Financial Services

Demanding More

September 28, 2021


Demanding More

September 28, 2021

Jeremy Kingsley

Senior manager, Policy & insights

Jeremy Kingsley is a senior manager at Economist Impact and regional practice lead for Technology & Society in Europe, the Middle East and Africa. He leads a regional team of analysts and editors on policy research, consulting and thought leadership programmes exploring technological change and its impacts on society. Jeremy joined The Economist Group in 2017 from Nesta, the innovation foundation, where he oversaw the Challenges of Our Era research programme and design of challenge prizes. He previously edited Nesta's magazine, served as a contributing editor at WIRED, and has spent 12 years covering technology, innovation and business trends as a journalist, researcher and consultant for The Economist, The Economist Intelligence Unit, The Financial Times, Slate, WIRED Consulting and others. He holds a master’s degree in philosophy and economics from the London School of Economics, with distinction, and a first-class bachelor’s degree from Trinity College Dublin.

Since the pandemic forced customers online in 2020, consumer banking behaviours have been in flux, boosting competition among banks and non-traditional competitors.

  • Four in five bankers (81%) believe that banks will seek to differentiate on customer experience rather than products, according to a global survey of senior banking executives conducted by The Economist Intelligence Unit. Mastering both customer experience and digital marketing are ranked as top strategic priorities for the next four years.
  • As consumers increasingly expect banks to take a stand on environmental and social issues, survey respondents view microfinance for entrepreneurs (34%), accounts for the unbanked (33%) and responsible lending to underbanked populations (32%) as top actions to promote financial inclusion and empowerment.

More than a year after much of the world went into some form of lockdown, many customers previously resistant to digital banking have grown accustomed to it, and most do not plan to return to their old banking habits. A survey of people in the US aged 18 to 65, conducted by Chase Bank, found that four in five now prefer to manage their finances digitally rather than in person, and three-quarters are likely to continue using digital payment options even after the covid-19 threat subsides. These findings are mirrored in many other countries around the world.

“Overnight people became digital, when it was supposed to take ten years,” says Michal Kissos Hertzog, chief executive of Pepper, an Israeli digital bank, of the impact of the covid-19 pandemic. “It doesn’t matter if you are Gen X or Gen Z—everyone became digital.” 

Banks have been forced to adapt as a result. “All banks have had to up their game, so competition has become stronger,” says Ms Kissos Hertzog. The shift to online brought by the pandemic has proven a boon for digital-only banks. As of January 2021, 14m Brits (27% of UK adults) had a digital-only bank account—16% growth from January 2020 and a threefold increase compared to January 2019.

The shift has brought forward expectations of the demise of the branch, traditionally the centre of the retail banking experience. According to our annual global banking survey, supported by Temenos, 65% of bankers now believe that the traditional branch-based banking model will be “dead” within five years, while 71% expect cash to represent less than 5% of all retail transactions globally by 2025.

Senior executives report that technology is driving customer experience. Survey respondents cited changing customer behaviours and demands around digital banking, the new technologies needed to understand and serve customers better, and regulation on digital technology (including data protection, which dictates how banks can interact with customers and their data) as the top three trends that will have the biggest impact on banks in their countries by 2025.

Consequently, survey respondents’ top strategic priorities by 2025 are all customer-focused: improving customer experience and engagement, including personalisation and intimacy; mastering digital marketing; and migrating client usage from physical to digital channels.

At Pepper, the focus has been personalisation. When individual customers open the bank’s app, they see a homepage personalised to their specific actions, says Ms Kissos Hertzog. “Different customers will see different products, will receive different marketing.” The goal is a “segment of one”, tailoring the experience precisely to the individual consumer based on their activity and preferences. “The more personalised the service is, the more engaged customers are.”

Technology investment

According to survey respondents, banks’ top investments in customer-related technology include developing artificial intelligence (AI) platforms, such as digital advisors and voiceassisted engagement channels, and advanced and predictive data analytics for customer experience. 

Adoption of this technology starts with data, says Ms Hertzog. “Banks are sitting on a humongous amount of data, but they are not doing a good job [of using it],” she says. “I want to use data to give customers a better understanding of their money, to help them decide how to save, to budget, whether they should invest in the stock market."

But she cautions against focusing investment on specific technologies just because they are the latest trend. “I’ve never heard my users saying, ‘I chose you because you have the best artificial intelligence of all banks’. What they care about is that they will have good service, that they’ll see the benefits from their bank, and that we meet their needs,” she says. 

“When we speak about technology, it’s important to understand that the technology is not the target, it’s a means to an end. Of course, we have to have great AI, and we are implementing machine learning and blockchain—we’re doing all of that. But we are doing all of that in order to give the best customer experience.”


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