Financial times are a-changin’: Retail bank transformation

By Critical Software
Digital transformation is the term of the day when it comes to European retail banking. But what does it actually mean...

Digital transformation is the term of the day when it comes to European retail banking. But what does it actually mean?

The digital customer

Digital is, bit by bit, taking over every aspect of our lives. From ordering products online to hailing a taxi, there’s an app for that. In financial services, things are no different. ‘Digital transformation’ is the generic term employed by most financial services companies to denote the gradual implementation of digital solutions to their internal and external activities. 

But is there a meaning behind the ‘digital transformation’ buzzword?

The simple touch

Customer journey simplification has been noted and acted upon by various retail banks across Europe. One major UK retail bank has introduced a single customer view enabling customers to view their pensions and savings products alongside their current account. Similarly, Scandinavian banks have come together to offer customers an API gateway, allowing access to their accounts through one app even if they are with different banks.

If there was ever an opportunity for banks to promote integration between accounts and services, it’s now. The Payment Services Directive 2, whose deadline for implementation in the European Union is 31 December 2020, democratises retail banking by encouraging Open Banking, in itself compelling traditional banks to allow fintech and digital-first challenger banks to access customer accounts. In this changing landscape, it’s likely new apps integrating customer accounts and services will become more common, simplifying banking for all.

Making it personal

Integration is the first step towards making the customer’s journey more amenable. The next step is to personalise that journey. Traditional banks are finding that, in order to compete with neobanks and fintech, they must allow the customer as much control over the personalisation of their finances as possible. These may not just involve services directly related to managing their finances, but also more peripheral services like financial advice tools and upcoming payment alerts. Indeed, a major UK retail bank has introduced a bespoke financial advice tool accessible via a customer’s smartphone, offering guidance on financial issues ranging from mortgages to savings planning.

The main reason traditional retail banks are keen to personalise is that FinTechs and challengers are already one step ahead. One digital-first challenger bank founded in the UK in 2014 has adopted personalisation as the cornerstone of its operations. From security measures based on customers’ biometric data (including face and voice recognition) to the ability to change the app’s logo and name, there’s no question banks like this are leading the way when placing customer experience at the heart of their operations.

The cloud uncovered

As well as being personalised and easy to access, the software banking customers use needs to be quick. One way expedient services can be achieved is through implementing cloud data storage practices. But what else can the cloud offer? 

One theme across the retail banking sector is the adoption of cloud platforms to manage customers’ personal and financial data. Traditional banks, previously reluctant to introduce cloud technology due to cybersecurity fears, have become more open to the prospect of cloud platforms, aiming to unlock their data processing and storage capabilities as well as their product development opportunities. 

One major UK bank has developed a storage facility for customers’ documents, be it bank statements or travel insurance confirmation, powered by the cloud, while another has used the cloud in their online open banking application, including card control, password management and customisable expenses tracking. Other large banks have started to use the cloud to decrease obsolescence risk, with a software-as-a-service based approach to the cloud enabling consistent updates when needed. 

Traditional banks have been slow in introducing the cloud to their working practices, mainly because of cybersecurity concerns. But now there’s no question that – with verifiably secure software-as-a-service (SaaS) providers becoming more prevalent – these concerns are starting to be assuaged. It’s no wonder the forecast for digital transformation in retail banking over the next decade is that there’ll be plenty of cloud.

How can a bank transform digitally?

With the rise of the digital customer and the growth of challenger banks and fintechs, incumbents must ensure this investment is not superficial and encompasses all aspects of digital transformation.

But investment may not be practicable or even enough. Open Banking means that traditional banks will need to be more willing to work with fintechs and market entrants to develop solutions for dealing with their customers. This is a culture change more than anything; if banks are not willing to accept the need to engage with their evermore digital customers, they are likely to be left behind.

To discover how banks can stay ahead of the curve, read Critical Software's white paper on its work in helping financial institutions to digitally transform their products and services.


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