Currently, banks are struggling with the increasing pressure being placed on profitability.
Low-interest rates and increasing competition between banks and new incumbents are burdening financial earnings, while regulatory initiatives and continuous demand for investments in digitalization are increasing costs. Besides this balancing act, customer behavior is dramatically changing nowadays, especially when it comes to banking
On the one side, there is a huge trend to use less cash. Contactless payments by card or smartphone are highly convenient. On the other side, services like transactional banking are moving from branches to digital channels. As a result, over the last five years, every fifth branch in Germany has been shut down. For banks, this process poses a threat, as direct customer contact – and with it the chances for up-selling, cross-selling and solving customer issues quickly – might be lost.
As a result of this, the focus on banking apps will increase rapidly. They offer the highest customer interaction as services are available 24/7 and easy to use. In short, a customer basically has the bank in their pocket. Not only is there the potential for reducing costs by consequently offering self-services, e.g. transactions, standing orders and so on, but also for smart up- and cross-selling of products with added value. The combination of the highest interaction and use of the device’s technology – like receiving a customer’s geolocation information and using it offer them the next best action, e.g. by push-notification – is not yet being fully exploited. Other than that, banking services can establish new business models. Banks should rather sell services to third parties by themselves than offer this piece of the pie to the fintech industry.
Outlook: Banking Trends 2019 and beyond
When it comes to banking trends, one should differentiate between innovation trends that will change the path of banking over the next couple of years and trends effective for the next 12 months that meaningfully combine current customer demands and banking goals:
- Build outstanding digital experiences
It is more important than ever to build customer-centric banking services in order to offer outstanding digital experiences that customers love. Implementing the customer into the product development cycle via user testing is the major key to success.
- Use of data/analytics
The use of data to conceptualize new features or redesign existing ones is as substantial as adding analytics to every feature that is being developed. Only with enhanced analytics capabilities are organizations able to learn and prioritize their next actions. Net Promoter Score should be a foundation for measuring the happiness of your customers.
- Expand mobile sales
Besides continuously launching self-services, one of the trends is definitely expanding mobile sales. Taking a look at the banking apps of competitors, this is a major topic in 2019 and beyond.
In the long run, voice banking might become another channel that has the potential to fundamentally change the banking experience. The accuracy of voice recognition, regulation of data privacy and establishing a balance between user experience and security are as important to be refined as the distribution of voice hardware into the customer’s daily routines. Our German subsidiary comdirect, a purely digital bank, is a pioneer in voice banking in the German market.
The rise of artificial intelligence (AI) will also play a role in banks. In the foreground, chatbots and automatically calculated next best offers based on customer data and customer behavior will be the first facing the customer.
Change of mind-set and delivery organization
From an organizational perspective, banks need to be able to adapt to the fast-changing circumstances. At Commerzbank, we believe this works best with an agile delivery organization where business and IT not only collaborate but also work in the same (virtual) team to reduce communication obstacles. In this way, we are able to react to changes of prioritization more flexibly. With about 150 years of history, we also empower teams to work in a more self-organized way and try to challenge the status quo, e.g. in terms of internal regulations, wherever possible. A shift in each employee’s mind-set is essential to successfully face the challenges in banking – also for the next 150 years.