How the pandemic will change banking in 2021
Over recent years, finance has become digitised. The rise of online banking, FinTechs and other phenomena has brought about an unparalleled age of convenience and accessibility for customers.
The events of 2020 have expedited this process. The pandemic has forced more and more customers to use digital channels. In the UK, the number of customers using mobile banking services on a monthly basis rose from 52% to 57% between H2 2019 and H1 2020. More widely, a similar increase was seen in the number of European banking customers using digital banking channels weekly (from 68% to 71% between 2019 and 2020).
This is true of both traditional banks and FinTechs. Across Europe, fintech apps have seen a 72% rise in usage since the beginning of the pandemic. Many traditional banks have found new ways to partner and interact with fintechs, from expediting loan application processes to adopting pay-by-bank features for customers shopping online.
With the socially-distanced reality of the pandemic set to last for some time, financial services can expect trends like integrated online banking and more regulations to continue. But what of other phenomena such as Phygital? Could it be that, as the pandemic recedes, physical banking - in some form or another – begins to creep back onto centre-stage?
The dependence of customers on the digital ecosystem in 2020 has made accessibility more important than ever. Open banking in the UK has meant account holders now expect far more integrated access to their accounts. The number of retail banking customers using open banking-enabled products double between January and September 2020, exceeding two million.
Yet open banking isn’t without challenges, especially with regards to customer perception. Much of this relates to trust and the unprecedented access given to third-party providers. A survey conducted by ING in October 2020 showed only 30% of respondents across Europe were comfortable with their bank sharing financial data with other companies, even if they had given prior consent for their bank to do so. Similarly, Ipsos MORI polling showed that while 75% of banking customers wanted access to data on how they spend their money, only 40% said they would be prepared to grant information to banks and TPPs to gain such insights.
Despite the uptake of open banking-enabled products in 2020, a more transparent approach will be needed to maintain customer trust and sustain its rise in 2021.
As with open banking, the pandemic has accelerated cloud banking. While this is evident in data analysis and storage, the cloud serves an arguably even more important role in modernising core banking systems. Many traditional banks have been placed at a disadvantage during the pandemic, their ill-fortune likely to be exacerbated as the situation continues.
There are ways around this, however. The use of APIs and cloud-based microservices within system architectures can work wonders for flexibility and adaptability when faced with sudden, rapidly developing situations, like the pandemic. These permit faster, more accessible processes to be devised. For instance, one European bank moved its credit card approval process fully online, removing the need for customers to visit their local branch in order to obtain a new credit card.
Despite the temptation of changing priorities away from core banking modernisation, incorporating APIs and microservices into workflows presents benefits to both operations and customers – such changes likely outliving the current health crisis.
A Phygital future?
What will banks look like once the pandemic is history? There’s no question that convenient, integrated online services are here to stay. But might the lack of social contact caused by the pandemic mean physical banking makes some kind of comeback?
Phygital has been trending among banks for some time. Bank branches are no longer just banks; they’re cafes, workspaces, car dealerships and more besides. One major European bank has already made this jump to Phygital, opening a Work Café in Leeds, UK in 2019 where guests can check-in digitally and take advantage of an on-site barista. Similarly, a UK-based bank has opened 25 shared-work, mentoring and networking spaces across the country, targeted particularly at start-ups.
While the pandemic means these Phygital spaces are closed for the time being, a post-Covid world is sure to make these multifaceted environments more popular than ever.
The impact of Covid-19 on financial services cannot be overstated. But the effect it’s had on banks and FinTechs has mostly expedited a journey they were already on –towards fast, convenient, integrated banking solutions for customers.
But many banks and FinTechs won’t have the resources to take this journey alone. Check out how Critical Software could help you navigate a post-Covid future by reading our white papers on and of digital transformation.
4 ways to digitally enhance an insurtech customer experience
Insurtechs run the risk of cannibalising their own mission to boost coverage by getting sidetracked focusing on the latest and greatest technology.
These folks may advertise an end-to-end digital experience, but behind their slick customer-facing portals, they struggle to overcome the same problems that established insurers still face: a broken customer experience.
If an insurtech platform delivers a digitised version of a broken process, shoppers may be deterred by the same pain points that they were hoping to avoid by going with the more modern insurer. This might mean that shoppers are required to fill out a series of confusing forms that don’t apply to their industry or even be required to pick up the phone and wait in a queue to secure the quote they got online. Spoiler: neither experience leads to conversions.
