In our last two pieces, we’ve looked at new technology trends and the importance of customer experience, plus the significance of being structured to enable reaction to customer needs. But why, suddenly, is customer experience so topical?
The rise of customer service in the sector is due, in the most part, to the frenzy of new fintechs. Each one solves a new problem for customers or offers them something that a traditional bank can’t, whether that be fee-free currency exchanges or cryptocurrency. And in their early days, these new entrants were fiercely competing to win market share from the traditional banks.
This year, new regulations will begin to level that playing field and this offers up an opportunity for traditional banks and the newer fintechs to move from a competitor to a partnership model. Each side will have something to offer the other.
The Forrester Report 2018 stated: “Legacy organizations have realised they need fintech start-ups to improve their existing business, offer new services, reach new customer segments and vice versa”.
2018 will see partnering go a step further for banks, looking beyond just start-ups. Banks will start to work more closely with tech and online retail giants. An example is online platform Alibaba, which recently evolved from being solely a directory of Chinese suppliers. It’s now a one-stop-shop providing services for international buyers and suppliers including logistics and business verification. It recently announced partnerships with over 25 banks and credit agencies globally, to provide cross-border trade financing for SMEs and a new credit reporting service. As open banking embeds, more customer data will be shared and we’re likely to see more examples like this one.
Our advice to banks for the year ahead is to be proactive about this change and design an ecosystem strategy that plans how they’ll build their network of partners, and which services they’ll target. Gartner predicts that by the end of 2019, 25% of retail banks will use start-up providers to replace dated online and mobile banking systems.
Of course, it’s happening all around us in other markets and is not specific to banking. Experienced companies are looking to work with younger companies who can bring additional benefits to their own offering. Take the partnership between established Sonos and relatively new Amazon Alexa; Sonos has a dedicated customer base which has heavily invested in them, but they needed voice activation to keep up with the market. Rather than build it, they partnered with the company that does it the best.
This year, we’ll see the new start-ups begin to turn their focus to the larger, more traditional banks, recognising they have something to offer in return. Banks should seriously consider capitalising on this shift and use it to develop a stronger position in the market with more to offer their customers.
This will of course require a culture shift in the legacy organisations, which will need to move from being conservative and process orientated to being ambitious, imaginative and collaborative.
Our next and final 2018 trend prediction will delve into some of the regulatory changes coming up in 2018 which will support this partnership model, and we’ll explain how they could affect your business - for the good and the bad.