Reinventing retail banking in a post-pandemic world

Although many things changed in the last few years, particularly in 2021, many more seemed to stay the same. Whenever the banking industry thought the end of the Covid-19 pandemic was nigh, a nascent variant of Covid would make their collective hopes redundant.

Despite these holdups, banks continuously tried to transform the way they deliver services and sought to improve efficiency and customer experiences. As we proceeded through 2021, the most successful retail banks exhibited leadership. The urgency of digital transformation increased as consumers continued to test alternative banking options.

Let us reflect on some of these trends in detail. 

Improving the digital customer onboarding success 

Banks need to completely revamp onboarding processes that lack the depth of communication, personalised recommendations, timely engagement, and multichannel integration. A solution is to re-engage existing branch personnel to assist in the digital onboarding process, armed with insights that can empower teams to provide valuable contextual recommendations. 

The future of customer engagement needs to be more personalised

Consumers were becoming increasingly connected with their banks or credit unions across channels in 2021, interacting with many touch points before opening an account or even doing a simple transaction. 

The most successful organisations had a holistic data and technology strategy that could be customised at scale depending on each client and could adapt in real-time to make smart decisions and automate the self–reinforcing cycle of tailored experiences. 

Financial institutions must move on from using data and analytics for the sole purposes of great internal reports, to using data, analytics and content for exceptional experiences. Financial institutions should merge offline and online data sources. 

Until this is done, the ability to optimise the customer journey will remain dreadful. If the customer profile includes hybrid customer channel information, the likelihood of personalisation of both content and channel will be heightened. 

Digital banking transformation is certainly not motionless

Financial institutions began to realise that digital banking transformation is a journey as opposed to a destination. Investments in digital banking transformation must continue to increase.

The benefit of a strong digital banking transformation process can become self-funding, reducing costs through efficiency and paying off in improved experiences driven by innovation, personalisation, employee satisfaction and growth. 

Making Banking-as-a-Service (BaaS) platforms mainstream 

The expansion of the Banking-as-a-Service model across the entire financial services industry in 2021 facilitated value creation as well as value exchange between both financial and non-financial entities, with the consumer being the primary beneficiary. 

BaaS platforms increasingly democratised the offering and delivery of products and services, accelerated the innovation process, and allowed for faster iterations as consumer behaviour changed. Banks should take steps to increase engagement with the customer beyond checking daily balances. 

This requires that financial institutions move more toward "embedded finance" that is part of a consumer's everyday life. Combining financial services with social media, retail, transportation, hospitality, investment and advisory services increases the potential to provide incremental value to retail consumer segments or even on an individualised basis. 

Illustration: TBS

Technology modernisation and scale is not enough 

Investment in new technology, by itself, did not alleviate conditions at most financial institutions in 2021. Evidently, the biggest challenge for most financial institutions was not legacy technology, but legacy leadership and regulations geographically. 

There will be an increased tightening in the number of banks in existence in 2022 and beyond due to the costs of doing business, and the changed behaviours that accelerated as a result of the pandemic. 

The biggest need will be leadership, vision and culture that embraces change, is willing to take risks, and is ready to transform their organisations into something entirely different than they have been since their formation. 

Adopting the cloud to remain competitive

The majority of financial services organisations are yet to deploy core systems to the cloud. The reasons include the perceived amount of complexity and concerns over security, risk, governance and control. 

Most financial institutions were actively using cloud services already or plan to in 2022 and onwards. In other words, while banks of all sizes recognise the need to transition to the cloud, a majority have not started this process. 

While there have been reservations in the past around cloud security and regulation, cloud computing solutions will become prevalent in the marketplace for both traditional and non-traditional financial institutions in 2022. 

Organisations of all sizes will move to the cloud to remain competitive. Traditional banking systems will become outdated and inflexible, making it costly to deploy new solutions or protect against advanced security risks. 

Re-training, re-skilling and new hiring

The need for a shift to digital engagement accelerated in 2021 and the expectations around speed, simplicity and empathy replaced physical convenience as a key differentiator. This shift disrupted back-office processes, increased the need for real-time data and applied analytics, and put pressure on leaders and employees ill-prepared for this pivot. 

The emergence of new jobs created explicitly to support a financial institution's digital transformation is occurring. In addition to new jobs, many existing jobs have been radically modified as institutions begin to introduce new technology. 

While some hiring was required to support digital banking transformation, there needed to be a prioritisation of employee retention and retraining as well. To be prepared, financial institutions must assess the skills needed in the critical roles of the organisation not only for 2022 but looking ahead for the next three to five years. 

Embracing the change that will be occurring will be the responsibility of every individual, at all levels. Going forward, lifelong learning will become a priority. While the commitment to learning will be a personal responsibility, each bank needs to step up to make it possible at a speed previously thought to be unproductive.

Outsourced solutions provide a gateway to innovation 

A robust ecosystem of partnerships helps banks experiment, learn, and, ultimately, import capabilities that are necessary to adapt to acute and chronic disruption. Ecosystems enable organisations to operate more flexibly, providing access to more collaborators and a greater range of potential innovations, thereby increasing the volume, quality, and risk tolerance of experimentation and learning. 

When hoping to build an improved process, add a new solution, or completely change existing business models, working with organisations that have already built a viable solution for other institutions should be considered. It allows for the focus to be moved to other initiatives that may need greater internal resources while allowing for solutions built at scale and with speed. 

Veiled attrition dented customer loyalty

It is hidden by attrition that most customers do not close accounts when they move relationships. Instead, they divert their loyalty to alternative providers that offer more value. Sophisticated capabilities such as the application of predictive analytics to manage churn need to be integrated with other marketing initiatives to stem the flow of customers using alternative providers. Focusing on the improvement of consumer experience will also result in more engagement, increased expansion of relationships and less mix.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.