How banks are responding to the digital revolution
There are lessons from global digital champions in banking as the sector across the globe are embracing new technology as a way to better meet the changing demands of their customers
Deloitte's Joel Lipman and Clinton Cunningham explain why the future of banking is digital.
Australian banks are setting the standard when it comes to digital. As waves of change hit our industry – from emerging neobanks to open banking – local players have been quick to embrace innovation that places customers at the centre.
But with plenty of disruption and even more competition on the horizon, the need for transformation isn’t over.
Our latest Digital Banking Maturity study provides a powerful benchmark by uncovering the strategies global banking leaders are following to win in the digitalisation race.
Maintaining Australia’s leading banking sector requires constant evolution.
The lessons from global counterparts will help inform the seamless, insight-driven experiences our banks will need to deliver tomorrow
The digital maturity landscape
While most banks have digital on their agenda, the approach differs between those leading the charge and the ones following. This year has brought a number of shifts to the digital maturity landscape across the globe
• COVID-19 has changed banking and fast-tracked digital channels: While 60 per cent of banks have closed or shortened the opening hours of branches, many have also implemented new digital features. These include fully digital processes such as account opening (34 per cent), remote identification and verification (23 per cent) and contactless payments (18 per cent).
• User experience (UX) is a key differentiator in driving customer satisfaction: Sixty-five percent of digital champions are ranked in the top 10% for UX. The largest gaps between champions and latecomers are in opening an account (71 per cent vs. 23 per cent), buying an insurance product (44 per cent vs. 7 per cent) and beyond banking services (48 per cent vs. 11 per cent).
• Innovation begets innovation: New functionalities are gaining traction faster in challenger banks than in incumbents. These include bill splitting services (27 per cent vs. 2 per cent), virtual debit cards (26 per cent vs. 2 per cent), chatbots with advanced use cases (15 per cent vs. 4 per cent), and chatbots for transactions (12 per cent vs. 2 per cent)
• Banks still need to close gaps in end-to-end digital sales processes to better serve online customers: Digital champions are investing in end-toend digital sales processes. They have widened their lead on latecomers for key products such as current accounts (51 per cent vs. 23 per cent), credit cards (85 per cent vs. 34 per cent), and cash loans (84 per cent vs. 30 per cent).
• Digital champions are seeing the benefits of transformation: Digital champions are leading their peers in a number of digital functions along the customer journey. They also, on average, outperform others in their country in both cost/income (-4.0 percentage points) and return on equity (+1.9 percentage points)
Lessons from global champions
For digital champions, products and personal finance management are primary investments.
Around the globe, we are seeing banks providing customised advice for saving and investment goals, comparison tools to measure financial health, and personalised plans to improve finances.
Another key source of significant differentiation for digital champions is in value-added services. While they don’t yet play a critical role in customer value propositions, these services differentiate banks and can be used as acquisition hooks. In a world of low interest rates, banks are seeking a shift from interest income to fee-based non-interest revenue, and value-added services provide a new area of potential upside.
Champions are also focused on expanding customer relationships. One way some banks are addressing this is offering the ability to order food and check credit scores from their apps, or access secure online document storage.
The Australian opportunity: what can we learn?
There is an opportunity for Australian banks to take digital customer experience to the next level and add additional value to their customers.
This could be through a combination of partnerships and ecosystems, as well as deciding on core areas of focus where they can provide differentiated experiences.
Making the right strategic decisions will determine market position and future-proof digital strategies. Potential focus areas for Australian banks include:
• Frictionless account opening: Enabling customers to make account applications online and through mobile. For example, allowing video verification when opening a new account.
• Product management capabilities: Customers at one of the major banks in Portugal can execute transfers using a virtual assistant.
• Personal finance management: Offering tools to measure customers’ financial health. Some banks allow customers to create a personalised plan to improve their finances including comparing their spending profiles to those of other customers.
• Beyond banking initiatives: For example, customers of an Irish bank can buy train tickets through its app.
• Ecosystems and open banking: Allowing customers to collate their current account history from other banks.
To achieve this, digital leaders should be asking four key questions:
1. What are the value-added services we might consider when expanding on our customer relationships?
2. What partners and ecosystems can we engage to provide new and enhanced services for customers?
3. How are we providing customers with greater control through account and product flexibility?
4. What is the role of personal financial management in our customer experience? Australia has a vibrant, innovative banking sector.
By keeping one eye on the digital evolution coming down the line, we can ensure our banks continue to lead the way.
This article draws from Digital Banking Maturity 2020.
The digital maturity assessment is based on three components: functionalities benchmarking, customer needs research, and a UX analysis. This study helps banks understand the digital competitive landscape and accelerates digital strategy development from three lenses – customer preferences, local competition and international industry direction.
Joel Lipman is a Deloitte Digital Partner, with more than 20 years’ experience in delivering large-scale digital transformation programs, building innovation capabilities and creating customer-centred strategies. Clinton Cunningham is a Director at Deloitte Digital focused on financial services and the impact of mobile across the customer experience lifecycle.