The dramatic adoption of digital banking throughout the COVID-19 crisis promises to be a trend not soon forgotten as consumers and corporates race toward a substantially more digital future.
Fortunately, financial institutions met the challenge for digital service throughout the pandemic. J.D. Power’s customer satisfaction survey indicated a gain in positive consumer sentiment for the 2020 time-period.i Businesses felt the same way, praising financial institutions as they met the record-breaking demand for PPP and EIDL loans.
As banks and credit unions begin to take a slight breather from the breakneck pace of the past year, the general advice is don’t exhale for too long. The next wave of consumer and business preferences is coming, and it involves greater personalization and the need for increasing levels of digitization.
If financial institutions are going to ride the wave with customer satisfaction intact, they will need to be prepared to jump in the water right now.
Winning the Future Digital Race
If there is a keyword for the next decade in consumer banking, it would be personalization. Thirty-seven percent of consumers want their bank to be more like Amazon, delivering relevant automated feedback as they search for new products, such as a mortgage, or open new accounts.ii An additional twenty-nine percent want their bank to act as a personal shopper, guiding them directly to the products they need, while sixteen percent know what they want and fully expect their bank to have it.iii
Businesses are exhibiting many of the same preferences. In our recent survey of corporate banks, we asked executives to rate their clients’ priorities now. We also asked them to indicate what they expect those priorities to be in 2025.
In both cases, online banking portals remained in the number one position, with range of products and services occupying the number 2 slot.iv Account relationship management fell to third,v indicating that corporates want account relationship managers to provide digital offerings that support swift and efficient financial management.
To succeed in the new environment, financial institutions will need rapid access to a more extensive array of products, services and capabilities. However, this isn’t a distant vision in an undefined future. It’s a reality that is happening now, placing financial institutions in an all-out sprint toward a new era of banking.
For most, rapid transformation will come through a platform-based ecosystem.
Platformification in Banking, Speed and Agility Realized
According to market analysis conducted by EY, the banking environment is changing at such a rapid pace that financial institutions can no longer win the race by developing and managing the vast number of “best-of-breed products, services, capabilities and personalized experiences” that customers and business are and will continue to demand.vi The consulting organization even goes so far as to wonder why banks and credit unions would try to do so, when platform services are simpler and faster to adopt.
Bank executives seem to agree. That’s why sixty percent of those surveyed by McKinsey said they are likely to form or join an ecosystem,vii becoming platform players.
Adopting a platform business model supports digital adoption, often through cloud-based services. While financial institutions can build their own platforms, partnering with an existing provider will be the quickest and most direct route toward meeting the demands of digitally focused consumers and businesses.
A platform is simply a cloud-based location where products and services are built and maintained. Financial institutions access products through a connection layer known as an Application Programming Interface (API).
Using cloud-based platforms, financial institutions consume products as a service, connecting to a host of third-party applications. New capabilities are brought to life in short order instead of the months or years required to develop proprietary offerings.
One of the major advantages to the platform model is how it suits the way consumers and corporates bank today. Platforms make it possible for financial institutions to connect consumers to bank services and financial management tools through a single banking portal. Users can even move from personal to business accounts all with the same login.
As consumer needs continue to evolve and rapidly change, platform players are providing the type of service needed now, allowing financial institutions to build loyal relationships that last into the future, no matter what surprises that future may bring.
i “U.S. Retail Banks Nail Transition to Digital During Pandemic, J.D. Power Finds.” J.D. Power. J.D. Power Press Release, Apr. 27, 2021. Web.
ii Sonia Brodski, et al. “What Does Personalization in Banking Really Mean?” BCG, Mar. 12, 2019. Web.
iii Sonia Brodski, et al. “What Does Personalization in Banking Really Mean?” BCG, Mar. 12, 2019. Web.
iv “Roadmap to the New Relationship Model.” Finastra. Retrieved from https://www.finastra.com/sites/default/files/2021-03/market-insights_roadmap-new-relationship-model-transitioning-from-traditional-relationship-management-world-lending.pdf.
v “Roadmap to the New Relationship Model.” Finastra. Retrieved from https://www.finastra.com/sites/default/files/2021-03/market-insights_roadmap-new-relationship-model-transitioning-from-traditional-relationship-management-world-lending.pdf.
vi Howard Moseson, et al. “How Banks Are Using Ecosystems to Drive Growth and Profits.” EY. EY Parthenon, Dec. 4, 2020. Web.
vii “Ecosystem 2.0: climbing to the Next Level. McKinsey Digital. McKinsey Quarterly, Sept. 11, 2020. Web.
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