Oct 29, 2020

Banks have only six months to improve digital offerings

Challenger Banks
neobanks
Monzo
Starling Bank
William Girling
2 min
Customer experience expert Quadient has warned high-street banks that the window for enhancing their digital services is closing fast
Customer experience expert Quadient has warned high-street banks that the window for enhancing their digital services is closing fast...

Customer experience expert Quadient has warned high-street banks that the window for enhancing their digital services is closing fast.

The company references McKinsey & Co’s article ‘Financial life during the COVID-19 pandemic’, which found a “muted” response from those surveyed in the US and Europe on their intention to switch from branch-based banking to online options, although Latin America, Africa and APAC were generally more enthusiastic (Exhibit 10).

The reason, Quadient surmises, is a general consensus that challenger banks offer a better digital experience and sometimes even a superior service level altogether.

Ipsos MORI’s survey found that Monzo, Starling Bank and First Direct (all digital banks) ranked as the top three in terms of ‘overall service quality’. In fact, the only category where these banks were not in at least the top four was in ‘branch service’, and that’s only because it wasn’t applicable to them as digital-only entities.

The race for improvement

According to Andrew Stevens, Principal, Banking and Financial Services at Quadient, this contrast is a cause for concern. Despite the pandemic forcing banks to close branches and refocus on their digital portals, it appears that not enough is being done to win over consumers.

“Rather than being the moment digital investments paid off, instead it was a wake-up call that many banks do not yet have the finished article. If they don’t become more customer-centric in the next six months, banks should expect their customer base to shrink,” he warned. 

“The challengers currently lead the way, using mobile and online systems built with customers in mind that make account holders’ lives easier, rather than more difficult. One-way relationships typically don’t last long, and customers who don’t see their bank investing in their digital experience are likely to switch away.”

Innovating a solution

As we explored in our Top 10 digital banks, the rising popularity of challenger and neobanks, as well as the transformative customer experience they provide, has thrown down the gauntlet to incumbents. Clearly, innovation is the only way to level the playing field.

“The value of a digital service is in offering more than just telling customers what they know, or giving them the same information and services they already had on existing channels,” continues Stevens, and high-street banks don’t even need to start from scratch.

“To add more value for customers, they must first consolidate their customer data and channels so customers have a unified experience. This will enable banks to catch up with the challengers, build loyalty to keep hold of their customers and demonstrate the benefits of using largely online and mobile services over regular branch visits.”

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Jun 17, 2021

Zafin: Banking is now in the era of the tech ecosystem

Zafin
Banking
Technology
Digital
3 min
FinTech Magazine holds a Q&A session with John Smith, EVP Ecosystem at Zafin, on the evolution of banking and its future as an aspect of tech ecosystems

The development of tech ecosystems is placing the future of post-COVID banking in jeopardy. At a time when Big Tech can replicate the functions of traditional financial institutions, what can banks do to retain a grip on the market?

John Smith, EVP Ecosystem at Zafin, has a few ideas. A SaaS cloud-native product and pricing platform for financial institutions, Zafin is preparing the next generation of banks to cope with this precise challenge.

Smith is responsible for the strategic and tactical management of the company’s ecosystem, including the creation of new business models to support growth and differentiation. We asked him four questions:  

Q. Have the events of the pandemic caused an irreversible shift in the digitalisation of banks? If so, is COVID the sole cause or are there other factors?

It’s a great question and one that I am asked a lot. Without a doubt, the COVID-19 pandemic has driven a significant shift in the acceleration of digital. In fact, I’ve seen some estimates show there to have been as much as four to six years of digital adoption growth since the initial lockdown started. 

While the pandemic may be the primary reason for this growth, two other drivers include fintech disruption and the high costs of operating a traditional retail bank. Both of these factors have caught the attention of banking executives as they set their minds on accelerating digital transformation with a focus on high return, low risk. 

Q. Some commentators believe banks must learn from Big Tech in order to survive. Do you agree? Please expand. 

I agree completely; we’re living in the era of the ‘ecosystem’. All the seismic shifts we’re seeing in technology, be it aggregation, embedded finance, DeFi or hyper-personalisation are all enabled by the foundation of an ecosystem.  

When financial institutions work with a strategic partner like Zafin, which has made the strategic investments in a best-in-class ecosystem, they’re able to capitalise on opportunities more quickly and safely, and will be better positioned for growth now and at the other side of the pandemic. 

Q. What are currently the obstacles to adopting Open Banking? Is it more likely to 'take off' in some regions rather than others?

I would argue that Open Banking has been in the US for some time and will only continue to grow there. By definition, Open Banking is about the secure sharing of financial information that customers are aware of and have authorised. Under that definition, we’re seeing aspects of this well underway even though its full potential remains to be seen.

Third-Party Providers are a natural outcome of Open Banking, whereby they can create propositions beyond what a bank normally does to enable banking functions such as payments, borrowing, saving and so on. Once again, some of these are already present through industry-led initiatives, whereas regions such as the EU have taken the pathway of regulation such as PSD2.  

The industry-led initiatives we’ve seen in the US have also had the added advantage of guard-rails that regulatory bodies like FFIEC and CFPB provide. There are also other technology-led initiatives such as API definitions that are set out through the FS-ISAC. 

I would argue the future of Open Banking in North America will be through the natural evolution of the guidelines and API definitions that have been published, as well as the natural progression of industry initiatives. 

Q. Are there any other bank tech trends you'd like to discuss? 

Coreless banking. Zafin has been pioneering some of the work around externalising functions out of the legacy core to drive a more ‘fintech nimble’ bank, while not having to deliver a ‘heart and lungs’ core bank replacement. 

Real life examples of this include moving some of the core functions of a banking system, such as product and pricing to a platform like Zafin. Origination, onboarding, KYC, risk, and compliance are all other examples of externalising banking functions for added agility.

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