Opinion

Why the smart banking revolution has yet to happen

The disruption of the banking industry has been highly anticipated but has anyone really cracked 'smart banking', asks R/GA experience designer Taichi Kozaki.

Banking services need to adapt in order to anticipate and meet people’s needs

The ‘smart’ category has dramatically expanded over the past few years. We've got smart watches, smart homes, smart cars and even smart egg trays.

In the past, banks have been conservative about exploring the trend, allowing fintech startups like Mint to lead the category. However, times have changed and big players like Barclays are launching into the smart space.

But for customers, what really makes an experience ‘smart’?

The kneejerk reaction for many companies seems to have been to put a patchwork of digital services over what’s already existed. But this is often underwhelming because it doesn’t elevate the experience.

Companies need to start challenging the current way of doing things. It’s no good asking people to change their banking behaviour in order to suit the bank. Instead, banking services need to adapt in order to anticipate and meet people’s needs. Only by creating a truly user-centric experience can banks hope to disrupt the industry and differentiate themselves from competitors.

But it isn’t easy. A recent survey revealed that 53% of Millennials in the U.S. believe that there is no difference between banks. As a result, more and more banks are hiring or buying digital agencies to redesign mobile applications and online platforms. While they do a great job of creating experiences with sleek interfaces that work on any screen size, this is not changing the fundamental way of how people bank.

Anytime, anywhere banking is essential, but it’s also the norm. Banks need to consider how they can integrate their services into every touchpoint and make people’s lives easier.

Biggest enemy

Obsolete IT structures and legal regulations are a bank's biggest enemy against creating good experiences. User experience design is often dictated to by decade-old databases that hinder the collection of useful information, while legal authorities require banks to collect vast amounts of intel before simple, customer-to-customer transactions can take place. This is one of the reasons why some so-called 'fintech' companies like Square Cash and Venmo, who are not bound by such restrictions, are applauded for providing better experiences than traditional banks. Their user flow mimics the way people actually think about sending money in the real world.

Pie charts look pretty, they are only a quick-fix solution for ‘easy’ financial problems like momentary overspends

That being said, fintech companies can only provide 'bank-like' services and often with limited functionality. Start-ups focus on delivering one financial service - really well - but they lack the breadth and depth of an established bank. The disruption of the banking industry has been highly anticipated. But we have yet to see anybody provide a truly holistic experience that covers all services that a customer needs.

In an effort to give customers a better view of what’s happening to their cash, apps like Level money began creating data visualisation tools in the form of spending charts. Then lots more financial monitoring apps started trying to claim disk space on our smartphones. While those pie charts look pretty, they are only a quick-fix solution for ‘easy’ financial problems like momentary overspends. They are not the answer to solving the root cause of people's financial problems.

Everyone has different needs, often stemming from various factors such as lifestyle, student debt, geographic and demographic situations, to name a few. A true smart bank should understand the specific needs of each customer and provide a personalised solution for them.

There is something in trying to make financial data more accessible, human and democratic though. The perceived lack of a ‘human touch’ is perhaps the reason why people prefer not to visit a branch unless they absolutely have to. Research shows customers largely see their relationship with banks as purely transactional.

It can be argued that banks have contributed to this feeling of alienation with revenue-driven customer segmentation strategies. Although banks offer financial advice services to a majority of customers, they can be poorly advertised to those on the "basic level". As a result, people perceive financial advisors as being reserved for those who are well-off. By making financial knowledge accessible to all customer segments, banks can challenge this perception.

Banks are in the enviable position of being the only institution to have access to basically every consumer financial touch point, from where you want to shop to what your credit agreement is. This allows them to collect the data that can provide customers with personalised financial insights. However, most banks stop here.

Help needed

The most powerful thing a bank could do would be to provide customers with personalised feedback based on the data that they’ve collected. A survey by Accenture found that more than half of the respondents want their bank to proactively recommend products and services they might need, while considering which account they already have. Customers may rarely visit their bank, but it doesn’t mean they don't need their help.

It is the bank’s duty to stay in-tune with the financial landscape, understand the needs for each and every customer, and provide the right service. So far, this hasn’t really been achieved. But with the way data and technology have begun to integrate with our lives, the opportunities for banks to ‘get smart’ are endless.

We have yet to see a real game changer in the financial sector

Of course, the word "smart" could be a red herring. Steve Jobs’ announcement of the first "smart-phone" gave people goosebumps because we knew that they were about to change the way people use phones forever. Many companies have tried to follow what Apple did by simply digitising their services and adding the ‘smart’ prefix; however, we have yet to see a real game changer in the financial sector.

Making the banking experience accessible through all touch points only puts the banks and Fintech companies at the starting line. The important thing is how they run from there.