BANKING
19.4m by 2020, according to the October 2020 forecast by Business Insider. The bank’s growing product suite proves they understand the changing needs of customers - such as settings that automatically transfer 10% of wages into a savings account or early wage access for those living paycheck to paycheck. The next stage of challenger banks is the creation of product marketplaces through banking as a service. They should be providing multiple offerings from other brands, moving further away from the siloed system of traditional banks only offering their customers their own financial products such as savings, loans and insurance. Whilst margins will be lower for marketplace products offered in comparison to own-brand products, set-up and risk is also outsourced and customer satisfaction should rise as they have a curated choice of market offerings rather than a single-branded offering.
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The traditional’s struggle This approach is trickier for traditional banks to adopt. Gartner researchvi shows that in the US 69% of retail banking brands rank average or below in digital performance. Currently, most are only selling their own branded products developed and delivered on their own technical infrastructure regardless of the customer needs. Traditional banks have the ability to use their branch network to increase customer digital and financial literacy as well as a customer service triage point (an area that most challenger banks have been poor at focusing on) - because people still want to talk to people at a bank as they make their financial choices. So what’s the answer? Traditionals have the advantage of albeit costly physical branches and are hamstrung by inflexible legacy
systems, technical debt and expensive time consuming transformation programs whilst challenger banks have proven to be able to develop customer experiences that fit audience needs, yet have an issue with ensuring they are the customer’s primary bank and then selling additional products to achieve profitability. COVID has added to this inflection point and accelerated the need for strong strategic vision as it has exposed traditional banks that had pressed the snooze button on modernization. When branches were immediately closed, banks had to provide a good end-to-end digital service and this exposed weaknesses in traditional bank customer journeys to all. For banking to properly adjust to what customers want and need, especially in recent times, companies need to adopt a hybrid approach to deliver the best parts of the traditional and digital models - the loyalty, service
