Technology will continue to disrupt industries next year; and the banking sector is no different.
Embracing digital has become the most effective way for banks to improve customer experience, combatting the disruption created from services like Revolut, while improving efficiency.
Technology adopted in the right way keeps costs down and allows existing banks, legacy banks to compete in a market where challengers are springing up left right and centre. And, of course, all of these are digital.
“As we saw in 2018, we’re going to see an acceleration of digital and automated processes across the board to improve that automation experience for the customers. And that goes for both retail customers as well as business and corporate customers,” said Don Bergal, chief marketing officer at Avoka.
Transformation through tech
The technology revolution will continue in 2019, and it should start out with basic things “like apply or fill up forms for a loan application, or a deposit account or a business account online,” continued Bergal. “But then it accelerates into doing all kinds of things, such as identity validation, fraud determination and anti-money laundering (AML) tracking, with online services that are all part of the digital process (things that happen behind the scenes that the customer doesn’t see).”
The more these processes can be automated and happen quickly, the better the experience both for the end users, as well as for the bank.
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Compliance issues surrounding AML and KYC are becoming more and more of a factor and consideration for banks and other financial institutions. So, what tech can banks deploy to help them achieve these emerging regulatory requirements?
“There are really two pieces of this,” says Bergal. “There’s the front-end that the customer sees, which is very much of a data gathering process, and then there’s the back-end, which directly impacts the cost of operations for the bank. You have to think of them really distinctly.”
“On the front-end, it’s all about how you capture the essential information from your customer, whether it’s the individual in their own right or an individual that’s associated with some small enterprise or even a larger enterprise. You have to uniquely identify them, you have to validate that identity, using some documentation. You have to capture other background information about them and then you have to pull that all into a package that can be used by the back-end systems; where they take that data and determine whether in fact there is a risk and whether they have to make a report to a governmental authority about some potential problem.”
Making an AML report is something that is costly and problematic for the banks. Reducing the number of times they have to do that and reducing the work on the back-end, therefore, is very important. The cleaner the data you get in on the front-end and the more complete it is, the better chance banks have of eliminating false alarms and having to do more work on the back end.
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Responding to the challenger
How are traditional banks responding ‘challenger banks’, why is there a mountain to climb?
“Traditional banks have a legacy to protect, and the big thing they bring to the table surrounds the personal relationship with the customer [sometimes for centuries], and a physical location,” said Bergal.
“Now, however, customers expect a very smooth digital experience and that’s just because of how the general public is doing business with other retail transactions. When you go to Amazon, or you go to another online retailer, it’s extremely simple; and the customers want to bring that to their bank.”
This is the most important thing the challenger banks, being digitally native, bring to the table. They’re completely digital, their whole system has been engineered around a friendly, digital experience. If the incumbent banks just matched that tit-for-tat they would lose their advantage [of physical location and customer history] that they bring to the market; “they’re putting themselves immediately in a secondary position,” explained Bergal.
So, in 2019, legacy banks have to bring a digital experience that ties in with their advantages, with the branches and with the personal relationship. Rather than just being a purely digital interaction it has to be an omni-channel interaction in 2019. There has to be a way for a customer to engage on their phone, on their telephone and in the branch, and it has to be seamless across all of those.
“As an example, if I’m filling out a loan application and I get part way through when I’m at home, sitting on my sofa and doing it on my mobile phone, I get to the point where I need some more information from the bank, I’m not sure exactly what they need or why they need it. I want to be able to call the bank and have the person on that end see exactly what I’ve completed and pick up from that point. I don’t want to have to have them start asking me the basic questions again. Who am I and what am I calling about? I need to have continuity in that process. Then once we get through that process, then I say well, I need my partner, my spouse, to fill in her part of the equation as well. So it shows up on her computer and she’s got to be able to contribute her information and validate her identity as part of the same application without having to start from scratch,” said Bergal.
Mix the old and the new
In 2019, banks will have to embrace this omni-channel experience, where they can interject their personal relationship and physical location, with a very smooth digital process, simultaneously. Of course, this is not easy. But, success will allow these incumbent banks to continue to show market leadership in the future, and stay ahead of challenger disruption.c
An onboarding experience that’s highly integrated will play an important role.
“It can lead to a much more personal experience and we believe that’s where the legacy banks are going to hold their own,” concludes Bergal.