The future of banks and their branches with the changing consumer behaviour
The banking sector is dynamic and relies heavily on change and evolution. With banks primarily being consumer-driven, consumer behaviour plays a significant role in the evolution of banking. In the present times, the evolution of banking is driven not only by consumer behaviour but also by the impact of technology on consumer behaviour.
Owing to the growth in information technology, most industries use new technologies, and the banking industry is no different. The banking industry comprises two sections – traditional banking and electronic banking (e-banking). While consumers use both traditional services and electronic services, in recent times, there has been an increasing shift in consumer preference towards the use of electronic services.
The success of banks depends on the level of customer satisfaction. Therefore, banks need to manage the changing demands of customers to survive in a competitive environment. The NTT Global Banking and Investment Guide to the 2020 Global Customer Experience Benchmarking Report surveyed banks and investment firms and found that “83.9% of banking and investment organisations agree CX offers a competitive edge, 60.9% consider it a primary differentiator, yet just 17.4% say CX forms a crucial part of organisational strategy.”
Over the past decade, there have been tremendous changes in consumer expectations. While earlier consumers built trust in a bank through bank visits and relationships with the bankers, banks are now seeing a new generation of technology-savvy consumers who build relationships based on quality parameters specific to e-banking, such as responsiveness, consistency, and safety.
The consumer preferences can drive significant changes in the banking industry. Given below are some trends in consumer preferences that banks must focus on to move ahead:
E-banking: Nowadays, with consumers demanding seamless and user-friendly digital experiences, banks must invest more in digital banking to meet consumer expectations. With more and more consumers relying on their phones, mobile banking is set to undergo tremendous transformation. Customers also expect banks to streamline the online account opening process to avoid a visit to the branch.
Open Banking: Open banking is transforming the way consumers interact with their financial data. Open banking enables banks to provide consumers with tailored financial advice based on their transaction history and spending habits. Banks can also increasingly collaborate with fintech companies to offer innovative services and products.
Artificial Intelligence: With consumers demanding immediate attention and a seamless experience with the bank, AI can elevate and significantly improve the realm of customer service provided. AI-powered chat-bots can be used to handle customer enquiries which in turn frees up bank personnel for other complex tasks. AI algorithms can be used to make credit assessments and handle fraud detection to ensure there are no flaws in decisions taken.
Customisation of services: With consumers demanding more customised and personalised services, banks must leverage data analytics to deliver tailored experiences to their consumers. Banks must provide customised financial products and services such as tailored loan terms and savings plans. Banks must also leverage data analytics to analyse consumer behaviour and identify patterns and preferences that can help them provide relevant and timely offers.
Social Responsibility: With sustainability and social responsibility becoming increasingly important to consumers, banks must adapt to meet these expectations. Banks can offer green bonds and sustainable investment funds to promote eco-friendly financial products. Banks can also focus on local communities to support small businesses and initiatives such as financial education programmes.
Security: Consumers not only prefer digital banking but also expect their banking experience to be safe and seamless. It is of utmost importance to safeguard consumer data to ensure security and privacy. Banks can also make use of biometric authentication and data privacy regulations to ensure consumer privacy.
Branch makeovers: Despite the consumer preference for digital banking, physical branches will continue to play a significant role, especially in specialised services. However, banks will need to redesign the branches into smaller tech branches that focus more on technology and self-service.
Banks need to adapt to changing customer trends and preferences, keep customers satisfied and continue to survive in the industry. Banks have been able to accomplish this to a large extent but will need to continue to do so, especially in the areas of engaging the customer, improving customer experience through technology advancements and empowering the bank staff.