Digitising European Retail Banks

March 30, 2020

Retail banks across Europe have been under pressure to digitise their services. Learn how leveraging the Cloud and expanding the opportunity for personalisation can change banks' fortunes.

Financial Times

The Digital Customer

Digital is, bit by bit, taking over every aspect of our lives. From ordering products online to hailing a taxi, there is – more often than not – an app for that. In financial services, things are no different. ‘Digital transformation’ is the generic term employed by most financial services companies to denote the gradual implementation of digital solutions to their internal and external activities. But what does ‘digital transformation’ actually mean? Indeed, is there even a specific meaning beyond the buzzword?

Let’s explore how retail banks are interpreting ‘digital transformation’ and who knows, this may help us understand where banks and customers alike are headed in a digital world…

The Simple Touch

This simplification of the customer journey through the aggregation of accounts and services has been noted and acted upon by various European banks, in both the retail and business banking sectors. One major UK retail bank has introduced a single customer view which enables customers to view their pensions and savings products alongside their current account. Similarly, Scandinavian banks have come together to offer an API gateway to customers, allowing them to access their accounts through one app even if they are with different banks.

If there was ever an opportunity for banks to promote more integration between accounts and services, it’s now. The Payment Services Directive 2, due to be implemented in its entirety across the European Union in March 2021, democratises the retail banking field by encouraging Open Banking, a component of which compels traditional banks to allow FinTech and Neobanks access to customers’ accounts. In this new retail banking landscape, the likelihood is that new apps integrating customer accounts and services will become more common, simplifying banking for all. Now that’s transformation…

Everything’s Personal

Integration is the first step towards making the customer’s journey more amenable. The next step is to personalise that journey. Traditional banks are finding that, in order to compete with neobanks and FinTechs, there is need to allow the customer as much control over the personalisation of their finances as possible. These may not just involve services directly related to managing their finances, such as ease of access to their multiple accounts, but also more peripheral services like financial advice tools and upcoming payment alerts. Indeed, a major UK retail bank has introduced a bespoke financial advice tool accessible via a customer’s smartphone, offering guidance on financial issues ranging from mortgages to savings planning.

Of course, the main reason traditional retail banks are keen to personalise is because FinTechs and neobanks are already one step ahead. For example, one digital-first challenger bank founded in the UK in 2014 has adopted personalisation as the cornerstone of its operations. From security measures based on customers’ biometric data (including face and voice recognition), to the ability to change the app’s logo and name, there’s no question banks like this one are leading the way when placing customer experience front-and-centre of everything it does.

The Cloud Uncovered

As well as fully personalised and easy to access, the apps and software banking customers use need to be quick. One way expedient services can be achieved is through implementing cloud data storage practices. But other than speedier services, what does the cloud actually offer to retail banking customers? Time to peek behind the cloud cover…

A common theme across the retail banking sector is the adoption of cloud platforms to manage customers’ personal and financial data. Traditional banks, while previously reluctant to introduce cloud technology due to cybersecurity fears, have become more open to the prospect of cloud platforms, with the aim of unlocking their data processing and storage capacities as well as their product development opportunities. One major UK bank has developed a storage facility for customers’ documents, be it bank statements or travel insurance confirmation, powered by the cloud. Equally, another major European bank has utilised the cloud in their online open banking application, which covers features including card control, password management, and customisable expenses tracking. Other large banks have started to use the cloud to decrease obsolescence risk, with a software-as-a-service based approach to the cloud enabling consistent updates when needed and eliminating the need for entirely new software or hardware to be installed.

Traditional retail banks have been relatively slow in introducing the cloud to their working practices, mainly because of cybersecurity concerns. Despite this, there’s no question that – with verifiably secure software-as-a-service providers becoming more prevalent – these concerns are beginning to be assuaged. It’s no wonder the forecast for digital transformation in retail banking over the next decade is that there’ll be plenty of cloud…

How Can a Bank Transform Digitally?

Traditional banks are realising that investing in digital is essential in the modern financial services sector. With the rise of the digital customer, and the growth of challenger banks and FinTechs, they will need to ensure this investment is not superficial and encompasses all of the aspects of digital transformation already described.

But investment may not be practical, or even enough when it comes to digital transformation. As mentioned, the prospect of Open Banking means that banks will need to be more willing to work with FinTechs to develop technological solutions to how they deal with their customers. Similarly, customers are demanding a greater digital experience with their banks than ever before. This is a culture change more than anything – if banks are not willing to accept the need to engage with their digital customers, they are likely to be left behind.

Going digital is a state of mind – and, through a combination of legislation and customer demand, it is due to become a lot more common in years to come.