A warning from the future: Don’t bank on old ways

FOR banks, the path of lowest possible risk is to continue doing what they’ve always done; however this would be a grave mistake, as Alan Hughes wrote in the Forum last week [The challenge to banks: Who will lead on service, Wednesday]. Not only is service important, as Hughes argues, but with technology shifting the way we bank, there are huge opportunities for innovation here too. Transforming the services banks offer can respond to customer behaviour and rebuild consumer trust. This has to be more than a service that manages a weekly budget or a new savings product with an introductory rate that vanishes six months later. Banks need to provide a bespoke service that meets a customer’s individual needs. One size fits all will simply no longer cut it.

The way we bank is fundamentally changing: driven by the proliferation of smartphones, more and more customers are accessing banking services on the move. Developments in a number of key technologies, such as mobile banking and the digital wallet, are converging to provide the opportunity to take advantage of this shift. With consumers increasingly managing their affairs on a single device, banks can capture live, accurate data on their customers and give almost instantaneous feedback. The benefits to the banks are clear: more data allows better profiling, which leads to a better ability to predict need, which in turn means more effective selling and greater sales opportunities.

Developing a “branch in your pocket” would allow banks to simplify as well as personalise the services – providing a single account dashboard to allow easy access to key information: income, outgoings and transactions, as well as charts and graphs to compare spending month-to-month and year-to-year. This can be adapted to meet the customer’s needs – and regularly adjusted to reflect savings targets, changes in circumstances, or holiday funds.

By making real improvements to their services based on consumer data, banks can incentivise increased engagement from their customers. The more the customer engages with their bank, the more they will receive a service pertinent to them, based on their own profile and behaviour. To provide indispensable services, banks must embed themselves into the lives of their customers – so they not only facilitate saving for a holiday, but also provide a gateway to book flights, exchange currencies and purchase travel insurance, all at the touch of a button.

It remains to be seen whether the banks are ready to embrace this, and bring down the barriers to the services they offer in order to rebuild consumer trust. If they aren’t, it is only a matter of time before someone else steps in.

Technology giants such as Google and Apple have been hinting at moves into the industry for some time. Meanwhile, the UK’s largest supermarket Tesco is preparing to move into in-store banking so it becomes the ultimate one-stop-shop. As trusted names with a proven record in innovation, they pose a genuine threat to the banks’ position. This is a friendly warning.

Paul-Jervis Heath is head of design for Head London.