"Outdated mindsets" holding back incumbent banks

By Ian Matthews, Data Evangelist, NGDATA

27 September 2018

Earlier this month, the former-chief executive of TSB, Paul Pester, stepped down from his role at the organisation following a string of IT failures which caused unquantifiable havoc. While IT failures themselves took centre stage as the focal point for the media – justifiably so; somewhat – it’s important to ask the question: was it just IT failure?

Or is there a wider, more pertinent issue at play here? One that is going to continue to cause an increasing number of issues for banks, and other types of organisations alike, unless it is addressed swiftly.

There is, and the issue ultimately boils down to the outdated mindsets of traditional banks. Organisations – especially banks – need to understand that in order to survive in this day in age, digital comes first. Modern consumers expect every digital experience to work seamlessly the first-time round. With plenty of challenger banks – such as Starling and Monzo – putting digital first and delivering advanced, in-demand features and excellent customer experiences, it's going to be tough for the traditional, incumbent retail banks to keep up. 

If banks can't modernise and provide the kind of services and experiences that customers are demanding, they risk losing relevancy in the market. They need to understand that the high value net worth customers of tomorrow are fast becoming the customers of today.

Without a flawless digital presence, it's impossible to truly engage your customers, let alone the next generation of digital natives. This is what the challenger banks are doing extremely well. They’re not only capturing new customers, they’re capturing advocates. They’re not customers because they have to be, they’re customers because they want to be – there’s a difference.

This is also largely down to the evolving mindset of customers. They’re now picking banks based on the experience offered, not the services. Let’s look at an example. The majority of traditional and challenger banks offer an overdraft facility. To take out an overdraft from a traditional bank, you’d most likely need to complete a fairly extensive application, submit the application, wait for a response, and then wait for the facility to be setup – it could take days, even weeks. You might even get declined. Now let’s look at Monzo. You can add an overdraft facility within minutes and adjust it accordingly in seconds. This is what customers have come to expect.

However, it’s not all doom and gloom for traditional retail banks. The digital disruptors are also facing challenges. Traditionally, in a start-up you move fast and break things. In banking, you can’t break things – you’ll lose your license. There’s still time for the traditional banks to pivot and catch-up, but as we've seen in the retail sector, the financial services landscape today is forcing businesses to evolve or die.

Ultimately, banks need to be smarter. They need to be looking at cutting-edge technologies to help them personalise and optimise the customer experience at scale. Banking is a necessity, and with necessity comes demand. It’s not humanly possible to supply this demand with the ultimate customer experience without technology. By turning to technology – such as customer data platforms – only then is it possible for banks to offer their customer base experiences that were previously only accessible by visiting your local bricks and mortar branch. 

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