The future of banking The future of banking

We believe the bank of the future is one that customers will form habits with.

If that’s the case, then how can banks build deeper, more personalised relationships with their customers? How can technology, data and innovation help them to address the changing needs of consumers and businesses?

This was the topic of a breakout session as part of our recent Our Digital Future event, where we focused on the future of banking. For the session I was joined by an exciting panel of industry innovators and KPMG experts:

• Richard Davies, CEO Allica Bank
• Paul Taylor, CEO, Thought Machine
• Paul Greenan, Director, Financial Services Customer team, KPMG
• Vishali Jivan, Director, Financial Services Customer team, KPMG

To serve customers effectively during the COVID-19 pandemic, banks have intensified digital transformation and technology adoption. The challenge now is to keep innovating, in order to stay aligned with fast-moving customer expectations and compete with disruptive new entrants.

In this evolving climate, do how banks see the future of the industry?

My colleague, Paul, began the discussion by presenting the business and commercial banking perspective.

“While addressing the pressures of the pandemic, banks must also focus on creating value for their business customers,” he explained. That will mean immersing themselves in what’s important to businesses and their customers; and providing solutions that help firms to be seamless and productive. 

Achieving this will require banks to focus on three key priorities:

• Insight. Using data-led insight to spot the behaviours, triggers and warning signals that predict business customers’ financial needs.   
• Innovation. Investing in innovation to develop solutions that will help customers’ to recover, stabilise and manage risk.
• Experiences. Creating propositions that will prove habit-forming for business customers.

The landscape is similar in retail banking. The focus here is on ensuring that every customer interaction adds value, and is simple, engaging and transparent.

Vishali presented three priorities for retail banking organisations to focus on in the coming year:   

• Customer insight. Gaining clarity of the propositions customers demand, to prioritise long-term relationships over short-term revenue.
• Technology adoption. Using platforms and working with partners to push forward with digitisation and overcome the constraints of legacy systems.
• Digital first. Balancing digital and human interaction in the moments that really matter to customers; and creating an operating model to enable this. 

Allica is a challenger bank serving SMEs that have what Richard calls ‘complex needs’ and is built on that balance of digital and human that Vishali recommends. In fact, Richard describes it as “digital plus human”, that is providing the right combination of digital experiences and human expertise. As as result, the company was recently voted Commercial Mortgage Lender of the Year – in its first year of operating in that market.

“We aim to deliver the best of both worlds,” he affirmed. “The process of lending to a medium-sized company requires more than an online portal or mobile app. Human understanding and judgement are critical ingredients.

“The key is to efficiently deploy human expertise at the right points in the customer journey, while supporting the rest of the experience digitally.”

That blend will differ from customer to customer, of course.

For many banks, the limitations of their core platforms and technology stacks are a major transformation challenge. 

As Paul from Thought Machine highlighted, legacy systems typically can’t support rapid responses to changing customer requirements. And even minor reconfigurations can be expensive. 

Thought machine have responded to this challenge through their next-generation, cloud-based core banking platform - Vault. Vault allows banks – from new entrants to established players – to execute change in a truly agile fashion. 

“In today’s cloud-native world, customers have new levels of expectations when dealing with banks,” Paul explained. The cloud offers the flexibility, stability, security and resilience that banks need in order to adapt. 

Success in the future will depend on the ability to anticipate and meet customer needs; to innovate at pace; and to implement operational change with agility and efficiency. To achieve this, I believe banks need to be ready to:

• Offer habit-forming propositions, using customer insight to shape the best possible experiences.
• Strike the right balance between human and digital interaction for each customer.
• Embrace cloud technology to enable the flexibility that legacy systems can’t provide.