As the Chief Marketing Officer and company co-founder, I’m a fervent advocate for putting small business owners and their customer experience (CX) at the center of insurtech product design. At B2Z, we provide digital, self-driven business insurance to small business owners by amassing digital intelligence through vast amounts of data, then leveraging it to streamline their insurance experience. That’s because our audience doesn’t have time to pick up the phone and wait to talk to an agent or chase emails over days or weeks waiting for a coverage decision.
1. Excel where others fall short
To understand where you can improve your CX, start by auditing the current insurance experience for potential customers in your target market. By identifying the common touchpoints and locations along the customer journey where the competition falls short, you can also find opportunities to pull ahead.
At B2Z, we found that most policy offerings were cumbersome and incomplete, but there were two major pain points we saw time and again:
- Irrelevant questions led shoppers to question whether they were applying for the right product. Small business owners could receive a quote after answering questions in an online form, but the process wasn’t tailored to their business. For example, pet retailers would be asked about liquor sales at their establishment.
- Shoppers couldn’t complete the process entirely online. Even after they were promised a completely digital experience, too many small business owners were required to follow up over the phone to secure coverage.
Why are these such serious issues? Small business owners are busy people. More than 70% of them work more than 40 hours per week as they fill a variety of different roles across their organizations.
This disjointed process left busy entrepreneurs with coverage gaps or uninsured altogether: over 70% of small businesses are underinsured, and 40 percent aren’t insured at all. And having the right kind of insurance can be the difference between a business shutting its doors or enduring. This landscape created an opportunity for thoughtful technology to improve the customer experience.
2. Use technology to solve pain points
In the property and casualty space, insurtechs can shrink expense ratios to almost 40% lower than those of traditional insurers. But they don’t do this by implementing technology for technology’s sake. Instead, they identify and target specific areas where tech can improve the customer experience and they strategically design the right solution for their customers’ needs.
Our work with chatbot design is a great example of how insurtechs can leverage innovative tech to differentiate their products and services.
Most insurtech chatbots are equipped to answer simple, formulaic questions you’d find in the FAQ section of their website. While this type of bot helps shoppers and customers access the right information at the right time, their limited natural language processing capabilities too often means customers must input the exact keywords to get a helpful response.
After examining where other chatbots fell short, B2Z developed Diya, a digital guide to small business insurance. During the application process, Diya chimes in at potentially challenging moments to ensure small business owners quickly secure the right coverage.
For example, when asked to select their business classification code, customers can type, “I cut hair” and select from relevant codes for barbershops or beauty salons.
By being purposeful about implementing new technologies, insurtechs can streamline the customer experience and differentiate themselves from others in the space.
3. Align your CX with customer expectations
The pressure is on for insurtechs to match the digital experience customers now expect when they shop for groceries or refill their prescriptions.
The COVID-19 pandemic changed behaviors and accelerated customer expectations for entirely digital experiences (which have existed since at least 2015). In the US, 73% of customers have tried new shopping behaviours since June 2020 and over 75% intend to continue them.
To achieve this, insurtechs must leverage data to streamline the customer experience. At B2Z, we leverage our digital intelligence to help small businesses quickly identify the right coverage options based on the risks within their industry.
For example, to gauge the right level of coverage for a contractor, we need to know whether their employees regularly work on platforms more than 15 feet off the ground. Rather than asking the business owner to provide this information, we leverage third-party data, and our algorithms review county records of similar businesses.
Then, by collating this information with millions of other contractors across the country, we can automatically match their business up to an existing model from an underwriting perspective. This leaves the customer with fewer questions to answer manually, streamlining the customer experience and shortening the application process to as little as five minutes.
By drawing from all available data sources, insurers can deliver a speedy, fully digital customer experience while holistically evaluating customer risks.
4. Every digital touchpoint is an opportunity to enhance the customer experience
As insurers rush to adopt new technology, incumbents and insurtechs don’t consider how their decisions will impact the customer experience.
By taking stock of the competition, implementing new tools that are designed for a specific purpose, and using data to gauge customer expectations (and design to meet them), you can keep your customers at the centre of an increasingly digital experience.
About the author: Stephanie N. Blahut is CMO and Co-Founder at B2Z Insurance. B2Z Insurance is a new small business insurance company that provides coverage for on-the-go business owners: simple explanations, easy application, digital quotes, and mobile claims. Stephanie is a seasoned digital marketing professional whose experience spans the insurance, publishing, and software industries. As B2Z’s CMO she leads their digital-first customer acquisition and marketing strategy.