As Banks Compete More On Experience, Compliance Becomes More Critical

Customer data is the essential asset banks need to utilise to better serve their customers, earning trust and inspiring loyalty. Banks that succeed in this endeavour will be rewarded with a greater share of wallet.

However, it is not enough to predict customers’ intent and deliver exceptional service. Banks also need to do this in a compliant and transparent way.

By achieving greater consumer trust, and with it loyalty, banks and other financial services institutions (FSIs) can start to build truly meaningful relationships with their customers.

With the passage of Australia’s Consumer Data Right legislation, there is a new incentive. As the fintech community grows and rapidly evolves, driven by a new wave of innovation, banks need to collaborate with the fintech community and third-party solutions through an Open Banking system which is already enabling new business models. Doing so will help the banks adapt to innovations quickly.

In today’s experience economy we are already seeing those new models emerge. Loans are granted in days or perhaps hours over the internet, sparing consumers weeks of paperwork and inconvenient and repeated trips into the branch. Payments are captured in seconds using mobile apps, and in some cases — through the application of machine learning and automation — bank clients receive answers to questions almost instantly.

The Game Has Changed

At a time of raised consumer expectations and diminishing brand loyalty, banks are competing more than ever on customer experience.

We see five important tenets underpinning the experience economy:

Discover Customers doing their own research in an unguided fashion. Banks have more information about their customers than anyone and can detect when they are preparing to buy a house or other major purchase based on activity in their account.

Engage Based on intent, banks can offer services that are relevant to where customers are at this point in time. Through Proactive engagement, they can guide researches to the bank, where they can offer a loan.

Consume Customers are buying products using a plethora of fast, convenient digital channels which are often bundled with other offerings. These need to be highly relevant and personalised. Consider the experience Rocket Mortgage offers its consumers compared to a more traditional in-branch experience, as an example.

Serve Service is all about the opportunity to build trust and provide financial advice, rather than just fixing a problem.

Comply Finally, whether you are an existing bank or a startup you need to comply with banking regulations across every stage of the transaction and service delivery.

On this last point, it is important to understand that compliance is not business hygiene — it is risk management, and getting it wrong comes with severe consequences.

There was the case of a US bank which bundled services and gave customers products they did not ask for. For instance, thousands of customers were enrolled in bill pay without their authorisation, and as a result 3.5 million potentially fake bank and credit card accounts were issued. So serious was the problem that legislation was passed requiring banks to act in the customer’s best interest and to be able to prove it transparently.

Meanwhile, a European bank which failed to spot money-laundering was fined $900 million.

In both instances, as well as the immediate cost, the longer-term risk comes from the erosion of consumer trust.

Technology Debt

While technology develops quickly and the change it spawns seems to be ever-accelerating, the reality is that incumbents are not starting with a clean state, unlike enterprises that are born digital.

Incumbent FSIs must build an architecture designed for the digital enterprise on a legacy foundation often lacking the agility to adapt quickly to changes and market threats.

It is therefore important to realise that the transformation towards a digital way of working is a continuous process of delivering new functionality that involves maintaining a two-speed IT architecture.

Infusing compliance processes in every customer interaction and digitalise every touchpoint is only possible by leveraging modern platforms fuelled by the latest technologies.

Source: Which50