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Digital: Customer Experience Trends in Banking

Digital: Customer Experience Trends in Banking
May 12, 2016

Digital as Customer Experience

The term ‘Digital’ has multiple facets and dimensions, all compatible with each other. Broadly speaking, it can refer either to the new paradigm of Customer Experience (CX) or to an advanced method of agile, lean, and outcome-based software change delivery.

In this blog, we will be concerned only with the former perspective i.e. digital as the new generation CX.

Competitive Context of Digital

The digital shift in Banking has four key influencers and/or enablers:

  1. Changing demographics (millennial customers) and shifting customer behaviour, expectations, and preferences.
  2. Emerging technologies – e.g. Artificial Intelligence and Cognitive Computing, Distributed Ledgers, and Internet of Things.
  3. The (comparatively) new generation FS players, sometimes collectively called ‘FinTech’, typically possible to be classified into two types:
    • Niche service providers such as PayPal, Transfer Wise, and Apple Pay in Payments, eToro in Social Trading, and Lending Works and Lending Club in P2P Lending
    • Full-service banks who have either been ‘born digital’ e.g. Atom, Tandem, Fidor and Mondo in the UK – or are fast morphing into digital incarnates  e.g. Garanti Bank in Turkey
  4. Regulation, typically the likes of Payment Services Directive II or the more overarching Open Banking Standards aimed at fostering greater competition and transparency in the financial services marketplace

Of the above, the first factor is the most dominant. Specific aspects of shifting customer preferences that are most relevant for digital transformation are:

Digital: Key Trends in Customer Preferences


Taking a Leaf out of Digital Banks

In 2015, USD 12.5 Bn was invested in FinTech globally, continuing the trend witnessed in the previous years. Some banks, such as the Spanish BBVA, have been active in earmarking funds for investing in FinTech ventures either directly or through sponsored VC firms. Almost all other banks have been investing heavily in in-house digitization, aimed at future-proofing their services.

A quick analysis of the business and operating models of some European digital banks – whether born digital or scripting powerful digital initiatives – yields a general pattern. The analysis includes only players who offer at least the basic minimum set of banking products.


Digital as Customer Experience: The How

Building on data presented in the previous paragraphs, we summarize the key elements of Digital CX, and the business / technology components that enable them:


Conclusion – Evolution of the Bank

Digital is rapidly transforming the very concept of a retail bank and the way it is perceived and evaluated by customers. The change is both deep and radical, as it affects the entire life cycle of the customer relationship – from sales through initiation and fulfilment, to servicing and maintenance.

The following is a thematic representation of this transformation:


Essential elements of this transformation:

  • For a traditional bank, brand salience was primarily a function of trust. While trust will always be an important parameter in building the image for a bank, the ‘stickiness’ of a digital age customer to the bank is increasingly based on the transaction experience.
  • A traditional bank had rigidly-defined products/ services, leaving the customer with limited choice. A ‘digital’ customer is served only with (and, in some cases, herself designs) products and services that speak to their needs.
  • A traditional bank saw ‘distribution’ as a way of reaching out to customers. Whereas, a digital bank seeks bilateral connect with the customer at times and places that suit them, and to engage with them by delivering personalized and innovative CX.