really struggling and need extra support. “So as the AI is working with and watching the user, as they’re going through the application, say they continue to fumble and they continue to have some difficulties, then the chatbots can come out again and recognize that and ask them, Hey, you know, I have an expert, a real person expert that I can connect you with. Would you like to have a short discussion on what you seem to be having difficulty with?”

This can be a game-changer for customer experience, because now the bank has contextual information about exactly where someone is in the transaction and what type of help that they need. As well as enabling the bank to provide superior customer experience and support, it can also lower their expenses.

The use of AI support is still in its infancy. It has enormous potential, but needs careful handing, says Samir. “I think it’s just starting. I can tell you that non-banks have been very, very successful with it, but we’re just starting to see that show up with banks.”

Diligence and delicacy

“So, I think it’s going to be a really big challenge, and we have to handle it delicately, especially when you’re talking about a bank providing a financial transaction, we feel differently with consumer products and objects than we do with our money. So, I think that’s something we just got to look out for and be very, very diligent about.”

With rapid advances in technology and customer service, banks need to look at their legacy systems – outdated computing software and/or hardware they are using and whether it is a help or a hindrance and is impeding them, because banks often end up catering to what the technology says they can do.

“Today, the technologies that are more flexible for our customer experience. So pay attention to that customer, really listen to the marketplace about what they need, and then allow us to be successful and sustain future business. The new technologies on the block, you got to pay attention to them. AI, predictive analytics, you know, auto-decisioning and ultimately the same technology will assist us in creating a superior customer experience.”