Why a ‘people first’ approach in banking is key to greater customer retention

The relationship between banks and their customers has significantly transformed. As digital services increasingly play a more prominent role in our daily lives, from the media content we consume to the way we shop online, so too is the way banks interact with their customers. Today’s customers judge their digital banking experiences with the plethora of other digital services they use – and they expect banking apps that can match up.

For example, consumers no longer expect banking apps that simply process payments. Instead, they want the same interactive and intuitive experiences that they get from other digital services.

As such, banks and financial institutions must prioritise modernising self-service capabilities by focussing on ‘engagement banking’, where banks work to complement the lifestyles of customers, rather than being a hassle to use. The problem, however, is that many banks remain confined by legacy systems that cannot integrate different functions, hence create silos for departments. This results in these banks becoming unresponsive to rapidly changing market needs, and too slow to cater to the demands of today’s customer. Banks responding to this situation by solely implementing a new technology can risk them making a relevantly big investment with inefficient outcome.

The financial sector landscape has been redrawn in recent times by the rise of online-only neobanks that operate more like tech startups rather than traditional banks, and that offer a far wider range of easily accessible services to customers in the ‘app-like’ approach they have become used to. Many traditional banks are failing to keep up with these challengers, in part because they put the technology before the needs of the customer, and because their cautious corporate culture make them unwilling to innovate and slow to take decisions.

Modern banks must prioritise developing effortless everyday customer experiences, and not focus on technology for its own sake. Digital services have to be seamless and flexible, to meet customer expectations for ease of use and convenience. Implementing facial recognition technologies, immediate new account approvals and app-based credit card requests are great examples of how banks can take the initiative.

In short, this means a move towards an ‘engagement banking’ model. This requires a people-first approach to digital transformation by focussing on the end-user experience and human connections. Digital banking enabled customers to access transactional banking services via websites or apps, which led to a weaker connection between customers and their banks. Engagement banking instead leverages technology to deliver personalised digital banking experiences with consistent customer journeys across all digital and physical channels, with experience and human connection at its core, strengthening the bond with customers.

According to the findings of 2021 survey commissioned by Backbase, 55 per cent of customers think their bank does not deliver a seamless experience across all channels. Engagement banking is as much about fostering emotional connection as it is about financial transactions. This can be achieved by delivering flexible, interactive experiences across any touchpoint the customer chooses. Engagement banking is about exceeding expectations, while always anticipating customer needs.

This is achieved by taking a top-down approach in changing corporate culture with incremental action. The key to building momentum and delivering competitive experiences is by starting small. Banks should choose one initiative to focus on and build on it over time and once change is seen through improved profits, customer satisfaction and more, it will help to break down silos within the organisation.

Understanding what customers want is essential in this process. By identifying what matters most to them and using data-driven insights to pinpoint solutions they will want to use, investment can be prioritised accordingly.

Employing a single modular engagement banking platform will reduce reliance on fragmented legacy systems and technologies and offers the ability to easily add new services in future. Engagement banking platforms sit on top of existing systems to break down silos leading to lower costs and instant execution capabilities. Placing customers and employees on the same platform will also deliver superior service and engagement with a unified, cross-channel view of each customer.

Banks that take up the challenge of engagement banking are far better placed to retain existing customers, while attracting increasingly tech savvy new audiences to their platform, and along with them come new avenues of business growth.

Financial institutions that continue along the traditional banking path will be left behind by an ever-evolving industry and a more demanding consumer base. The solution is to employ a customer-centric philosophy that focuses on building closer connections with people rather than taking a technology first approach.

Ahmad Ghandour is the managing director at Backbase