You don’t need to be a fortune teller to see there are big changes ahead for the banking sector. Technologies coming out of smartphone technology, through to the blockchain are changing the way we pay, creating a situation in which traditional banking organisations must adapt or face extinction.
Keeping track of all this change is tough, but at this year’s Money20/20 annual event, the themes outlined are some of the trends that banking professionals should be aware of worldwide.
Mobile gets moving
If you thought mobile wallets were never going to take off, then you haven’t been paying enough attention. Mobile wallets may have only conquered around a quarter of handsets, but that’s not because consumers don’t want to use their phones to pay.
The reality, is that consumers are keen for different mobile payments options, and predominantly one that simplifies the overall banking experience. It is up to banks to deliver this. For example, by providing a single view of account information on one screen.
Are you experienced?
That thirst for personalised interaction is not just a feature of Gen Z customers, though. Today, all banking clients want a better customer experience. After all, if giants such as Google or Facebook can tailor the user experience, why can’t banks?
The challenge for institutions is that the kind of information you need for that personalised experience is rapidly being lost, as customers increasingly resort to alternative payment providers, from PayPal to tap-and-go platforms on mobile devices.
The advice to established financial services providers is: if you can’t beat ‘em, join ‘em. Banks must get on board with real-time, digital payment systems, and fast.
Consumer demand for rewards cards continues unabated. But the need to increase reward value while interchange fees stay flat, means a new model for loyalty schemes could be on the horizon.
Taking a leaf from the needs of Gen Z, banks are encouraged to look beyond simple payments and offer rewards that are more experience-based. These should also be delivered immediately—at the point of sale, for example.
Banks that don’t move with the times risk losing wallet share.
Take on tech
One particular area of collaboration worth fostering is that involving financial technology providers.
Whereas companies such as PayPal have traditionally been seen as rivals to traditional banks, they could increasingly become allies in the fight to retain customer relationships.
Financial technology firms are frequently nimbler and more customer friendly than traditional banks, but they may lack scalability, infrastructure and brand reputation. The case for partnerships is obvious.
Cracking the code
As payments increasingly move into the digital realm, the need for a physical account number is diminishing. Today, your phone can produce a unique token for each payment, greatly improving security and convenience.
This move to tokenised, code-based payments, potentially linked to technologies such as biometrics could change the face of credit card security.
Despite massive advances in technology, the banking industry is still highly susceptible to crime.
If anything, technology has given criminals new tools to attack the sector: witness the losses from ransomware or social engineering, for example.
Staying ahead of this constant threat will require further technical investments, in areas ranging from endpoint protection to voiceprint identification.
Out with the old
Bringing about all the changes required to meet today’s customer expectations is simply not possible with yesterday’s IT systems.
This means many banks will have to consider investing in new technology that can allow them to carry out real-time payments, tokenisation, paperless operations and more.
The good news is that smart banks may be able to use this technology refresh as an opportunity to not only install more flexible and efficient systems, but also to adopt lower-cost infrastructures based on cloud computing and software-defined networking.