Traditional banks have been left in the dust when it comes to the user experience offered by top neobanks such as Revolut or Starling and now need to offer the same, if not better, user experience. Over a coffee and a catch-up, I was informally introduced to the neobank, Monzo: a rising star in a sector that is set to grow to $471 billion by 2027.
Within a month of first setting sight on the eyecatching card, I had packed my proverbial bags and had left my previous bank for Monzo – and what’s more, I haven’t looked back since. And I’m not alone: Monzo’s customer base has grown from just over 1 million customers in January 2019 to 3.9 million as of August 2020.
What happened? How is it that these disruptors are able to win share so effortlessly in a sector that was once a benchmark for lifelong customers and loyalty that extended from generation to generation?
It all comes down to the customer experience.
Neobanking appeals to the customer experience
First, let us look at traditional banks. Wedded to legacy core banking systems that are often decades old, the most common response to requests for a more modern, digital-first experience from traditional banks is ‘We wish we could, but…’. For instance, customers want immediate approval and access to funds for loans and credit cards but traditional banks leave them feeling frustrated as they can only offer to let them know once a decision has been made, and the funds are available.
Other customer wants, such as the choice on how and where banking occurs, are usually met with requests to visit branches to sign forms. With such a large digital divide between what the customer wants and what traditional banks offer – it’s easy to see why consumers are ripe for change.
Neobanking, on the other hand, is offering an unprecedented user experience, removing the need for queues, waiting, tedious branch visits and more. Instead, it offers consumers control and convenience in the form of fast and easy-to-use mobile apps with all the functionalities of traditional banking: and none of the frustrating limitations.
For me initially, the advantage of Monzo was the ability to receive money into an account on weekends, where more traditional processes only operate on business days. A small, yet significant advantage that has caught the attention of many users looking for more convenient banking – 12 million of them in fact.
Features like quickly being able to create separate saving pots, giving users an instant monthly breakdown of repeat expenses like utility and phone bills, and being able to immediately contact customer support are all proving popular with users.
So how do traditional banks transform their outdated processes and methods into dynamic, future-proof systems that will align with customer needs? What problems do they need to tackle in order to do this?
How Banks need to approach digital transformation?
The problem for many banks is their legacy core banking systems are often decades old, and cannot be replaced without extensive disruption to banking activities. As a result, digital transformation is often just superficial with underlying processes still taking time and remaining cumbersome.
Digital banking transformation needs to take place in an accelerated fashion if banks want to keep pace with the likes of Monzo, Starling, Revolut and other top neobanks. Behavioral changes, particularly this year, have accelerated the demand for banking that can be done from the comfort of the home office or dining table.
This means there are several approaches the banks can take to help transform their digital ecosystem to keep in step with the rise of neobanking.
Banks need to ensure that digital transformation, the customer journey and the experience are seamless across multiple platforms. This means from the moment a visitor lands on the website, using the mobile app, to contacting customer support, the experience is quick, intuitive and consistent across the board.
For this to happen, banks must look to software solutions that can add a functional digital layer over legacy banking systems to increase efficiency in meeting customer demands anytime, anywhere.
Is there space for traditional banks in the digital age?
Digital transformation must never stand still. Customer behaviours are evolving all the time, therefore banks must continue to look for ways to improve both their content flow and customer experience.
Eventually, this transformation must enable banks to change from catching up to taking the lead in the digital race. This may happen sooner than we think. Indeed, neobanking appears to have hit rocky waters, with many big players being slow to take advantage of the sudden global disruption caused by Covid-19.
Adoption also remains low, in part because traditional banks are now offering attractive digital services, with 53% of UK consumers happy to use a digital banking app from their existing bank. Why then, would people bother moving to a digital-only neo bank? Consumers are also wary about giving a comparatively unproven startup the responsibility to hold their day-to-day money – something no one can afford to lose suddenly overnight.
For too long banks have been synonymous with manual processes, paperwork, inconvenience and inefficiency, yet there is still plenty of room for digital transformation.
Players in the fintech space have a great opportunity to support this transformation, enabling them to meet these needs. In their content marketing, recognizing these pain points and issues, and grounding all messaging in these, will pay rich dividends.
Thoughts? Comments? Do you violently disagree with everything we’ve said? Drop us a line: [email protected].