Almost 33 percent of millennials believe they will not need a bank after a few years; another 33 percent are willing to switch banks in the next three months; 75 percent would be more excited about a financial offering from a technology biggie like Apple or Google, than their bank; and almost 50 percent think financial technology will transform the traditional bank.
This is the young generation’s expectations from banking, according to the findings of the Millennial Disruption Index (MDI). These customers don’t care who they bank with as long as their requirements – experience, convenience, value – are met.
That’s a world away from old school banking, with its paperwork, face-to-face meetings and branch visits. It means that if the conventional bank is to appeal to the new customer, it would need to innovate and reinvent itself.
Essentially that means three things – providing personalised, contextual experiences; integrating banking services into day-to-day life; and maximizing value to the customer. In technology/business model terms, that translates into intelligent technologies, omnichannel strategy and platform banking.
Investing in Intelligence: AI, Blockchain, IoT
In this year’s Efma-Infosys Finacle ‘Innovation in Retail Banking’ study, 79 percent of organisations said they had increased investment in innovation, and on average, more than half of them expected to earn a measurable return in one to three years. As of now, most of that money is being deployed into relatively traditional technologies, such as information security, advanced analytics and open banking APIs.
However, to be on the leading edge of innovation, banks will soon have to divert their investment dollars towards technologies like Artificial Intelligence, Blockchain, and the Internet of Things.
Luckily, most banks have access to these technologies and have some action going already. The next step is to reimagine banking operations and differentiate the organisation for the millennials market.
Conversational AI (chatbots) are becoming popular with banks as a tool of service and engagement: In the Efma-Infosys Finacle survey, 70 percent of respondent organisations said they planned to use it to improve service experience and query resolution.
One such example of AI is Swedbank, where “Nina” takes more than 40,000 customer calls every month and resolves about 80 percent of queries in the first contact.
Pursuing an Omnichannel Strategy
Almost 70 percent of the millennials in the MDI study said the way they accessed money would change totally within a few years. This is a clear indication that banks cannot expect future generations of customers to flock to their channels. Instead, they must go where those customers live, work and play. That means removing all friction from banking channels and experience, and integrating them into day-to-day events.
One bank that’s doing this successfully is ICICI Bank, with a feature called iMobile SmartKeys that allows iMobile users to pay quickly and safely via a number of mobile applications, such as chat, messenger, email, games or search browser, without exiting the application they’re using.
Banking on a Platform
So the banks that millennials deal with, will have to be a lot smarter thanks to AI, Blockchain etc, and a lot more accessible. At the same time it should also maximise value for customers, even if that means offering rival or non-financial products.
This is the intent behind the ‘platform bank’, which unlike the monolithic pipeline bank that produces and owns everything, works with an ecosystem of partners and providers to aggregate a rich array of products and channels to fulfill different needs. These could be from other banks, fintech firms, e-commerce companies, retailers, telecom operators, etc.
The platform bank opens its environment to third party developers via APIs so they can innovate applications on top. Going forward, it will be the banking business model of choice to attract the value-seeking, next-generation customer.
(The author is vice president and global head of engineering, Infosys Finacle.)
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