Retail banks looking to differentiate, innovate and stay a step ahead of the competition in 2023 can look to digital engagement as a solution.
Retail banking has lagged other industries in using digital transformation to rethink business models and processes. In 2023, the technologies are available to revolutionize how retail banks engage with customers, drive new business and improve revenue.
A recent McKinsey report outlines the core issues facing many retail banks today and shows how digital engagement is a key opportunity. Tight profit margins for daily banking, changing customer expectations and the complexities of lending and wealth protection make it challenging for retail banks to retain strong financial positions.
Reimagining the Customer Journey
For retail banks, it’s time to rethink the transactional nature of daily banking and embrace a long-term relationship. That approach means thinking about and understanding the customer journey.
McKinsey recommends considering the customer lifecycle and how it can use digital technologies to engage customers and enhance their experiences at each stage, from search and evaluation to purchase and use.
Banks should rethink the approach to each product type – from basic products like checking accounts and credit cards to car loans and mortgages to investments and asset protection strategies. Retail banks can use technologies to meet customers where they are and deliver new, easy and convenient services.
Banks that “operate like a tech company,” according to McKinsey, should focus on three areas of strength to reimagine their service platforms:
- Data Analytics. Banks have rich repositories of customer data and engagement but have not yet tapped its potential. New strategies are needed to collect, store and use data to create personalized messages and products customers are seeking
- Technology Stack. Technologies already exist within banks to meet the demand for processing and streaming information. The opportunity now is to use those capabilities to differentiate and create a digital-first business model
- Agile Operating Models. The banks that are successful will create agile business models and procedures that combine the right technologies with talented employees that are ready to respond to ever-changing business needs and customer demands
How Banks Are Doing
Retail banks are moving into this new reality and will need to accelerate progress in 2023. They need to address several customer mindsets as they evolve their digital footprints:
- Customers are not inclined for fully digital banking experiences. There’s still an interest to talk with a real person in a branch, on the phone or via chat
- That said, banks must strike a balance to attract those customers, especially younger people, who are comfortable with fully online banking
- Banks need to be everywhere – on every channel where customers might be
A survey by The Financial Brand shows that banks are still moving gingerly. Their December 2022 survey of business executives shows that fewer than 15 percent find their banks have been extremely/moderately successful in any of eight areas of digital customer engagement, including
- Fully digital account opening
- Consent-based open banking access
- Seamless omnichannel experiences
- Tools for the next most likely product
- Tolls for automated flows between accounts
- Tools for employee access to customer insights and recommendations
- Tools for needs analysis
- Tools for product comparison
The opportunity is there for banks in 2023 to move boldly in new directions that will reshape their relationships with customers.