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Incumbent banks must embrace data-centric capabilities

Retail banks are currently lagging in their ability to offer true omnichannel experiences, as customers pivot to competitors that offer more personalised experiences, according to the 2022 World Retail Banking Report 2022.

The report, published by Capgemini and Efma, found 75 per cent of customers surveyed are attracted to fintechs' cost-effective and seamless services, significantly raising their digital banking expectations.

However, traditional banks are struggling to deliver, with 70 per cent of banking executives concerned they lack sufficient data analysis capabilities. Therefore, with customers now able to switch providers at the tap of a screen, it is critical banks better leverage data and artificial intelligence to tailor the experience, create stronger connections and maximise customer value.

The recent surge of fintechs within the industry has caused a paradigm shift in what consumers now expect from their banking experience, challenging the revenue and relevancy of many traditional providers. In the report's ‘Voice of the Customer' survey, about 75 per cent of respondents said they are attracted to these new agile competitors as they offer fast, easy-to-use products and experiences that are readily available while remaining low in cost.

On the other hand, nearly half of respondents said their current banking relationships were neither rewarding (49%) nor emotionally connected (48%). Fifty two per cent said banking was not “fun”. To keep pace with these rivals, retail banks will need to rethink their business models and focus on driving greater customer engagement.

Customers want rewarding, engaging experiences that are easy and approachable

With enhanced data governance models, banks can collect proprietary customer insights to improve the competitiveness of their digital marketing capabilities. Combining this with AI and machine learning will unlock new possibilities in identifying, retaining, and engaging customers with real-time experiences.

However, many of these benefits are lost to traditional banks that currently lack the capabilities to process the sheer volume of customer data. In the report's executive survey, 95 per cent of top global banking executives said outdated legacy systems and core banking platforms inhibit efforts to optimise data and customer-centric growth strategies, while 70 per cent said they lacked resources to process and analyse data.

“The formula for growth sounds simple. Customers want to be provided with personalised experiences, regardless of wherever they may be on their own digital journey," says Nilesh Vaidya, global industry head, retail banking and wealth management, Capgemini's Financial Services Strategic Business Unit.

"The challenge, however, remains in execution. Retail banks must rethink their wider business models, restructuring to focus on providing the same personalised, lifestyle-enabled ecosystem journeys that customers have come to expect from their digital interactions," he says.

"Without addressing the disparity and striking inconsistency between a customer's digital and physical banking experiences, traditional banks risk losing customer value to their more agile fintech counterparts.

Banks must leverage platform-based models to optimise growth

According to the survey, more than 70 per cent of banking executives cited that traditional banks lack data and analytics capabilities. As incumbent banks race to keep pace with the nimble fintechs, many providers are meshing traditional offerings with nonfinancial lifestyle products. Others are offering Banking as a Service and embedded banking solutions via the ecosystems of non-financial third parties. Platform models can help collect data for personalisation, making them well-positioned to mine data ecosystems and derive real-time insights.

However, while platform-based models are not new for banks, many players are still struggling with their execution. In the executive survey, 78 per cent of respondents worried about cannibalising products through ecosystem partners and 72 per cent were concerned about preventing brand dilution. According to the report, the challenges must be faced to deliver the personalised, omnichannel experiences and ecosystem journeys that customers want, which will rely on embracing new technologies and tearing down internal silos.

“To thrive in this fiercely competitive environment, with digitally native fintechs continuing to capture a rising amount of market value, we're seeing retail banks finally embracing innovative technologies and platform-based models to optimise this data-driven growth," says John Berry, CEO of Efma.

“While this has evolved within many of these incumbents' digital channels, customers still expect branches to be experience centres, filled with self-service options and financial advice. By strengthening their ability to collect and analyse data, providers can identify what customers want, which ultimately is consistent omnichannel banking experiences.

Positioning banking CMOs as customer strategists and chief engagement officers to deliver a true omnichannel experience
In tackling the data- and technology-driven challenge of strengthening customer relations and personalising their banking experiences, chief marketing officers need to step up and play a pivotal role in this evolution.

According to the survey, 75 per cent of global banking CMOs said they have direct responsibility for brand building (25% said it was a shared responsibility with other C-Suite executives), and 63 per cent for new products' development and launch, demonstrating how these leaders are expected to own the customer lifecycle and manage each facet of customer engagement.

However, many of these CMOs are ill-equipped to guide the transition from product- to customer-centric marketing, cites the report, largely because the data needed to pursue those customer-based strategies is poor, siloed and focuses only on internal data, missing the external data sources.

For example, only 22 per cent of CMOs reported that they directly manage end-to-end customer experiences or have access to complete customer profiles needed to effectively tailor their product or service. However, through engaging with this critical data, CMOs can deliver a true omnichannel experience by anticipating customer needs and creating personalised offerings.

To achieve this, CMOs will have to take a page of out the fintech's book to curate targeted content, upgrading the banking experience with continual process improvements and establishing an effective, data-driven value loop which prioritises engagement and long-term relationships. In doing so, retail banks will be able to create, realise and capture long-lasting customer value.

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