How Banking Can Adapt to New Consumers

Even though practically every industry (among those that market products or services) has tried to adapt itself more or less proactively to new consumer habits, requirements and expectations, banking has, until recently, been in a position that has allowed it to have a slower reaction to these factors..

Little competition, a relative position of power —the customer in the past has not had any other option than to establish a relationship with one bank or another— and the lack of alternatives to most financial services created a gap in communication between the consumer and traditional banking.

But there are two factors that have changed the context of financial services. On one hand, the internet and the new model of bidirectional communication means consumers can share their opinions and influence these processes. Businesses not only receive feedback, but know the expectations of consumers. On the other hand, new financial services models put forth by Fintech businesses have come into the sector, and these models offer a clear alternative to traditional services. In addition, Fintech companies are directly based on a consumer-centered model, which follows consumer psychology and behaviour much more closely.

Consequently, this new banking-customer relationship and the appearance of new competitors has forced banks to make considerable changes.

A study by Accenture explains how the consumer is moulding traditional banking, not only regarding the services offered, but also in the way it approaches its processes and even its own business culture.

However, banking isn’t starting completely from scratch; it has important data history and consumer knowledge, as well as a position of confidence. With these premises in mind, there are four ways in which banking can work to confront the new paradigm of financial services 2.0.

  1. A New Approach to Bank Branch Offices. Branch offices have previously served as the connection between the customer and the bank. With the advent of the internet, this connection has been displaced, and banking operations are less dependent on the customer’s presence. This makes the branch offices less necessary, which can help save costs. But the change should go beyond this and radically change the user experience in the branch office, by adding an element of advice and personalisation to these proactive and multichannel services.

  2. Much More than Financial Transactions. Banking should go from being purely transactional to adding value to the consumer-banking relationship. One of the elements that new consumers value most is proactive financial advice, as well as completely personalised product and service recommendations.

  3. Taking Advantage of the Position of Confidence. The data history that traditional banking accumulates and the volume of new users provide banking with exceptional knowledge on user behaviour and tendencies thanks to data analysis, which is increasingly more precise.

  4. Winning Over the Millennials. In the next few years, this segment of the population will be one of the main, if not the main, consumer of services. Even though it’s generally not helpful to group an entire generation under the same label, millennials do share a common factor: the majority would stay with their bank if online services satisfied their expectations.

Despite the intense changes in the approach to financial services, and the speed at which these changes are happening, traditional banking can continue to have a great impact in the sector if it takes advantage of its consumer knowledge, overhauls the processes centered around it, and establishes a flow of communication that provides proactive and personalised financial advice. For this to happen, digital transformation is imperative.