December 14, 2016
The banking business runs on relationships.
For centuries, the bond between banks and their customers – especially small businesses – has served as the backbone of commerce and the lifeblood of every community. But as customer demand for new and better digital experiences reaches a fever pitch, the way banks think about building and maintaining relationships with customers is changing – fast.
Once the cornerstone of the banking experience, face-to-face interactions with customers are no longer a given. Increasingly, banks are interacting with customers through mobile and online banking transactions.
Take a look at some of the largest banks in the US and the trend is clear. Bank of America, Citigroup and JPMorgan are closing hundreds of branches in favor of digital, self-service banking options. Meanwhile, Bank of America and others have started introducing “full-service automated financial assistants” (chat bots) that can perform simple, everyday tasks like budget tracking and making payments.
With the proliferation of cloud and mobile technologies, banks today have an unprecedented opportunity to redefine the banking experience and re-establish what banking means for their customers. This opportunity extends to every innovator in the space – especially those partnering with banks to help them build the banking experiences of the future.
But with so much innovation happening across virtually every aspect of banking and financial services all at once, where do banks start?
Banking Beyond the Branch, Payments and Small Business
To better understand the impact of technology on customer relationships in the banking industry, my company, Bill.com, partnered with SourceMedia Research and American Banker to uncover how the industry’s top decision-makers are rethinking customer engagement for the digital era.
Outlined in the 2016 Bill.com Banking on Relationships Report – which involved more than 200 banking leaders and was conducted in August – banking beyond the branch, digital payments, and small business customers represent the top priorities for the banking industry over the next 24 months. By the numbers:
Everyone agrees that technology is a disruptor
: Nearly all (91%) banking leaders agree that new technologies are dramatically changing the way they engage with customers.
Banking beyond the branch is the top priority
: Looking ahead, banks plan to invest more in tech solutions that enable banking beyond the branch over the next 24 months. Specifically, 86% report that mobile, digital payments, online/web are the top overall technology investment priorities.
Small business payments are a key focus
: When it comes to digital payments, small business customers are twice as important to banks as large businesses and, over the next 24 months, banks expect to place nearly as much focus on small business payments as they do consumer payments.
The future of small and medium-sized (SMB) banking is clearly digital
: With regards to small business customers, 76% of bank leaders report that digital and mobile represent the highest-priority channels for growing SMB engagement over the next 24 months.
How Do Banks Get There?
Banks looking to innovate the customer experience have an important choice to make: will they go it alone and rely upon internal talent and resources to develop proprietary new technologies, or will they tap into the vast and growing fintech ecosystem and partner with highly-specialized digital natives to get there?
While most will ultimately take a hybrid approach, fintech partnerships offer banks a smart and fast way to fuel innovation. According to our survey, bank leaders recognize the merits of this strategy: 48% expect fintech partnerships to increase over the next 24 months and 51% expect partnerships to remain near current levels. By contrast, only 1% indicated they expect fewer fintech partnerships in the years ahead.
In addition to deciding how to create new customer experiences, banks must also think about what they should prioritize. While each bank has its own unique set of goals and circumstances that will ultimately guide their strategy, broader trends in technology product cycles cannot be ignored.
For example, while the “digital web” currently provides higher levels of engagement with SMB customers than “digital mobile” (27% compared to 18%, according to our survey), broader tech trends clearly indicate that mobile is the future. Banks are taking this into account, reporting “digital mobile” as their highest priority channel over the next two years (46% compared to 30%).
If more than two decades in the financial technology space has taught me anything, it’s how to spot a trend. Looking ahead, there are a few other key trends I see unfolding that banks would be wise to consider when setting the innovation agenda:
Faster and lower-cost payments: New digital payments platforms are leveraging the power of networks to make payments faster and cheaper for consumers and businesses alike. Examples include Circle (consumer payments) and the Bill.com Network (business payments).
Deeper and more seamless integrations: As the world goes digital, it is also becoming increasingly interconnected. When someone looks up directions to their favorite restaurant in Google Maps, they expect to see photos, reviews and other information too. Small business owners want this level of intelligent integration as well – at the very minimum they expect payments and other cash-flow data to automatically sync with their accounting system. The newly launched Bill.com Connect helps banks solve this very problem.
Greater visibility, in real-time: We live in an instant and on-demand economy where virtually anything can be ordered at the touch of a button. Banking customers are starting to expect the same type of visibility and control over their finances.
Broader collaboration: Connection is perhaps the single-most defining characteristic of our digital universe. As messaging and other tools that facilitate collaboration become ubiquitous on the social web and beyond, the banking industry can expect to see mounting demand in the coming years for broader and richer connection and collaboration around their finances. This is especially true for business customers managing increasingly digital accounts payables and receivables processes.
In the coming years, these and other broader technology trends will continue to impact the way banks interact with customers and build richer, longer-lasting relationships. This change represents an unprecedented opportunity for banks to redefine the banking experience and firmly establish themselves at the center of their customers’ financial universe. To get there, banks should look to the growing fintech ecosystem to accelerate innovation and deliver the business banking experiences their customers want – and deserve.