Banking has to become a lifestyle business

In order for banks to compete in the new era after the corona pandemic, the customer experience needs to be reorganized and redesigned. A new study shows what is necessary for this and how banks in Germany deal with it.

Classic retail banking, i.e. business with the majority of private customers, is in a profound process of change. Changed customer behavior, intense competition, digitization and other factors lead to a steady narrowing of margins and are increasingly presenting banks and savings banks with new challenges. Studies on the latest trends and developments and how to react to them can be found on the Bank Blog.

Fierce competition is expected in the aftermath of the corona pandemic. In order for customer expectations to be met, banks need to review their priorities and reorganize investments. Retail banks are faced with a decision: either the institutes base their offerings on customer expectations or they run the risk of losing these customers completely.

A new study by Capgemini and Efma examines a current trend in which banking is invisibly integrated into the lifestyle of customers. According to this, with Banking-as-a-Service, for example, financial transactions can be better embedded in the lifestyle of the consumer and in this way a sustainable, experience-oriented customer journey can be made possible.

With Banking 4.X into everyday customer life

The economic consequences of the corona pandemic are currently continuing. The effects have triggered a new era in banking that focuses on value orientation and customer centricity. In the study, this is referred to as Banking 4.X. In order to be successful in banking 4.X, banks and savings banks are forced to accept the digital transformation and thus also to implement cloud-based banking-as-a-service (BaaS) platform models that use APIs. In this way, banking and financial transactions can be better integrated into everyday life for customers and at the same time more accessible.

Over the past decade, neo and challenger banks have attracted over 39 million customers. The study showed that 81 percent of consumers worldwide are currently ready to switch from their traditional bank to a new-age financial provider. However, provided that this provides simple access and a flexible banking offer.

Digitization is necessary to win customers

The corona pandemic is forcing traditional banks even more to accelerate digitization and cost optimization measures so that they can not only keep their customer base, but also expand it. In addition, private customers who have been affected by the pandemic expect fully digitized offers on demand (on-demand), hyper-personalized services and support around the clock.

According to the study, around 72 percent of customers in Germany expect a cross-channel banking experience. Nevertheless, 46 percent of the bank managers surveyed stated that they were still unsure about the implementation of open banking, the combination of ecosystems and a truly data-driven organization. Nevertheless, these measures are relevant components of the modern 4.X banking method. Because with an innovative attitude and way of thinking - away from the traditional banking business and towards the introduction of banking-as-a-service - financial institutions could grow beyond their core banking products, create new offers and thus offer their customers personalized services.

Platformization is gaining in importance

In open ecosystems, established banks can locate new values ​​via BaaS platforms. Thus, on the one hand, they gain access to new data sources and, on the other hand, there are various monetization options. One thing is certain: the banks are being forced to quickly switch to experience-oriented, platform-based approaches so that banking transactions and other services can be integrated into the everyday lives of customers. This shows a positive development: 66 percent of the banks state that they already use such a BaaS platform. Another 25 percent are in the process of developing them. In Germany, 58 percent of the institutes use a BaaS platform and 31 percent are currently developing it.

Traditional banks can use external providers

Traditional banks have several strengths that are easy to monetize. This includes, for example, customer knowledge, existing reporting, license agreements, transaction processing as well as connection to global systems and many more. In addition, you can already fall back on numerous external providers. In this way, their offering can be improved - at the same time, customer demand for a more established and tailored experience can be served in the best possible way.

The strategic cooperation creates innovative, creative offers that reflect the customer in his lifestyle, his needs, desires and even in his personality. Therefore, banks should focus on improving customer support, reducing the cost of banking products and services, and offering sustainability initiatives.

BaaS helpful for new synergies in the ecosystem

The study showed that the traditional banks have recognized that it is of the highest relevance for them to take advantage of the offers of their broader ecosystem. 80 percent of banking executives think that BaaS is helpful in harnessing synergies in the open ecosystem and thereby developing innovations and new banking products and services. In this way, institutions can catch up from their current level of customer expectations to the level of tomorrow. It is to be expected that this lag will become even greater in the era of Banking 4.X.

New, needs-based, digital and also easily tradable channels will change the way we do banking today. In this way, banks can also involve the underserved and underserved population groups more closely.

Data-driven approach to an improved customer experience

The path to success is the aforementioned, targeted collaboration with the right partners. The BaaS approach offers a number of possibilities to collect more data through and about ecosystems - and to use this for an optimized customer experience. Over 86 percent of customers worldwide say that they would share their data in order to get a better, more personalized experience. It looks similar in Germany: Here 85 percent of consumers say it.

In order to be able to use the data from the ecosystem, established banks have to build up their digital capabilities accordingly. In the era of Banking 4.X, institutions can thus create, maintain and increase added value. It is also expected that leading banks will focus their transformation efforts on the consumer. This is done by tracking both the behavior and mood of their customers through intelligent data analysis.

It should be noted, however, that banks must act quickly. The study shows that 61 percent of companies do not have a dedicated customer experience (CX) management team that defines customer roadmaps. Institutions could significantly improve their customer experience by setting up a digital CX level and transforming bank branches into experience centers. In this way, banks enable their customers to offer their customers a consistent and secure omni-channel experience across all touchpoints.

Infographic: BaaS platforms as the path to the future of banking

The following infographic summarizes key results of the study and shows how banking-as-a-service platforms enable the embedding of financial transactions for the banking of the future.

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