In 2019, the trends of recent years will be accelerated and interlinked in banking: Open Banking and the customer experience will remain the determining themes, while banks will increasingly use the potential of AI (artificial intelligence) applications to address customers individually.
The greatest impact can only be achieved if such trends are coordinated. This interlocking ensures a significant improvement in the digital offerings of banks, which are under increasing pressure to modernise as customers from other industries become increasingly accustomed to much more digital convenience. Richard Dratva, Chief Strategy Officer at CREALOGIX, explains five trends that will interlock in the coming year:
1. Open is the new Banking
Open Banking has long ceased to be a first-mover topic. Financial ecosystems based on Open Banking are entering a new phase: Banks, third-party providers and technology companies are developing applications and connecting them into a seamlessly networked banking environment that is integrated into the customer's environment. We are still at the beginning. Those who are able to do so will begin to build their own ecosystem, always using the customer perspective as a yardstick. In order not to stretch the patience of customers, it is high time to bundle the confusing multitude of individual applications. Banks often underestimate the demanding task of orchestrating applications, delivering attractive digital services securely and, in particular, aggregating bank data.
2. Convenience is the new Loyalty
This newly coined slogan from the digital world is also gaining acceptance in banking. So-called "low-effort" experiences help to achieve higher usage or higher turnover per customer; quite the opposite of "high-effort" experiences, which increasingly deter customers and motivate them to change banks. Regular activation and impulses from the bank are becoming increasingly important, because the customer wants to be connected with their bank. Making it as convenient and pleasant as possible for customers to conduct their banking business (for example like Amazon or Alibaba do) remains one of the largest construction sites in the industry. This means not bothering the customer with the complexity of the interplay of different applications: The front end must not hint at the sophisticated architecture behind it.
3. Smartness is the new Personalisation
AI technologies are now so mature that they support banks in serving individual customers individually – smart instead of schematic personalisation. Self-learning algorithms predict the customer's needs at a certain point in time, in a specific situation, and suggest suitable products. Financial institutions simplify the customer journey by using intelligent and proactive data usage. They strike the right note and – thanks to communication at eye level – make it easier to understand financial products. AI makes this possible without the need for additional personal advice. Personal advice is reserved for complex situations.
4. Digital is the new Revenue
Investment in digitisation must pay off. Banks need to use digitisation not only to reduce costs, but also to generate additional digital revenue from their ecosystems and redesigned customer journeys. The use of APIs by and for third parties opens up new potential for the so-called "platform economy", which to date has hardly been tapped by banks. It is important for a bank to follow a new philosophy, namely active cooperation with Fintech partners. This is the only way for a financial institution to benefit from the new opportunities that open up for it when it understands "banking as a platform" instead of building a defensive wall against the digital world, as was often the case in the past.
5. Time to Market is the new All-you-can-eat
The industry cannot afford long durations for huge "Big Bang" digital projects; purely for financial or risk reasons, but especially from the customer's point of view. Because customers don't want to wait too long for something new. Agile process models make it possible to bring these visible improvements to the market within weeks, in an early development phase within the framework of manageable expenditure (minimum viable products), and to test their acceptance. If something is not successful, it can be replaced by new ideas even without large write-offs. This agile approach, which is also associated with uncertainty, contradicts conventional notions of the big throw that can be planned to the last detail. We recommend to our customers a policy of small steps: not hectic, but tireless (from sprint to sprint) and without hesitation, to go the way of the digital future – one step at a time. If a financial institution does this for a while, management will be amazed at how far it has come.
"If a bank continues to hesitate or wait in 2019, it will lose its digital connection and drastically restrict its own scope of action. The fact that the ‘late follower’ is rolling up the field from behind does not occur in any known scenario of bank digitisation."
Richard Dratva, Chief Strategy Officer at CREALOGIX
