Retail banking has never had such intense competition from both inside and outside the banking industry. While larger technology companies like Google, Apple and Samsung move into payments, an increasing number of smaller fintech start-ups are competing for individual service supremacy as the product set for banking becomes more and more unbundled.
The battlefield is no longer dominated by large, well-known legacy banking organizations competing on price or a physical delivery network. Instead, digital players are competing on the basis of consumer experience and design.
To understand the scale of the threat to banks, global experience design agency Beyond surveyed both US and UK consumers to test the readiness of consumers to switch to non-bank, online-only challengers. They also asked what consumers expect from the digital banking experience, to understand how banking can better meet their needs and avoid losing them to competitors.
The key finding in the dual set of white papers, Taking Friction Out of Banking: How Can Banks Improve the Digital Experience to Retain Customers in a Competitive Market? is that over half of the population of the US and UK would consider digital-only services for all their banking needs.
Those with complex financial needs (5 financial products or more) – often the banks’ most profitable customers – were even more receptive to online-only offerings (65% vs. 57%). In addition, consumers were more willing to consider digital-only options for payments and money transfers (79%) and checking accounts (77%).
In response to this challenge, banking needs to balance two competing priorities. On the one hand, banking needs to better cater to digital natives who expect the whole journey to happen on their phone. On the other hand, banking need to ensure the majority that may not be as digitally engaged have an optimal experience as well, regardless of the channel through which they choose to engage.
This balancing act introduces both complexity and the need to act fast. The experience delivered in the future will need to support different delivery channel desires, screen types, user journeys and need states. Unfortunately, each consumer follows a different decision path to purchase and loyalty.
Consumer Experience Expectations
The reason for this willingness to change financial services providers is that consumers are becoming digitally sophisticated as they get used to the intuitive, seamless experiences from firms like Apple, Uber, Google and Amazon. According to the research, “Today, a good experience is one that delivers the following fundamental elements: ease, speed, security, consistency and personalization.”
As expectations move up the digital experience pyramid, factors that were once impressive are now perceived as basic, entry-level requirements for a good customer experience. “Banking cannot move up the pyramid until they deliver against the basic fundamentals – and until they do, the difference between their customer experience and that of their rivals will only become starker,” states the research.
When the survey asked consumers to rate their current banking experience, the research found that consumers want improvement from their digital banking provider in the areas of security, personalization, speed and ease of use. It should be noted that these areas in need of improvement ranked at the lower, more basic levels of needs.
In the US, 71% of people wanted additional levels of security (vs. 65% in the UK), 53% wanted faster ways to transact online (vs. 56% in the UK) and 50% wanted easier ways to log into their account (vs. 52% in the UK). The challenge for the banking industry is that technology and fintech start-up providers are already delivering intuitive experiences that anticipate consumer needs, while banks are slow to deliver on consumers’ most basic expectations.
As most financial organizations have found, each of these digital experience expectations present design challenges.
The Security Design Challenge
As many banking organizations have found, the desire for enhanced digital security features often conflicts with the desire for speed and ease of use. For instance, while fingerprint technology appears to be a logical response to consumer needs, the research from Beyond found that for those who had not yet used fingerprint technology in the US, only 24% chose it as their preferred log-in method.
This doubled to 48% amongst those that had already used it (in the UK it almost tripled from 17% to 47%), illustrating that consumers tend to doubt technology they are not already familiar with. This challenge begs the question whether banking is doing an adequate job educating consumers on the features and benefits of their digital offerings.