I know you’re keen to discuss the findings of your research, but for our readers who aren’t familiar with Personetics, would you please provide a quick overview.
What we do is very simple, although what it takes to get it done is quite complex. Financial institutions have tremendous amounts of data about their customers. With online and mobile banking becoming the major channels for customer interaction, there is more data than ever and it’s more real-time than ever. We enable financial institutions to transform these data assets into personalised, real-time insights that are delivered to customers through all digital channels, and help them better manage their finances on a day-to-day basis.
There are millions of consumers that are already using these services from banks that have deployed our solutions. What we’re seeing is that satisfaction and Net Promoter Scores go up dramatically when customers get personalised guidance and assistance, so by helping consumers, these banks are also making their business stronger.
You recently released new research called ‘Banking Disintermediation: The Personalisation Imperative’, looking at the use and expectations of traditional and alternative financial services (AltFI) by UK consumers. What do the findings reveal?
One of the standout figures was that 45%, nearly half of all participants, would switch their current account to an alternative financial institution (AltFI) such as a challenger bank, retailer, or fintech company.
The findings also reveal that AltFI customers are more satisfied than their traditional banking counterparts, with a substantial 82% saying they would recommend an AltFI. Additionally, 66% of AltFI customers said that the services helped them better manage their finances, opposed to 57% of traditional institutions’ customers.
What should the banking industry take away from the results?
AltFI usage is greater than industry expectations, and while current usage levels are consistent across all age groups, adoption of the services is set to increase as millennials embrace convenience, easy ways to engage, and demand more guidance and personalisation. Customers aren’t leaving in droves just yet, but the study indicates that a shift has commenced.
It’s clear that customers aren’t happy with the service they’re receiving from traditional banks. Banks need to cater to individual requirements for customers and offer tailored services that satisfy their specific needs. Personalisation has become a key factor for customers when choosing their financial providers, and with the introduction of new, easier ways to manage finances that AltFIs are providing, traditional banks must rethink their approach to remain relevant to consumers.
It sounds like the average consumer isn’t in a rush to leave the traditional financial institution, but more people are using AltFIs than expected. Do you think we’re at the start of a major shift in retail banking?
What the survey shows and what we’re seeing in the market is that it’s not an all-or-nothing question. The risk to traditional institutions isn’t necessarily that customers will leave them now in droves. The real threat is the erosion of customer engagement, relationships, and affinity.
The trend is that consumers are shifting their relationships towards providers that are giving them personalised services and guidance. The startup banks are more agile and don’t have a legacy IT to deal with, so it’s easier for them to deliver up to date services and technology. At the same time, traditional banks have more data assets they can utilize to better serve their customers, so I believe alternative and traditional providers can emerge as winners if they understand what consumers are looking for and take the necessary steps to deliver more personalised relationships and services.
How do you see the relationship between established banks and AltFIs evolving?
I think we are going to see more and more collaboration around the customer, and that will include traditional and alternative providers. One of the things that some of the innovative players – traditional banks and alternative providers – are starting to do is expand their partnership strategy. They leverage their understanding of the customer to provide a host of services that would be provided by a network of affiliates.
By doing so, they deliver value to the customer, while at the same time strengthening their relationships. As a customer, if I can find more useful services through the bank app, for example, I have less of an incentive to look elsewhere. This also further enriches the banks’ data assets about me as a customer, so now the bank can become even smarter about providing me with a highly personalised service. Partnerships and networks are going to become very important for financial institutions in order to provide this holistic customer view and customer service moving forward.
What do you think the banking customer journey will look like 10 years from now?
I think the notion of banking as we know it today may not exist in 10 years, and for a number of reasons. Cash will probably disappear from most economies, and all transactions will be digital and mostly mobile- and biometric-enabled – just smile and buy. As the economy will continue to shift from an ownership to service model (‘Uber everything’), traditional financial services such as savings and lending will become less common. Financial services will become more of a mash delivered by multiple types of providers, and embedded tightly into the actual services.
Most decisions will be done or greatly assisted by robo-advisers, which will become more capable and have a broader view and understanding of the individual at every step along the customer journey. They will become an extension of the customer and provide intelligent guidance for day-to-day activities, as well as more important life cycle events.