First off, what is seamless banking? Seamless banking refers to personalised digital banking services based on data and insights about customer habits and preferences, ensuring a consistent experience regardless of how you avail of the services. It is more a matter of winning digital minds and analogue hearts via products and services that serve the needs, values and beliefs of the customers.
There are two significant aspects to consider if you’re looking to drive seamless banking:
- The first aspect would involve the bank integraing its existing financial services into various non-bank applications.
- The second would require the banks to ensure that the customer uses negligible or zero physical artefacts while using the bank’s financial services.
Recent research by Bain & Company has revealed a few interesting insights:
- A survey of 131,000 consumers in 22 countries found that digital channels were the preferred banking mode.
- The share of product purchases via digital channels has increased by 2% to 16% since 2017.
- The total share of digital purchases stood at 18% to 60% depending on the country, with the UK topping the chart.
The increased use of mobile devices, globally, especially Central and Eastern Europe has pushed the digital drive leading to mass adoption of digital banking services. They are the drivers of seamless banking experience owing to the ready digital infrastructure, and superior interface and visualisation today’s mobile devices offer. Customers are empowered to make smart and informed decisions in real-time.
The Neobank Factor
Another prominent development is the entry of neobanks in the financial market. Neobanks have increased competition, gained considerable market share and offer a superior customer experience challenging the incumbency of traditional banks. Their success arises from a focus on identifying the gaps in current banking structures to provide a vastly superior digital alternative.
A neobank is 100 per cent digital and uses apps and online platforms to support their customers, rather than traditional physical branches. Neobanks intend to evolve further to enter the mainstream financial sector with some banks having applied for licenses in some markets, while others having acquired fully-licensed banks for instance, Tandem’s takeover of Harrods Bank. In some cases, traditional banks have started to develop its own digital-only brand.
Even though traditional banks have the ready advantage of customer support and funding, they are far behind in developing innovative customer experiences:
- Neobanks offer flexibility and ease and are more inclusive than their traditional counterparts.
- They can better perform in terms of customer service, rates and products offerings.
- They along with FinTechs further market segmentation.
However, a seamless customer journey is a continuous process, which is integrated rather than additive. The future of banking resides in an eclectic omni-channel mix of the physical as well as digital to serve seamless experiences. Most banks view the omni-channel approach as significant to help them adapt better to changing customer preferences and digital disruptions. The Building the Retail Bank of the Future Report by Bain & Company found that 75% of the banks consider omni-channels as extremely significant. Most of the banks are in their early stages of development of such channels.
Digital banking developments in Emerging Markets
Consider Africa, which is majorly a cash-based economy steadily moving towards mobile money. Alternative forms of banking and payments are a popular mode in Africa with 84 million active digital accounts. Big players like Standard Chartered have also realised the feasibility of digital channels to smoothen the customer experience. Jaydeep Gupta, region head of Banking in Africa at Standard Chartered says “we have now launched digital banks in 8 markets within 15 months as we have seen a growing demand for convenient banking in Africa. In line with this, we will be launching our digital bank in Nigeria which follows the eight digital banks which we have already launched so far.”
The increased use of digital payment innovations in West Africa is causing the demand for accessible services and product innovation in the digital banking space to shoot up. African governments are initiating wide-reaching financial inclusion roadmaps to alter and reshape accessibility to finances. They are collaborating with private sector organisations to reach varied customer segments.
So Where is Seamless Banking Headed?
The current digital trend and adoption of several types of neobanking facilities, like the easy and instant financial management services from Salt will simplify banking for both individuals and businesses in a digital way, enabling the seamless banking dream. There are several reasons to account for the digital shift:
- The Gen Z and millennials are all gung-ho on speed, efficiency and accessibility. They are concerned to get things done ‘now’ – whether it’s bill, send money or seek a loan. The waiting game isn’t appealing anymore.
- There is a change in consumption pattern with regard to financial services that concerns more about the process that would help them save time. As long as a financial service is embedded in their natural process, the customers don’t care about the nomenclature of the service.
- The entry of new digital players in the virtual financial market that understand the nerve of the customers better than the incumbents is another significant change. These players use the data to tailor their services according to the specific needs of a particular customer. Such services, being embedded in the natural process like online shopping, become an obvious choice while traditional banks are left out.
- The traditional banks are bound by tight regulations which makes them incompetent to try and assimilate disruptive practices. Also, banks are more concerned about fixing their face rather than improving their processes. They are ancient when compared to the technologically advanced neobanking services overtaking the digital space.
Seamless Banking: What are the challenges?
Digital seamless banking is fast gaining traction, but there are certain challenges that can hamper growth and adoption:
- Traditional banks still hold the major share of market resources.
- Acquiring a significant customer base is essential for the survival of such digital banks. Customers feel hesitant to opt for a complete switch-over to the digital mode, owing to lack of trust.
- Lack of funding does not allow for scalability and economies of scale for digital banks who have to develop their products and services from scratch.
- Compliance with regulations is a major hindrance for digital services that are disrupting the digital banking scenes.
The current times call out for a critical outlook towards the disruptions via neobanking and omni-channels while considering the incumbent role the traditional banking sector plays. Whether digital seamless banking simply overrules the incumbents in future or complements them towards a seamless banking experience is an issue worth debating. However, the fintech sector and neobanks like Salt can sure act as catalysts to redefine financial markets and improve access for the underbanked and unbanked and ensuring seamless banking experience.