Customer engagement
Fintechs have been more successful than traditional banks in meeting consumer needs through a focus on user-centric design and services. Consumers care less about the technical details of financial products and more about hassle-free, values-aligned outcomes. Traditional banks often miss this point, focusing on attributes like interest rates and payment options instead of end results. Strategies that traditional banks could adopt include better aligning service hours with customer needs, embracing digital transformation to offer seamless, intuitive experiences, focusing on outcomes using informal language to discuss services, building trust through transparency, and using data to personalize experiences.
Generative AI
ChatGPT has limitations and potential risks when used in customer service applications within the banking industry. While ChatGPT can generate unique, clever responses, it is a general solution and may not be adequately optimized for the specific needs of the banking industry, requiring additional training and adaptation. Rather than relying on pre-approved responses, ChatGPT generates unique answers for each query which may result in inconsistent or incorrect information being provided to customers. It can also present challenges related to data privacy, bias, and intellectual property violations, including a risk of sharing sensitive or private information that could potentially be further disseminated by the chatbot. However, it does have strong use cases in internal operations and in the generation of training materials or FAQs, provided that sensitive information is not shared. Banks need to carefully assess their needs before adopting any new AI technology, ensuring it is the right fit for their specific requirements and compliances.
Digital transformation
A mindset of “progress over perfection” is important while pursuing digital banking innovation. Striving for perfection can lead to analysis paralysis, extended development timelines, and missed market opportunities. The industry’s successful players focus on rapid experimentation, iterative learning, and resilience. Key practices for a progress-oriented approach include releasing early and often, modular architecture, test automation, agile methodologies, data-driven priorities, user-centric design, and quick course corrections. Transitioning to this mindset faces obstacles like cultural resistance and fear of failure, but can be overcome with senior leadership support and cross-functional teams. The benefits of this approach are manifold for customers, providing quicker access to new features and more responsive upgrades. It also offers better personalization and integration with third-party services. Real-world examples like Chase Bank, PayPal, and DBS Bank illustrate the effectiveness of focusing on continuous, incremental improvement over trying to achieve a perfect product.
Payments
The Federal Reserve’s FedNow instant payments system provides revenue-generating opportunities for banks and credit unions but also brings strategic and marketing challenges. The system competes with the Real-Time Payment (RTP) network, run by The Clearing House, and is seeing increasing adoption, with 23% of surveyed banks planning to offer FedNow and 48% considering it. Even though joining FedNow is voluntary, experts suggest that not participating could risk losing business, especially from small and medium-sized business customers. FedNow also presents a learning curve for consumers, who must adjust to the speed and irrevocability of transactions. Financial institutions have different attitudes towards FedNow: some see it as an early adoption advantage, others as a market learning tool, and the rest are in wait-and-see mode. On the business side, experts expect FedNow to be essential as instant payments become increasingly important for accounts receivable and payable. Overall, while it’s still early days, FedNow is expected to become a significant component in the financial transactions landscape.
Payments
There’s a shift underway toward faster and more secure payment methods like Tap-to-Pay. This trend benefits merchants by streamlining operations, reducing chargebacks, and enhancing customer experience. Financial institutions such as J.P. Morgan and Citigroup are responding proactively, developing integrated payments ecosystems to meet these evolving needs. Payment providers like Square, Stripe, and PayPal are also joining the fray, extending Tap-to-Pay services to a broader range of sellers, including small- and medium-sized businesses. Overall, the rise in contactless payments reflects a broader move towards digital transformation in commerce, aimed at making transactions more efficient, secure, and customer-friendly.
Customer engagement
While customers are open to being loyal to one primary bank, an Accenture study notes that they expect their loyalty to be reciprocated with rewards and integrated services. Despite this, less than 15% of banks offer such holistic rewards. The report also reveals shallow customer satisfaction and a fragmented banking landscape, with over half of the surveyed customers having financial products from multiple providers and digital-only banks. The study strongly suggests that to retain customers and build true loyalty, banks should offer integrated products and rewards that look at the customer as a whole. This approach is particularly important for engaging younger customers, who are willing to switch banks for better services and are influenced by ‘finfluencers’ on social media. Banks that do not adapt risk losing market share to fintechs and bigtechs, who are quickly filling the gaps in customer expectations.
Customer experience
Synovus Bank is prioritizing digital customer experience as a key driver for growth, aiming for intuitive, seamless interactions in both its online and mobile platforms. The bank has upgraded nearly every major digital solution in the past four years, focusing on user-friendly features and robust security to build trust and customer loyalty. The features considered essential in mobile apps include account balance checks, transaction history, and biometric login, while newer, desirable functionalities include personalized financial advice and conversational AI capabilities. The bank is also working on accommodating different generational needs within its digital platforms, aiming for a single mobile app that can offer different experiences to different customer segments. Despite advances, the industry still faces challenges in providing a seamless omnichannel experience, including integrating data from various sources and overcoming the limitations of legacy IT systems. Future improvements in digital banking may include AI, machine learning, blockchain, and enhanced security features. Synovus aims to differentiate itself by focusing on what matters most to customers: convenience, ease of use, personalization, advice, and security.
Digital transformation
In the ongoing digital transformation in the banking industry, there is a trend towards incremental innovation rather than revolutionary changes. While ‘moonshot’ ideas still have a place, the focus is currently on practical, cost-effective innovations that bring small improvements quickly to market. The partnership between fintechs and traditional banks is deepening, with both sectors seeking mutual benefits. U.S. banks are making progress in providing hyper-personalized digital experiences using AI and machine learning but data privacy remains a challenge. The head of banking and financial services at Infosys adds that Environmental, Social, and Governance (ESG) factors will become a front-and-center business priority for banks in the near term.
