The future of the banking industry

Every month we see huge developments and changes happening in the banking industry. In September, IBM released research suggesting that 65% of banks have plans to put blockchain projects in production in three years’ time. Meanwhile the CMA recently released findings stating that banks are not working hard enough for their customers, and the BBC claims more than 600 High Street bank branches have closed in the UK in the past year. On top of this, traditional retail banks are facing increasing competition from digital-first challenger banks such as Monzo (formerly Mondo) and Atom.

The changes aren’t just coming from within the industry, but also from a huge shift in customer expectations. 51% of US adults bank online, as do 47% of Europeans, and this number is likely to increase as more Millennials buy in to financial services. This is part of a wider customer attitude that banks should be using the latest popular technology to provide the best service to their customers. However, with new expectations and technologies emerging all the time, how can the banking industry adapt to this digital world?

While tying all these different changes together may seem complicated, the key to the future of the banking industry is actually relatively straightforward. Banks looking to provide the best possible services for their customer now need to place a seamless, connected omnichannel experience at the heart of their business, knitting together the opportunities of new technologies and traditional banking into a coherent, organised strategy. This is something that NCR were among the first to realise, investing $230 million in research and development.

The rise of digital banking does not mean a bitter end for High Street branches; there is still a correlation between branch location and market share. Mark Welbourne, Head of Retail Delivery and Group Retail Strategy at Nationwide, has observed that: “Nationwide’s share of the Current Account market is higher in populations closer to the Nationwide branch network. As this is true for both new business and stock (back book), it would suggest that accessibility to a branch is still an important factor when selecting Nationwide.” However, physical locations alone are no longer enough, and banks need to embrace new and emerging technologies to meet the needs of a varied customer base.

The first step for banks is to rethink the architecture they are using to bring together elements of transaction processing. Much of what occurs in a teller interaction, call centre, mobile environment or ATM channel requires similar information to authorise. By bringing together transaction processing and organising it in granular elements that can easily be combined, the specific needs of each channel can be included in the orchestration of the transaction.

For example, in a call centre, the customer is authenticated via a passcode – whereas at an ATM the customer is authorised using a PIN. Meanwhile, a transfer transaction used to pay a utility bill goes through exactly the same steps regardless of the whether it is carried out on an ATM or through a call centre. This kind of omni-channel transaction processing enables the consolidation of connectivity to internal and external services, thereby reducing the cost of managing and maintaining these links and allowing for new ones to be added quickly. It also allows for transactions to be started in one channel and completed in another – perhaps the prestaging of an ATM withdrawal on a mobile device; or the partial completion of a loan application online with the completion over the phone.

Next, banks need to consider which technologies can improve customer service at physical locations. One example of this is the increasing use of mobile tablets, service kiosks and digital signage in-branch to help staff better serve customers. These types of digital devices offer additional insight into each customer as an individual, and allow bank staff to provide the right services to the right people, communicating the bank’s understanding of each individual client.

Once banks have successfully combined the insights of their existing channels, the third step is anticipating what the next avenue for customer transactions might be. For example, in 2016 there was significant Q1 growth in the global wearables market (67% YoY according to IDC), and banks may want to be prepared to offer services catered as much for the wrist as the mobile device.

Finally, on the back-end of banking technology, we have blockchain. Blockchain has the potential to significantly disrupt banking over the next few years. When successfully rolled out, it can help banks safeguard against data tampering and revision. Furthermore, even while customers may not be conscious of blockchain supporting their transactions, it can add significant benefits that drive up customer satisfaction and loyalty. These include the possibility of faster international payments, reward points systems and faster, more transparent automated processes for complex banking transactions requiring layers of approval, such as mortgages.

Every aspect of the future of the banking industry relies on the customer, and banks looking to succeed will need to make the most of their customer insights to guide their transformation process. This means tying in new technologies that customers adopt within an existing omni-channel infrastructure to provide a seamless banking experience, wherever and whenever the customer wants it.

Andy Brown

Marketing Director, Payments

NCR