Are Most Banks Too Small to Succeed in Today’s Digital World?
Over the past couple years, the Digital Banking Report has done several research reports on the digital transformation of the banking industry. While the largest financial institutions appear to be keeping pace with consumer expectations, the majority of the industry is falling woefully behind. It doesn’t need to be this way.
The Digital Banking Report has been researching the financial services industry for more than two decades, tracking industry trends and making predictions about the future of retail banking. Recently, a startling trend has emerged that could have a dramatic impact on the industry worldwide.
We have found that as digital technologies and advanced analytics have provided exciting opportunities for financial institutions, only the largest organizations are positioning themselves for the digital future. While there are notable exceptions, the question to be answered is whether the majority of institutions are too small to succeed in a highly competitive digital banking ecosystem, where winners will be determined based on the ability to use data and insights to deliver exceptional digital experiences?
As a panel of over 100 industry experts and several hundred respondents to a global survey looked at the major trends and predictions for 2017, the collecting and application of consumer data, use of advanced analytics, ability to personalize the customer journey and improving the customer experience were at the forefront of many experts’ predictions. In fact, the impact of improved use of customer insight was the foundation of most of the trends predicted for 2017.
Expansion beyond traditional products, services and channels were also predicted, as open APIs, the Internet of Things (IoT) and more fintech/banking partnerships were expected. Finally, there was an agreement among those surveyed that pursuing each (or any) of the major trends would continue to be a balancing act, as organizations would need to prioritize innovation while trying to continue their cost cutting … all in an environment of regulatory transition.
Here are some of the findings from the past 18 months that concern us, as the industry tries to meet consumer’s digital expectations, while competing with smaller fintech firms and large tech organizations.
In a study on the importance of personalization in banking, published in conjunction global market research leader GfK and sponsored by Personetics, we surveyed both consumers and the financial services industry to determine the key beliefs, behaviors, trends and priorities related to personalization of the banking relationship.
By comparing the results of the consumer and financial institution research, we were able to determine gaps in the delivery of digital personalization, as well as uncover opportunities for differentiation. We found that consumers want personalized, predictive and actionable insights delivered in real-time – and are willing to partner with financial institutions to achieve this value-added objective.
These expectations are caused by the increase of digital and mobile technologies, and the rise of mobile payment innovators such as PayPal and Square, that have made banking customers aware of real-time financial transactions and value-added services. At the same time, Google, Amazon, Facebook and Apple (GAFA) have raised the experience bar even further, showing that consumer needs can not only be met, but anticipated. As a result, financial institutions must accommodate these increased expectations with personalized service, or risk relationship abandonment.
To assess the ‘personalization maturity’ of financial institutions, we had organizations rate themselves as ‘Advanced’, ‘Emerging’, ‘Static’ or having ‘No Plans’ to provide contextual, personalized insights and solutions to consumers. In our research, the largest financial institutions had the highest self assessment around the ability to provide real-time contextual guidance.
