Digital Trends in Retail Banks
For more than a century, retail banks and other financial institutions have depended on their robust branch networks to deliver a superior customer experience. But now, in our pandemic-fueled, digital-first world, customers are seeking digital banking solutions that make up the digital trends in retail banks.
As branches continue closing and reducing their operating hours, younger and older generations alike are turning to digital banking to accomplish everyday tasks, like paying their bills and depositing checks.
Customer expectations are high, technology is advancing, and (thanks to the rise of fintech startups) competition has never been greater. Studies show that the top 100 banks in North America, Europe, and Asia saw a notable decline in 2020, and experts didn’t see a speedy recovery in 2021, either.
The pandemic has been a litmus test for banks’ digital infrastructure. Now, banks are focused on delivering a standout client experience despite the virtualization of their own workforce, including how to maintain security and protect against cyber attacks while employees are working from home.
As brick-and-mortar and other retail banks make efforts to digitize, they must:
- Simplify the digital customer journey
- Enhance data analytics capabilities to generate key insights
- Expand digital payment tools
- Better integrate delivery channels
- Discover the benefits of open banking and the latest APIs
- Incorporate new technologies such as Internet of Things, AR/VR, and blockchain into current practices
- Invigorate their currency systems by using big data, artificial intelligence, cognitive computing, and other new technologies.
For example, banks have employed AI-driven software to recreate the social interaction associated with the in-branch, teller experience. It turns out that many clients now prefer voice assistance over in-person banking visits, when possible. Just ask Bank of America, whose virtual assistant Erica had over 10 million users in 2019, before the pandemic struck.
Gone are the days where clients are willing to spend an hour opening a bank account at their home branches. Today, they expect to open new accounts in just minutes, right from the comfort of their phones (I personally opened a Marcus Goldman Sachs account on the Boston subway once, after seeing an advertisement on the train).
Our predictions for key digital trends in retail banks for 2022.
Act like a tech company
To survive beyond 2025, banks must start acting like the latest technology startups. This means they need to not only attract top-tier engineering and product talent, but they need to build products quickly in order to keep up with the latest startups.
Unfortunately, many banks are weighed down heavily by legacy technology, making it difficult to develop operating models that are lean and agile.
Retail banks should start seeing fintech companies and other startups as partners, not competition. Unfortunately, many retail banks are not equipped with the technology to partner with fintech startups. In these cases, it might be necessary to upgrade the tech stack.
Like fintech companies, retail banks will need to participate in the larger tech ecosystem, developing products and partnering with technology companies that allow them to deliver excellent service to their current client based.
Quantum Metric, the Continuous Product Design platform, has helped retail banks minimize risk and maximize speed by focusing on customer experience analytics and data. With this information in hand, teams can prioritize the opportunities that have the greatest impact on their bottom line, overcome disciplinary silos, iterate quickly, and build digital products faster.
Retail banks need to engage in data-driven product design, meaning that they must iterate based on actual customer data and real-time insights, not simply based on unfounded assumptions from the top (executive suite) or bottom (product & engineering teams).
Retail banks that partner with Quantum Metric make their workforce more agile, self-organizing, and flexible. The platform can help retail banks to strike the perfect balance between in-person and remote arrangements, all while making it easier for retail banks to scale up and down as necessary.
Add new specialities
Another one of the important digital trends in retail banks is a new focus on specialization.
Retail banks have seen losses across the financial spectrum, including across loan categories, credit cards, commercial real estate, and small business loans. To make up the difference, retail banks have the opportunity to cultivate and develop new specialties, such as loan originations.
While loan growth and payment transaction volume are down, trading revenues and wealth management fees are up.Retail banks can also add new services in areas such as POS financing and mortgage refinancing.
While we have seen tremendous advances in technology focused on point of sale or payment activity (think Stripe, Square, and Amazon), there are countless opportunities for retail banks to innovate at the beginning and end of the value chain, in areas such as production, inventory management, payroll, invoicing, and accounts receivable.
Other trends that retail banks are considering as part of their digital-first strategies include:
- B2B HR and payroll technology
- Payroll fintech
- Financial health services
- Fintech-as-a-Service Platforms
- Tools to manage PPP loans
Venture capitalists at well known firms are especially interested in technology for income and employment verification, direct deposit switching, and payroll-attached lending.
