In virtually every aspect of connected life, consumers are demanding personalisation — and banks are under pressure.
While financial services led many sectors in recognising the potential of technology decades ago, rapid advances more recently in areas like retail have put banks under increasing pressure to deliver services that are tailored to the individual.
The general view is that banks are just too slow to transform, but it’s an assumption I readily challenge. Over the last few years, banks of all sizes have developed and launched new digital services and mobile apps at a pace I’ve not see in the financial services sector before.
The perception of slow and steady persists, however, and it’s because banks are missing the focus on personalisation. With consumers so used to the personalised services of brands like Amazon and Netflix, this gap is widening even further — and it’s what’s giving challenger brands their advantage.
Created and developed to offer everything to every consumer, large banks are being challenged to deliver the rapid pace of change that is needed to put personalisation at the heart of their offerings.
Conversely, smaller challenger banks have no legacy strategy or proposition to adapt. They are entering the financial services market with clear and focused propositions, designed to appeal to a niche demographic for maximum differentiation and appeal.
So, what does this mean for the banking landscape of the future?
Taking a ‘one-size-fits-all’ approach to banking has been relied upon for decades, with the assumption that appeal is maximised if everything is offered to everyone. Yet this standardised approach is not connecting with customers.
As I mentioned, banks aren’t being reluctant to change this situation through digital transformation — it’s just that it’s not easy.
The challenge here is two-fold. Firstly, in how larger banks were built, with a one-size-fits-all architecture to deliver every product or service a bank could ever want to offer to any customer. Adding new systems through integration brings some flexibility, but under the hood this core banking infrastructure is restrictive.
The other issue is that larger banks are the victims of previous success. They have worked hard to appeal to every type of consumer, and they’ve got them on their books. But personalising and segmenting such a broad group is a huge, unwieldy undertaking.
In contrast, newer banks don’t have to shake off legacy perceptions or rework legacy systems. A digital-first approach brings agility and flexibility from the outset, with the ability to rapidly create a banking proposition that is designed for a very particular type of customer.
A great example is UK-based Monument. Launched this year, this digital bank has purposefully hand-picked a focused segment: the mass affluent with between £250,000 and £5 million in liquid assets.
Every Monument message and product has been developed with its niche audience in mind, pushing aside the myriad banking services they could offer to focus only the ones that really resonate and matter to those with high incomes.
A digital mosaic architecture
Instead of being shackled with a ‘one-size-fits-all’ infrastructure, challenger banks have the opportunity to develop what we at Persistent Systems call a digital mosaic architecture.
Instead of building in everything from the outset, a digital mosaic provides a flexible structure to add and integrate the right services, applications and data platforms to meet the needs of a particular customer group.
It’s easily composable, and that brings new levels of efficiency, flexibility and agility — and a step change in the personalisation of the customer experience.
With this clear advantage, digital banks can take a truly tailored approach from the start, selecting only the products and services they need, whether that’s debit cards, loans or cross-border payments. With each component acting like a Lego brick, they have the opportunity to select only the best technologies for each product or service they want to offer.
For larger banks, this becomes more complex, as “under the hood” their technology infrastructure lack the flexibility they need to adopt a mosaic architecture quickly. Furthermore, the workflows within this infrastructure were originally created with the bank’s processes in mind, rather than the customer’s priorities, demands and expectations.
With a more composable, mosaic architecture, everything starts with the customer experience — and the technology becomes the enabler, not the blocker, of personalisation.
A customer-first approach with the cloud
To even the playing field and gain more competitive advantage, established players in the financial services sector are increasingly looking to the cloud to remove their dependency on complex, legacy IT infrastructure.
I’m seeing previous trust issues with cloud delivery dissipating, as banks recognize the cloud is now both highly trusted and critical to digital transformation projects. Flexibility and security are created in core components such as a credit decisioning system, KYC solutions and anti-money laundering technologies, and banks benefit from the ability to deploy and scale at speed.
The cloud brings the opportunity to break free from a single technology, to compose and integrate a unique and powerful combination of cloud-based services and applications for the optimum customer experience.
Partnering with a trusted systems integrator means this doesn’t have to be an insurmountable challenge either. Use experts to create and implement a best-in-class cloud infrastructure while you focus on what’s really core to the business: running the bank for your customers.
In today’s fast-moving banking landscape, the power and flexibility of a digital mosaic has never been more critical — and the opportunity is now.
This blog was originally published in ‘Finance Derivate’.