Many organizations are partnering to leverage big tech’s digital expertise. Others are playing the waiting game, to avoid collaborating with what might become their most deadly competitor. Where do you stand?
Antony Jenkins, the former chief executive of Barclays, warned that banks are facing their own “Kodak moment” as they face similar challenges that the film company faced when refusing to move with the times.
“Banking will be shaken up by the combination of artificial intelligence, the internet and distributed ledger technology, such as blockchain, which will do away with the need for central counter-parties on transactions. And while banks hire tens of thousands in their technology arms, often they are mostly maintaining legacy systems.”
Are these fears overblown – or should banks fear they might get left behind?
Technology isn’t the big issue
First, consider that according to the latest CXMB Financial Services report, despite historic levels of investment by banks, while 30% of customers believe that resolving issues has become easier over recent years, 32% believe it has become more difficult.
The results sound pretty evenly mixed – until you take into account that 57% of customers reported that they had moved some or all of their business from a bank as a result of a poor customer care experience.
The fact of the matter is that legacy business models are under threat. And yes, emerging competitors, including venture capital-funded fintechs and tech giants like Apple and Google, are threatening banks’ market share and disrupting the expected ways of doing business that have underpinned the industry for the last 300 years. But a look at the bigger picture shows that banks need to close the gap that exists between what they offer and how well those offerings actually meet customers’ needs and expectations.
It’s the technology/service gap
The CXMB survey results conclusively show that today’s customers expect to engage on their terms and in the channel of their choosing. Where this need is not met, customers are significantly more likely to rate their experience as a negative one – and as the responses above indicate, they often seek out alternatives.
While banking customers overwhelmingly prefer to speak on the phone to resolve issues, the frequency at which they pick up the phone isn’t always by choice. The responses below indicate that customers would prefer to use digital channels such as online chat, email, texting and self-help (such as online knowledgebases), but are presumably forced to resort to a phone call to have their needs effectively satisfied.
(Source: CXMB Industry Insights: Financial Services)
The disconnect between channel availability and channel efficiency is also borne out in perceptions of where banks have made strides and where they still need to catch up. While customers cite “Technology” and “Service” as banks’ No. 1 and No. 2 respective biggest improvements in recent years, they also point to “Service” as the No. 2 area where banks need to focus in the future. (“Service fees” was ranked No. 1 for this question.)
Navigating increased customer expectations
So, are banks facing a Kodak moment? While it’s true that customers are often lured by the promised speed, convenience, and efficiencies brought about by technological innovation, you can make the case that first-mover advantage is ultimately finite because legacy organizations have the resources to replicate or acquire new technologies in order to level the playing field. What matters is meeting customers on their terms, in the channel of their choosing, and avoiding the poor experiences that lead to disloyalty and switching. For more than 20 years, VXI has been providing highly specialized services for banking and financial services clients. We can help you navigate the change ahead.