A new report by the Economist Intelligence Unit reveals that four in five bankers (81%) believe that financial institutions will seek to differentiate themselves on customer experience rather than on their products and services in the next four years.
The report underscores the importance of customer experience, as changes to customer banking behaviour triggered by the pandemic create long-term structural changes.
The report is based on a recent global survey of 305 senior banking executives conducted by the Economist Intelligence Unit (EIU).
The report highlights how financial institutions have been forced to adapt to the sudden movement of customers managing their finances online, which has proved beneficial to digital-only banks.
As an example, as of January 2021, 14 million British citizens (27% of UK adults) had a digital-only bank account, representing a 16% growth from January 2020 and an increase of 3X compared to January 2019.
Almost three in four (71%) global respondents expect cash to represent less than 5% of all retail transactions globally by 2025.
The shift towards online banking has highlighted the evolution of how financial institutions manage relationships and the demise of the traditional branch.
Global banking executives’ top strategic priorities are all focussed around the customer experience. Improving customer experience and engagement, including personalisation and intimacy, was viewed as the top strategic priority by 30%.
The report further reveals that consumers, particularly Millennials and Gen Z, are increasingly demanding that companies follow responsible business practices.
This is leading to business engagement with issues that are important to consumers, such as combating climate change and promoting diversity and financial inclusion.
Additionally, banking executives are prioritising the financial empowerment of their customers.
Findings show that around one in three financial institutions are considering growing microfinance for entrepreneurs (34%), deposits for unbanked populations (33%) and responsible lending to under-banked populations (32%) in the next one to three years.
The shift has brought forward expectations of the demise of the branch, traditionally the centre of the retail banking experience.
According to an Economist Intelligence Unit global banking survey, 65% of bankers now believe that the traditional branch-based banking model will be “dead” within five years, while 71% expect cash to represent less than 5% of all retail transactions globally by 2025.
Technology driving customer experience
Survey respondents cited changing customer behaviours and demands around digital banking, the new technologies needed to understand and serve customers better, and regulation on digital technology (including data protection, which dictates how banks can interact with customers and their data) as the top three trends that will have the biggest impact on banks in their countries by 2025.
Consequently, survey respondents’ top strategic priorities by 2025 are all customer focused: improving customer experience and engagement, including personalisation and intimacy; mastering digital marketing; and migrating client usage from physical to digital channels.Banking