The past 18 months have illustrated consumers’ urgent need for financial flexibility and when they’re the ones dictating terms, you listen. Choosing not to could spell extinction for banks. Mambu’s Eelco-Jan Boonstra, explains.
According to a joint research “Evolve or be extinct” from Mambu and the Financial Times, 58 % of senior bank executives believe their bank’s operations will cease if they don’t revamp to a consumer-obsessed business model. As an industry that continues to lag behind others, monolithic banks are in dire need of renovation.
There are, however, a few contenders who understand the necessity of digitisation and are putting consumers at the forefront of their approach. These financial ‘Evolvers’ include fintechs, challenger banks and forward-thinking traditional players that are laying the foundations for modern-day banking. Through a laser-like focus on customer centricity, they layer their business models with agile offerings and a progressive social purpose.
What really separates the Evolvers from the Legacies?
Legacy banks can’t keep up because they don’t have the capabilities to do it all themselves. A third of banks are unable to deploy updated or new products at speed and lack qualified employees, with the skill sets needed to operate new technology. Well over a third also don’t have the appropriate systems to support new workforce models. This explains why two fifths of senior executives intend to modernise their platform, but plan on doing so through third-party providers.
This is where the Evolvers race ahead. For example, by working with fintech partners to help them quickly respond to consumer demand, Evolvers are able to harness cloud-based platforms to deploy flexible financial products and achieve a seamless transition to digital.
Evolution starts and ends with a consumer mindset
After a turbulent 18 months for the global economy, consumers are increasingly seeking more control over their finances, and want banks to support them with the tools and services that can help during challenging times.
Evolving banks are doing exactly that, positioning themselves as “lifestyle partners” able t0 provide accessible financial products that are customer-centric and offer users a 360-degree view of their financial lives. This is crucial in a post-pandemic world and illustrates why nearly half of Evolvers rank the customer experience as their top digitisation priority.
As a result, banks identify new customer opportunities and deliver highly relevant offers at the right moments. Consumers enjoy these sorts of financial offerings too, as the report indicates that Evolvers see 24% stronger engagement levels compared to traditional banks.
But consumer engagement like this doesn’t just come from sought after products, it’s deeper than that.
It’s time for banks to show they care
Consumers increasingly desire to feel valued and want to see financial players act on these needs. Evolvers do this by making emotional intelligence a key part of their business model. By being transparent with their customers and committing to a clear social purpose, their progressive thinking stands out in an industry slow to change – enabling a competitive advantage in a saturated arena.
The biggest social cause Evolvers emphasise is the ideology of people over profits. They focus on meeting consumer demand in a way that’s both sustainable and delivers a best-in-class customer experience. This hasn’t gone unnoticed by the wider industry. In fact, 81% of retail banking leaders strongly agree that replacing outdated mindsets with a progressive social purpose is vital to growth strategy.
The best part of this ideology? It’s not just words. Mambu’s report shows that profits have actually slipped down the priority list for banks as ‘increasing earnings’ was identified as only the fifth most important factor when adopting a consumer-oriented model. It is this train of thought that will move the industry forward, while those who hold onto their legacies get left behind.
As most industries become consumer obsessed it’s important that banks emulate this approach to remain competitive. The key to this will be the ability to offer intertwined services that are seamlessly integrated under one roof.
It is this interoperability that banks must adopt to fend off growing competition from technology giants, such as Google and Amazon, as well as stay one step ahead of new market entrants. Failing to do so will leave traditional banks on the sidelines, as forward-thinking players surge ahead in the battle for the customer.
When facing doubts about the future, banks should look to financial Evolvers for guidance. By placing the customer experience and progressive mindsets at the core of their business, they have proven that banks can continue to play an important role in modern society.
About the Author
Eelco-Jan Boonstra is Managing Director EMEA at Mambu.