Are value-added services the key to the future of banking?

The revolutionary impact digital technology is having on banking operations has imposed on the sector both a responsibility and opportunity to provide better products and services to its customers.

As the world of e-commerce is proving, a fundamental key to customer loyalty and retention today is the extra value a business can deliver.

The move away from cash now means e-commerce consumers can make purchases with a couple of taps, regardless of their location.

So it’s little surprise that bank customers want the same level of convenience and service from their banking provider. Be they personal or corporate – they all want more personalized and consistent experiences.

For the traditional banking sector, tapping into the increasing value of its digitally-active consumers will be key to its relevance in the future.

The future banking model:

With the encroachment of Fintech capabilities and challenger banks, most incumbents have now grasped they need to reimagine their business models to deliver more than mere financial products.

They have realised that by focusing hard on their customer needs, they can strengthen and build on the traditionally strong relationship they’ve always had with them.

Most services that required a visit to the bank can now be done online. User-friendly, mobile-based banking apps are shortening the distance between customers and their money, be it new accounts, extended overdraft facilities or even short-term loans.

Personalization and customization

But most customers now want more and the way for banks to deliver this is personalization.

Doing so is crucial if they are to compete with forward-looking competitors.

• Think Amazon, with its Amazon Cash and Amazon Lending offerings that mirror prepaid debit cards and investment services.
• Or British challenger bank Revolut, which has rolled out touch-free QR-code-based payments across Europe for business clients.
• Or Monzo that doesn’t charge fees for spending abroad, and doesn’t mark up the exchange rate – unlike most other banks.
• Or Square, the payments company with its point-of-sale dongles. It has expanded its appeal by adding traditional services like small business loans through Square Capital, and its range of add-ons like email marketing and payroll support.

Customer-centricity is their secret to sustainable growth by helping customers apply for financial products tailored to their needs at the point in time that they need them.

Its effect is well documented. A survey by McKinsey shows why this approach is so important for banks seeking growth:

• Loyalty: Digitally active consumers are twice as loyal as non-digital consumers.
• Purchase activity: Digitally active consumers buy twice as many banking products compared to non-digital consumers

So how are the banks achieving this?

Data is often trapped in legacy systems. But new technology is available to help organizations gather customer insights while maintaining privacy.

The balance between security and efficiency is challenging. But adoption of new AI-driven technologies that can identify and eliminate false positives in risk management processes like anti-money laundering and fraud are smoothing the path.

Data-driven personalization is allowing banks to analyze valuable data on customer demographics, product usage, and credit behaviour in real time. To this, they can apply machine learning and AI algorithms to determine what's important to deliver personalized insights and services.

That might be:

• Providing customers with a view of their finances, from spending habits to savings opportunities
• Recommending actions to better manage day-to-day banking
• Offering point-of-sale personalised loans • Supplying digital receipts
• Giving access to shares and trading platforms.

On the business side of banking, it might be:

• The offer of payroll support
• Tax-efficient e-invoicing 
• Cashflow management.

By integrating useful services into their offerings, banks can transform their relationship with customers far beyond the standard transactional nature of transfers and balance checking.

How the future will look for banks and their customers will be very different from today. We are witnessing an evolution in which banks have a unique opportunity to become business-wide innovation hubs.

Done right, they will become a bigger part of our daily lives. The successful bank of 2030 will be offering us products and services that enhance our entire lifestyles ¬ not just our finances.