Innovation in retail banking

Yvette Wise, Retail Banking Lead at Capita, examines how retail banks can put customer expectations at the centre of innovation to accelerate growth.

This has been a watershed year for digital transformation, with organisations developing and deploying myriad new technologies at scale and pace, to help society to weather the economic storm that’s been whipped up by the Coronavirus pandemic.

There’s been a lot of debate about the need to reshape and reset the economy post-pandemic and even the death of capitalism itself. While that might seem extreme, we certainly have a unique opportunity to accelerate business transformation, to rethink and embrace innovation. In many ways, the pandemic has turned a future need into a pressing, immediate need.

But just how do banks rethink innovation in a world turned upside down?

In our Incremental to Exponential podcast, Ashok Vaswani, CEO of Consumer Banking and Payments at Barclays, says: “There’s no facet of life that finance doesn’t touch and so everyone has had to think about things differently, from the future of cash use to digital payments… the consumer is expecting convenience like never before.”

Consumers now expect an ‘Amazon-like’ experience with their bank – digital-first, quick and seamless. Ashok sees a major shift in that every single organisation has now effectively become a financial services organisation, thanks to customers’ expectations of instant, online payments in a few clicks. So, incumbents need to consider how they play to these changing dynamics. This gives rise to a great opportunity for contactless and digital banking products.

In 2020, we saw years’ worth of growth in digital adoption happen in just a few short months – it has transformed the way that many consumers interact with their bank. The mortgage world, for example, was forced to adapt by digitising complex processes – this will almost certainly open the door for other innovations in the sector, such as developing a digital identity trust framework to streamline the home buying and selling process for customers and lenders.

How can innovation lead to better outcomes for consumers and the banks?

At Capita, we’ve seen digital transformation in the financial services sector accelerate. There’s clearly a debt crisis about to happen but there are key differences to the one that took the world unawares back in 2008. This time, we have a wealth of data, predictive analytics and behavioural analytics tools to help to create better outcomes for people who find themselves in trouble by taking a human-centric approach to managing debt.

Innovation is rife and gathering pace. If we look to China as an example, we might consider the consumer banks largely irrelevant as citizens have rapidly adopted digital currencies and the WeChat social platform. We’ve been slow to adopt digital currencies in the West. Elsewhere, open banking is ushering in a new era for consumer banking, making innovation more important than ever in an increasingly competitive commercial landscape.

Financial services firms need to innovate to stay relevant and provide the best possible service to their customers.

Challenger banks have the opportunity to carve out a new path and deliver a better customer experience. It could be argued that there’s little to differentiate major banks in the UK, possibly as a result of heavy regulation, but digitising services can offer a great way to stand out from the crowd. And it’s not just FinTech and small technology companies that are circling incumbent banks. Big technology companies are also knocking on the door, although incumbents have an advantage over them as they don’t have the expertise to get into the regulated space.

Banks can partner with big tech to determine complementary strengths and offer customers new propositions. Incremental to Exponential considers that big equalling slow and stodgy is entirely a myth. It’s rather the case that size gives scale, data, distribution, expertise, networks and brand that is hard for start-ups to replicate – especially at pace.

Ashok says that, in the digital age, limits to technological transformation are really just set in the mind. The rate of its adoption is also so much quicker. This means that new business models can be created and executed much more easily than before.

Which comes first, the technology or the cultural change?

To create an environment in which innovation will thrive, technology and culture change need to go hand in hand. A shift in mindset and a desire to deliver better outcomes is as important as the technology being introduced.

Although the implementation of new technology will drive much innovation, banking leaders need to also consider how they can empower and motivate their people, re-skill a large number of employees and attract a new breed of talent, while putting the customer experience and improving outcomes at the centre of innovation initiatives. So how should companies meet this challenge? The first step is to implement forward-thinking strategies to position themselves at the forefront of the coming, technology-powered workforce revolution as an employer of choice, while supporting a sustainable operating model and winning the battle for customers.

Social listening platforms provide valuable insight into consumers expectations, how they would like to interact with their banks and their pain points. Gathering and using this data should be a continuous process to drive innovation in customer experience. Ashok would agree: “Listen, listen, listen to what your customers are saying. Every time we’ve done something where the journey has been fantastic, the customer has taken it up without us even having to market it.”

Is innovation-fuelled acceleration likely to continue at the pace that we currently see?

One thing is for sure: there’ll be more change in the next decade than we’ve seen in the whole of the last century. Many exponential technologies including robotics and AI are accelerating and converging, and they’re giving rise to exciting new ways to serve banking customers.

Retail banking is often data-driven and process-heavy, and it’s undergoing a major customer and workforce transformation, as wide-ranging automation technologies take on manual tasks across value chains. Many functions and roles are being reimagined. Automation technologies such as Artificial Intelligence and Robotic Process Automation are combining in an Intelligent Automation strategy to solve complex business issues. The future workforce will be a hybrid between human and Intelligent Automation elements.

Rising customer expectations have driven Capita’s financial services clients to adopt new technologies that support their innovation needs - aligned to improving the customer experience and delivering better outcomes.