The banking challenge: who will come out on top?

It’s safe to say the financial sector has changed significantly over the past decade or so. There’s real-time recognition that the pandemic has irrevocably changed the industry.

If 2000 and 2021 were the years that forced banks to change the way they operate (and embrace it), 2022 and beyond is where we see this change institutionalised.

A new normal has emerged. A faster digital metabolism, challenging conventional business models and empowered, demanding but fearful customers. All against a backdrop of rising inflation costs and the biggest squeeze we’ve seen in over 40 years.

The banking industry is experiencing more fluctuations in consumer behaviour than other industries. The new normal sees seismic shifts in consumer behaviour. Pandemic habits are long gone, replaced with motivations driven by rising living costs and the fear of a recession.

These evolving challenges mean banks need to rise to turbulent times. Those that are adaptable, resilient and forward thinking will come out on top.

Magnetic has worked with a number of banks to help future proof their businesses and look forward — from helping a global bank build innovation capability internally — to creating a future vision and strategy for the mortgage part of the business. In this article we’re diving into 3 trends we see emerging in the banking industry:

Overwhelmed by multiple apps and passwords, consumers want a single, streamlined app to manage their finances. New, exciting FinTech solutions are emerging to meet the needs of businesses and consumers.

Enter trend #1 — the super app. A super app is a single portal offering a full spectrum of services from paying bills, booking taxis and ordering food. Super apps use an integrated platform to carry out multiple tasks and create a unified user experience.

There’s already a huge market in South-East Asia. Some of the most popular super apps in the world include WeChat in China — with over 1 billion active users and Gojek, an Indonesian on-demand multi-service platform. Despite their growing popularity in South-East Asia, there’s still a big gap in the market in other locations around the world. First movers’ advantage will be essential in gaining market share and the race has already begun. Bank of America announced that it will replace its disparate mobile apps with one platform incorporating retail banking, investing, and mortgage services. As one of the first super-app players BoA will act as a useful case study for the sector and other markets including Europe.

The business case is clear: consumers are crying out for simplicity and convenience. The beauty of super apps is that they provide businesses with a captive audience, by blocking out the noise of numerous apps. Because users need to use the app to access multiple services, businesses have more opportunities to market their products and services, as well as collect user data. Data is king: it can be used to improve the customer experience and make targeted marketing efforts to further improve brand engagement and loyalty.

Enter trend #2 Digital; make it personal.

It’s well reported that the pandemic accelerated the adoption of digital channels. In a post pandemic world this trend continues and consumers are demanding a more customer-centric model.

A few of the shifts we’re seeing:

• Move to online only banks with over a quarter of British adults having an account with a digital-only bank only.
• ‘Digital immigrants’ and elderly people are also increasingly moving to digital banking but require specific targeted support.
• Increased demand for data driven hyper-personalised features and advice adapted to individual customer needs.

This customisation element adds a human touch to an otherwise robotic experience.The Bank of Ireland announced their intention to become the ‘Netflix of Banking’. BoI uses tagging and tracking tools to personalise e-mail messages and omnichannel branch experiences — realising a 278% bump in application submissions across digital channels. This mutually beneficial personalised content has helped the bank raise personal loan digital application submissions by 15%.

The challenge for banks is striking this balance between automating the banking experience while also maintaining a personalised relationship with each individual customer. While we continue to see this shift to digital there is still significant investment in bricks-and-mortar stores. Lloyds and Nationwide have recently launched futuristic flagship branches in Manchester. This might seem to be defying the digital trajectory but it represents the convergence of in person expertise and enabling technology.

Enter trend #3 The conscious consumer

Climate change is a hot topic. Banks (like most businesses) are working hard to look at their carbon footprint and reset policies to make sure they are environmentally friendly. There’s a significant opportunity for banks to go one step further and gain a competitive advantage by serving climate-conscious consumers.

The conscious economy is growing and more consumers are asking ‘where does my money go?’ We are seeing increased demand for green bonds, sustainable equity strategies and other products that let clients directly contribute to environmental or societal change.

Triodos, is a UK based challenger bank with a mission to make money work for a positive change. The bank provides information on every loan and investment it makes and every policy it follows is in the public domain for anyone to see. The impact for customers is being provided with an alternative to mainstream banking that allows them to keep their money in places that align with their moral values.

Magnetic is a design and innovation company that helps design better futures. We’ve worked with global businesses to build capabilities and transform organisations. If you’d like to find out more about our work, get in touch with Amy Taylor or drop us a line.

Authors: Darlene Kijemba & Amy Taylor.