Hyper-personalize the client experience
Retail banks deal with very sensitive personal information, such as mortgage and loan information. Because of this, it’s absolutely critical that retail banks keep client information confidential. But this level of client information also makes it possible to offer hyper-personalized banking experience.
It turns out that millennials and Gen Z’ers—the future clients of retail banking—are more likely to fork over personal data, as long as they receive personalized guidance in return. In fact, clients will change banks for more hyper-personalized service and better one-on-one virtual engagement, another crucial digital trend in retail banking for 2022.
To create this hyper-personalized experience, retail banks should lean on customer data, machine learning, and data analytics in order to build better relationships with their customers. AI, ML, and big data can help banks to create personalized solutions that foster brand loyalty.
If performed correctly, hyper-customized bank experiences can lead to “increased satisfaction and engagement, fraud-prevention, better decision-making and a feeling of human understanding from their bank.”
Leverage AI and Data Science for Security
As cybercrimes and financial fraud threats become increasingly more prevalent, retail banks must employ AI-powered technology to safeguard against financial losses, regulatory consequences, and brand loyalty.
With more remote workers, there is less on-premise IT/security. This means customer analytics, risk management detection tools, and anomaly detection software will become essential, as banks will need to surface potential issues long before they become a serious concern.
Moreover, retail banks will have more personal and financial data on their customers than ever before. While such data can help organizations build superior products, it also puts customers at serious risk when such information falls into the wrong hands.
Implement Blockchain technology
One of the digital trends in retail banks that is least understood is the adaption of blockchain technology.
Still in its early days, blockchain technology has the potential to decentralize financial transactions. This means that clients would be able to keep track of trades, bonds, stocks, and other transactions without requiring third-party authorization, which can delay the transfer of funds by days.
JP Morgan is already part of the blockchain revolution. Just last year the historic bank used blockchain technology to move billions in rep-market trades. This new Ethereum-based blockchain technology enables cash and treasuries to be moved instantly, which speeds up transfer times to almost instantaneous, reduces costs, and improves transparency.
How Quantum Metric can help retail banks adapt to the latest digital trends
As I mentioned earlier, Quantum Metric is already helping retail banks, financial institutions, and other organizations thrive in our digital-first world.
So far, Quantum Metric has helped retail banks to drive their agile transformation by:
- Reducing time spent configuring an event
- Cutting down on how many emails you’re sending to validate an issue
- Identifying, verifying, and improving the user experience faster
- Helping teams to prioritize the business impact of their product’s backlog
- Spending less time triangulating data across surveys, error logs, call centers, and other sources
- Discovering problems before customers call, fill out a survey, or complain
Quantum Metric helps retail banks to answer important business questions, such as, “Should we prioritize helping a handful of people struggling to open a new account, or ten of thousands of customers struggling to apply for a new credit card?”
Retail banks have used Quantum Metric to continuously identify ways to improve things like mobile check deposit flow. The platform assists teams with improving small but mighty features, such as the UX design and wording of error messages. Quantum Metric makes it easier to formulate an hypothesis, set up an event to capture data, and build new features that reduces friction.
Product, DevOps, IT/Ops, customer experience (CX), insights, and marketing teams at retail banks have benefited from using Quantum Metric. By combining multiple sources of data together and overcoming disciplinary silos, retail banks that use Quantum Metric have driven their bank’s digital transformation and moved their organization towards a more agile, customer-centric structure.
Quantum Metric has also helped retail banks in other ways, such as:
- Increasing loan application completion and identifying features (such as loan calculators) causing friction
- Enhancing UX on mobile apps to reduce the number of people calling in or using their desktop
- Improving digital self-service by understanding what customers are doing before they land on the “Contact Us” page
- Rescue new accounts and applications by triggering a live chat or other feature when someone is struggling to open an account or complete an application
- Detect and provide fraudulent activity by identifying patterns such as multiple logins or cutting and pasting login information
- Personalize and upsell in transaction flows by improving product placement and offering real-time engagement
- Identifying API anomalies that caused a site-wide crash
- Decrypting secure data to support customers
Understanding digital trends in retail banking will help you take your retail banking digital portfolio to the next level.