Financial Services

Whose Customer are you? The Reality of Digital Banking

May 21, 2018

Global

May 21, 2018

Global
Renée Friedman

EMEA

Renée Friedman joined The Economist Group in July 2016 as a Managing editor for EMEA.  Her work focuses on thought leadership programmes for the financial services sector.

Prior to joining The Economist Group, Renée worked in a variety of roles: in Economic and Political risk consulting, in finance in the City of London as an Economist, a Macro strategist and a Bond fund manager,  in the  international and UK domestic policy spheres as an Economist to the Treasury Select Committee at the House of Commons and as Senior Economist and Chief Technical Advisor for the UN Development Programme’s (UNDP) Regional Bureau for Europe and the CIS,  and as an academic, designing and teaching economics courses at universities across London.

Renée has spoken on a variety of panels  and events focused on Russia, Ukraine and other emerging market economies including those for BNE Intellinews, IHS Global Insight, the IMF Poverty Reduction Strategy meetings, and for the UNDP. She has also appeared on CNBC.

Renée holds a PhD in Economics from London Business School, a Masters in Russian and East European Studies from the University of Birmingham, and a Bachelors in International Trade and Development from the London School of Economics & Political Science.  She is also a Prince 2 certified project manager. In addition to her native English, Renée speaks Russian.

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The future of banking is digital, but the human touch will remain essential in attracting new customers for loans and complex investment products. Stakeholders must co-operate like never before to deliver the user experience customers want while keeping their money and data safe.

This report, the fifth in The Economist Intelligence Unit’s series on the future of retail banking, marks a significant shift in the strategic concerns of banking executives worldwide. Previous reports tracked the shift in customer expectations and its likely impact on distribution and product design. Now the focus is firmly on implementing open banking and dealing with its consequences.

  • Technology and digital are now bigger—and more important—trends than regulation. Changing client demand, the rise of the smartphone and the introduction of new digital technologies have replaced post-financial crisis regulation as the drivers of strategic thinking at banks around the world. Integrating open banking that allows apps to initiate payments and other financial transactions is core to adapting to the digital banking age.
     
  • No single digital strategy suits every bank in every market. Respondents say their banks are adopting different strategies. While 61% want to develop niche propositions, others are, to varying degrees, opening up and giving access to new third parties. Some banks will view regulatory and technological change as opportunities to recreate themselves and build new ecosystems, while others may simply comply with emerging norms and regulations by granting access to customer data and payments via competitors’ smartphone apps. Going with the easiest options may leave banks, and their products, at risk of being assimilated, aggregated and unbundled by agile competitors, leading to a loss of brand and product visibility.
     
  • Banks must become more agile. The development of agile products requires improved organisational agility as well. According to 52% of survey respondents, product agility is now their top strategic priority. New payment players and the likes of Google, Apple, Facebook and Amazon, collectively known as GAFA, know what their clients want and are able to adapt quickly. Banks have to keep up, restructuring their business models to ensure that new products and features can be integrated quickly across physical and digital channels.
     
  • The impact of open banking and tighter security and data rules—and the conflicts between them—do not appear to be fully understood. While 71% of respondents are focusing their digital investment on cyber security, only 17% are concerned about a third-party relationship vulnerability being exploited as a result of open banking. The biggest danger to a sustainable banking model is the loss of valuable data on customers’ lifestyles and needs. Without that insight, all banks will struggle to upsell more profitable loan, investment and retirement products.
     
  • Customer and regulator concerns about data security may limit some of the big banks’ ambitions. The larger banks can take the fintechs on by building all-encompassing platforms that offer a seamless interaction with other products, services and comparison tools. Offering greater functionality means banks can learn more about customer needs and tailor new products to match.
     
  • Artificial intelligence and chatbots have a role in customer services, authentication and fraud, but banks are taking a cautious line as they do not want to lose their customers’ trust. Just over 20% of respondents think artificial intelligence (AI) will improve the user experience. However, banks need to appease customers’ uncertainty about the security of their personal information and how these data about them may be used. They will need to do this while maintaining a frictionless user experience that still takes into account individuals’ needs.

     

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