The UK Competition and Markets Authority (CMA) has stepped in to force banks to innovate in order to make life easier for their customers and to encourage competition within the industry. The inquiry (costing £5m and taking 2 years) lacks real punch if their aim was to enable customers to switch more easily (only 3% of banking customers switch each year). Nonetheless, the fact that they felt the need to order banks to be more transparent and build better relationships with their customers is a very sad state of affairs, and all the more difficult to understand in a sector that has seen FinTech all but transform people’s access to financial services worldwide.
It seems that in light of the FinTech revolution, high street banks are struggling to keep up with this agile new breed of competitors. They are hampered by their size and internal bureaucratic processes and like many traditional industries they are still developing products, services and technology with little focus on the outcome for the customer. But financial services, and banks in particular, need to take customer innovation seriously because disruption is coming. And it’s coming from outside their sector. If banks don’t act fast to change the way they engage with customers (their most valuable asset) it could be too late.
Today’s customers want their brand to be two steps ahead of them, preferably more, and for companies to simply keep up with the pack is no longer good enough. Customers want companies to anticipate what they’re going to need next, and if a brand shows any signs of not living up to this expectation, they will seriously consider jumping ship. In the banking industry, with only 3% ever switching, either customers are incredibly happy with their provider or are dissatisfied and stuck. If it’s the latter of the two, their likelihood of purchasing any other products and services from their bank is going to be miserably low.
The next generation of banking customers, aren’t interested in how many branches a bank has, or even how many ATMs. They’re not interested in the small print, fine print or any kind of print. Historically older generations have not been able to switch but this is changing. The next generation won’t be loyal and they won’t stick to a bank just because it’s the one their parents used. They’ve gone way beyond just wanting to do their banking online.
Customers want the kind of services that might be provided by the leading tech giants of Silicon Valley; any product or service needs to be effortlessly intuitive, community-based, engaging when it needs to be and relevant. Products needs to be built for how they live their lives and not for how banks make the most profits. Moreover, consumers want products and services built by them and certainly not by a different generation in a corporate office building in the square mile.
Banking is in trouble when it comes to dealing with a generation of people who are tech savvy, these will be their customers in 20 years and even if the financial sector chooses to ignore this looming challenge, short term commercial gains are often prioritised over the long term value of investing in a relationship with their customers. ‘Customer is King? Sadly, not always.
There can be little doubt that rather than lifting their vision, creating a sense of belonging and a real dialogue with their customers, the majority of banks are still retreating towards traditional ways of dealing with the customer – perpetuating the ‘us’ and ‘them’ environment.
Companies that are thriving today, and will ultimately succeed in the long run, intuitively ‘get’ their customers. They are continually creating experiences, products and services that resonate with people. Great companies truly know exactly what their customers want and when they want it, they know where their ‘blind spots’ are and they are actively developing and refining solutions in collaboration with their customers to address their ever changing needs.
There will come a time within the next five to 10 years where we’ll start to see organisations who don’t understand their customers fail – and some of these brands may well be high street businesses, including banks. To stand a chance, banks must treat innovation not as an optional extra but as the beating heart of their brand. They need to share the values of their customers, create a sense of belonging, create emotional rewards and make their customers feel smart and proud to have chosen to bank with them.
If banks get it right and start truly building their products with their customers and for the long term, the only thing the CMA will have to worry about is how to regulate all this new innovation!