Brace for More Changes in the Banking Industry
We recently spoke at the BAI Beacon conference held in Chicago about the work we completed for Regions Bank, a large regional bank with roots in Birmingham, Ala. The conference was well attended by more than 1,500 bank leaders and executives covering a wide range of relevant topics providing insights into what is top of mind for the industry. The majority of presentations focused on different themes on innovation as the banking industry responds to major shifts in the marketplace. These shifts range from the emergence of mobile banking, the influencing power of Millennials who have very different lifestyle needs from their Boomer predecessors, to the growing disruption coming from the fintech industry. In reviewing the overall topics and content, we identified four major innovation streams financial institutions are either considering or implementing, serving as a benchmark for the industry:
1. Innovation in channel stickiness
The conference covered much on how branch network and omni-channel strategies need to evolve in order to continue to remain relevant to customers. Topics of interest ranged from redesigning the physical branch layout, to moving from transactions, to providing advice and empowering customers by allowing them to feel confident in their financial decisions, to exploring ways to link digital strategies back to the branch network. Terms such as “agile” and “seamless” were often cited as a new way to think about the financial banking ecosystem for customers, evolving from one-size-fits-all to curated bricks and mortar and digital experiences that better serve unique community needs. The number of topics and sessions reinforced that financial institutions are just at the beginning of their branch transformation journey.
2. Innovation in money management
Fintech trends and emerging disruptive platforms were by far the most attended and discussed topics at the conference. This is one innovative trend banks have been quick to respond to and embrace, with many exploring how to leverage the relationships with fintech companies in removing the friction points in banking, while also allowing customers new ways to access and manage money. Presentations covered how to partner with fintech firms and where these new platforms can best be used in building stronger customer relationships. The presentations also covered mobile wallet studies from Oxford Economics and Charney Research, which found that 60 percent of customers agree that mobile money enhances the purchase experience and drives loyalty to their financial institution. However there is a growing concern regarding fraud, and customers are looking for guarantees the platforms are secure. The study noted the growing appetite for biometric features like facial and iris recognition is strong from consumers. Expect to see more development in the area of security as this continues to be a growing concern as more transactions go virtual.
3. Innovation in transformational processes
Banks are also exploring how to harness the power of innovation as part of internal change management processes required to stay competitive. Leveraging design thinking to overcome challenges and find new solutions and partnering with firms who can bring new thinking in areas such as fintech, branch design and staff training, most financial institution are focused on harnessing the power of innovative processes. Digital is seen as key in supporting these transformational processes: through digital solutions banks can create effective in-branch experiences, enable front-line staff to better engage with customers, and offer more intuitive and immersive online and mobile banking platforms. Site selection for branches was another area where financial institutions are rethinking their processes to gain better clarity on finding the optimum location for their branches. More importantly, as they consider consolidation and branch redundancy, banks are taking new approaches on how to be best minimize the risk of losing customers and marketshare.
4. Innovation in personalization
Big data was a hot topic at the BAI Beacon conference, and we found that the conversation has gravitated towards how to leverage data in delivering more personalized services to customers. At past conferences, everyone’s focus was on the value of managing big data. Now banks are discovering how this information can provide greater personalization and how this can also be linked to automation in delivery of services. Discussions around AI and offloading current low margin consultations was also a hot topic of conversation, both as part of the sessions and in the numerous breaks and luncheons. We expect to see a considerable shift towards allowing greater customization in services, messaging, and the overall customer experience in upcoming years.
The banking industry is undergoing major transformation due to massive changes in regulatory policies, consumer behaviors and the shifting competitive landscape. Although these changes are significant, the majority of financial institutions are wisely embracing varying degrees of innovation to ensure they remain competitive.