By John Durrant, Senior Vice President, Head of Bank Financial Products, Fraud, and Operations, Capital One.
Countless words have been written about FinTech startups and the disruption of the banking industry, and rightfully so. Startups are working to pick off parts of the financial services industry to find ways to improve the experiences and win over customers. Many think that banks are too big and slow to respond to the disruption caused by the pace of technology advancements and the shift to digital interactions. It’s easy to see why.
So much changing – so fast
The financial services industry is at a dramatic crossroads in its evolution. Shifting consumer attitudes and behavior and increasing consumer expectations are driving banks to explore new ways of attracting and retaining customers in a highly competitive environment. Digital products have already had a material impact on the frequency of branch visits, and consumers increasingly cite them as a driver for their choices in banking. Tremendous investments in technologies such as cloud-based computing and machine learning are nearly certain to unlock new opportunities for companies to build new products that continue to change where and how consumers choose to bank.
The way consumers transact continues to change and the pace of adoption to mobile payments has been breathtaking. There are now many ways to interact with banks, which expands opportunities for consumer choice, ease and access in banking, but forces banks to be much more innovative in how they adopt and use technology. Sure, there are structural differences in every market, but it would seem foolish to not take stock of what has happened in other markets.
Demographics are evolving as well. Millennials now surpass Baby Boomers as the largest generation in the United States with 78 million strong. They play a significant role in dictating today’s financial services landscape and that role will only grow with time. The questions around how they will change their attitudes and preferences as they age is the topic of frequent debate. I, for one, anticipate that their preferences will change as their needs change and that they will still be quite different from those of prior generations. Aside from being first-generation digital natives, Millennials are the generation most likely to use digital banking channels, as evidenced by the steady growth we see in areas such as mobile and online banking, enhanced ATMs, and remote digital capture.
The real world still matters
Yet, even in this digitally-dominant age, customers still value some physical interaction with their bank through local branches (and in the case of Capital One, our Cafés), for assurance, advice, and the ability to facilitate and support some transactions. According to Capital One’s New Digital Bank Branch study, most consumers indicate that branches are important in how they handle their banking matters, with half (50%) saying they are essential. Interestingly, a notable number of Millennial consumers indicate a physical presence is essential to their banking.
What does this all mean for the next generation of banking? Is it strictly a digital and mobile focus? Will physical locations become a thing of the past? And how does Next Gen banking align with the changing attitudes and behaviors of tomorrow’s consumer?
For one, the physical and digital worlds will be increasingly blended as banking evolves, so that accessing banking products and services becomes a simple, stress-free and seamless experience. The same Capital One study found that nearly half of consumers see the evolution of the banking experience being a gathering place, like a Café, as an improvement. Looking ahead, in-person interactions will need to be warm, friendly, and geared toward helping while also setting the stage for a largely digital, self-servicing experience.
The industry will need to better understand customers’ needs by understanding what motivates their banking decisions: an ever-increasing variety of product options, stellar customer service, an easy, seamless experience across all channels – and accessibility. Customers expect 24/7 access to their money and want to stay on top of their accounts in a simple, hassle-free way. This can mean using Artificial Intelligence (AI) to provide a convenient, voice-based experience to interact with their credit card and bank accounts through devices such as Amazon’s Alexa. Or, using text messaging to get quick access to their account balances, recent transactions, or even make a payment. Capital One’s Intelligent Assistant, Eno, was the first natural language SMS chatbot from a U.S. bank and was developed to engage in a channel customer are using they use every day, all day – texting. Over time, we will continue to hone the Eno capabilities and adapt to the needs of our customers while providing insights that help make sense of their money.
Next Gen banking will be increasingly focused on creating personalized, real-time automated experiences so that banking is integrated into our everyday lives. So, for customers who are further away from physical locations, this means allowing them to bank in a way that is just as convenient, secure and delightful. Need a replacement for a lost debit card? Capital One is piloting ways for customers to order through their mobile app and receive a replacement at their home or office within an hour, complete with online delivery tracking. Need to deposit cash? We’re looking into ways of enabling this at nearby drug and grocery stores.
We’re already seeing the power of mobile and envision a future where customers can pre-stage every ATM transaction on their mobile phones so, when at the ATM, they can simply authenticate with their device, complete the transaction, and be on their way.
Accessibility also means focusing on removing friction in the customer experience and helping customers protect their financial information. Currently, we are using Natural Language Processing and AI to create virtual numbers for each online merchant you shop with to protect credit card numbers and eliminate the need to update your lost or replaced cards. And, the industry is enabling banks to allow customers easy access to their credit scores through the three credit monitoring bureaus – we do this with Capital One’s CreditWise. We also provide services that track a customer’s social security number and monitor the dark web to detect personal information in places where it shouldn’t be. As digital and mobile use becomes more widespread, the industry will need to continually improve systems to detect and deter fraud.
Technology to solve customer needs
Banks also need to be prepared for the next wave of emerging technologies. Robotics, AI and Augmented and Virtual Reality are creating new platforms for innovation in every industry and banking will not be an exception. This new wave of bank technology has evolved from digital first phase, to mobile first phase, and, in the not-so-distant future, to AI first phase.
These and other innovative technologies will provide customers with the access they crave, anytime and anywhere. The next generation of banking will not only make it increasingly easier to perform basic transactional tasks; it will significantly enhance banks’ ability to help customers save time and money and alleviate their concerns about the safety and security of their financial information.
Things are changing and changing fast. Competition is fierce and coming from all angles – traditional banks who have huge scale, FinTechs and even large-scale technology companies. Banks have their work cut out for them, but also have a great opportunity if they leverage technology to build capabilities that solve customer problems in a way that integrates into their lives seamlessly.