Banking on disruption: when digital can be a force for good

In my view, more has changed for banks in the past four years than in decades previously, and it’s all thanks to the rapid pace of digital innovation. In almost every area of our lives now, digital means we’re doing things differently, and that’s changing our relationships with people, services and brands. Banking is no exception. As customers we increasingly want experiences to be quick, easy and seamless. We expect to find and get what we want, when we want it.

The rise of the disruptors

This is where disruptors are currently leading the way, delivering services that are transforming customer interactions. Take Amazon, for example, providing exceptional customer service, moving beyond its core activities, creating more reasons for customers to become Prime members.

And of course digital disruptors are steadily encroaching on traditional banking areas. From credit cards to contactless payments, from merchant payment services to deposit accounts, all are now available from new entrants in the financial services sector. What’s more, the innovative approach they’re taking to these solutions is striking a chord with customers. When asked, customers have said they’re likely to consider other such services from these providers.

Rethinking banks’ services

On the other side of the coin, banks are looking to serve customers in the digital space too. This is, after all, a more cost-effective way to manage relationships. And many customers would now rather access advice and support online than go in branch.

But with banks’ existing range of products and services, interactions are in danger of becoming purely transactional. The pressure is on to engage customers effectively and to answer new and evolving needs with the same progressive approach being taken by their disruptive competitors.

Deepening customer knowledge

Step forward cloud-based tools. They’re attracting huge interest because of the rich types of data they generate, which can be turned into actionable insights. Now banks can personalise services and support to a level that was inconceivable in the days of relationship managers.

For example, with these tools a small business could:

• use bank transactions to identify customers who might have low credit ratings to help avoid bad debt and late payments
• or access benchmarking data to understand whether their average basket size is on a par, lower or higher than local competitors
• or match invoicing info with bank data to predict whether an overdraft will be necessary, rather than waiting until it’s too late.

These tools won’t remove the need for human interaction, by phone or through live web chat for example. But they will provide many more touch points with customers and more reasons to engage. Such interactions can then deepen a bank’s knowledge of their customers and broaden the areas where they provide support. This presents a real opportunity for banks to prove their relevance and value across a broad range of small business tasks: by learning about their customers and offering timely, relevant and complementary solutions.

Strong foundations to build on

In this fast-moving world, it seems to me that banks have underestimated the assets they already have: strong brands, that are trusted to keep personal data safe, with broad customer bases and systems that are already built to process complex data. With such strong foundations in place, perhaps the world of digital disruption can be used as a force for good, deepening engagement with customers rather than handing them to disruptors on a plate.

For more insights on SME fintech and digital banking for small businesses, visit our resources page