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W.UP: So long, 2020 – Three digital banking lessons learnt in an extraordinary year

As we’re soon saying goodbye to 2020, we felt it would be a good time to share some key learnings we can take into the new year. Here’s an overview of the trends that have dominated the past 12 months, plus some recommended readings for an in-depth look.

Half-baked digitalisation efforts won’t do banks any favours

“Do… or do not. There is no try,” Yoda instructs Luke in The Empire Strikes Back in a lesson that immediately sprang to our minds reading Jim Marous’s latest digital banking report.

“While there is an almost universal awareness of what needs to be done to digitally transform financial institutions, research from the Digital Banking Report shows that the progress is still slow to non-existent at most organizations. This is a recipe for failure in today’s banking ecosystem,” says the financial industry strategist. The retail banking transformation is stuck in the infancy stage and the majority of banks still haven’t leveraged technologies such as robotics, design thinking or artificial intelligence.

This stood out to us because AI, first and foremost, is not about doing things differently. It’s about doing things smarter.

Think about it: before the digital age, people had to go to a branch and talk to a bank clerk to do their banking business. While the clerk took care of whatever issue needed to be taken care of, they learnt a lot about the customer through their finances. Based on that information, clerks would offer them products and services they might need. In other words, banking products were sold entirely through personal connections.

With the advent of digitalisation, however, there have been fewer and fewer reasons for people to go to branches, so the personal aspect of their relationship with banks have almost completely disappeared. What happened to all that valuable information clerks used to check to find out what products to offer to customers? It’s still there. Except, without the right data analytics tools, it’s pretty useless.

AI can help banks rebuild this personal relationship with customers in the digital space using advanced data analysis. They can learn about people as much as possible, the same way bank clerks would do. Or, in fact, better. Using machines to personalise human interactions is nothing new. What has changed is that banks have better access to them – and they’re more pressured than ever to figure out how to use them to their advantage.

Essential read:Demystifying AI: why it matters and how to get it right

Long read:Becoming a data-first bank: Are personalisation platforms the way to go?

Financial health is not a box to tick

It’s your new business strategy.

“Promoting customers’ financial well-being is a great opportunity for financial services firms to respond to the ever-increasing number of values-based consumers, boost customer loyalty, and drive growth,” Forrester’s Aurélie L’Hostis wrote in the research company’s recent report, The Financial Well-Being Opportunity, in April. Her words rang truer by the day as the world embraced a new normal in the wake of the coronavirus crisis. One that forced businesses, financial or otherwise, to keep an open dialogue with their customers and stay in sync with their needs – from at least six feet away.

If there’s one point that the pandemic crisis has driven home, it’s this: taking care of customers’ financial fitness is not about rolling out flashy apps or showing rainbow-coloured charts. Or not entirely. It’s time banks moved on from thinking they’ve ticked the financial well-being box by offering one-size-fits-all PFM tools. They must adopt a holistic, personal and proactive approach to financial fitness instead. Then build capabilities to monitor how individual customers’ behaviours change and personalise customer interactions accordingly.

For example, people with no salary coming into their current accounts can be flagged to receive offers for emergency loans and updates on available relief options. Peer comparisons and cash flow patterns can also reveal which customers are financially stable for the time being but have a good chance of being hit with financial trouble in the future. Then banks can remind them to transfer money from one account to another to cover upcoming bills, alert them of scheduled transactions or help them stick to the 50/30/20 budgeting rule.

Essential read:Acute treatment: the biggest mistake banks can make when building financial well-being programmes

Long readBanking in the time of COVID-19: How personalisation can help banks stay connected to their customers

Bank-fintech collaborations: the road to digital success? 

“Fintechs started to pop up in the early 2010s. First, they were viewed as competitors – and small ones at that. No large bank thought of them as a real threat on a 3-5-year horizon,” recalled Michael Anyfantakis, platform lead at Amsterdam Trade Bank, during our October panel discussion on the key opportunities and challenges of bank-fintech collaborations.

The tables have turned when, with the rise of challenger banks, a new breed of banking consumers has also emerged. One that will settle for nothing less than the best of both worlds. Instead of just going after customers, fintech firms started going to banks with ideas on how to build better customer experiences. And slowly but surely, they have gone from competitors to collaborators.

Many fintechs have built compelling track records of project delivery and impact. They’re much more credible and mature, with years of experience in driving digital transformation across an industry hindered by robust regulation, legacy systems and product-first thinking. And now that banks have a blueprint for such partnerships, they might just be what they need to thrive in an ever-so-competitive market.

Read the original article here. Find out more about W.UP here.

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