The battleground for banks is not digital vs traditional: it’s the race to be customer-first

19.4m by 2020, according to the October 2020 forecast by Business Insider. The bank’s growing product suite proves they understand the changing needs of customers - such as settings that automatically transfer 10% of wages into a savings account or early wage access for those living paycheck to paycheck.

The next stage of challenger banks is the creation of product marketplaces through banking as a service. They should be providing multiple offerings from other brands, moving further away from the siloed system of traditional banks only offering their customers their own financial products such as savings, loans and insurance. Whilst margins will be lower for marketplace products offered in comparison to own-brand products, set-up and risk is also outsourced and customer satisfaction should rise as they have a curated choice of market offerings rather than a single-branded offering.

This approach is trickier for traditional banks to adopt. Gartner researchvi shows that in the US 69% of retail banking brands rank average or below in digital performance. Currently, most are only selling their own branded products developed and delivered on their own technical infrastructure regardless of the customer needs.

Traditional banks have the ability to use their branch network to increase customer digital and financial literacy as well as a customer service triage point (an area that most challenger banks have been poor at focusing on) - because people still want to talk to people at a bank as they make their financial choices.

Traditionals have the advantage of albeit costly physical branches and are hamstrung by inflexible legacy systems, technical debt and expensive time consuming transformation programs whilst challenger banks have proven to be able to develop customer experiences that fit audience needs, yet have an issue with ensuring they are the customer’s primary bank and then selling additional products to achieve profitability.

COVID has added to this inflection point and accelerated the need for strong strategic vision as it has exposed traditional banks that had pressed the snooze button on modernization. When branches were immediately closed, banks had to provide a good end-to-end digital service and this exposed weaknesses in traditional bank customer journeys to all.

For banking to properly adjust to what customers want and need, especially in recent times, companies need to adopt a hybrid approach to deliver the best parts of the traditional and digital models - the loyalty, service

and financial literacy education of the branch in traditional through to the needs-based product and experience of the digital. The key for both in the route to market is to start relearning who their customers are and what they need – and to prioritize helping them over selling to them. Banks that don’t solve this problem risk their survival and this must be their number one priority. Developing a customer experience and products that meet the needs of their particular customer base is critical.

Banking is one of our oldest services and there is a belief that customers with traditional banks do not want change. This isn’t the case – in fact, people expect change now more than ever. We have been made to question modernization across all walks of life without any choice, and so customers expect to see movement that now matches with what they have come to enjoy from other services.

But banking is not the most engaging sector for customers; they are like utilities where our engagement is low and based often only on a monetary exchange. Therefore, getting people to switch is incredibly difficult because, behaviorally, we often see more potential worries about a switch in comparison to the benefits we receive from switching. For many, the thought of having no ties to a traditional banking system worries them, which proves the need to emotionally engage with customers and offer assurance over practicality and function. We are already seeing digitals capitalizing on traditional bank failings and slow movement since the pandemic, but they also will struggle to cost effectively scale acquisition due to the inherent worries of switching from traditional banks. Building an emotional engagement that helps address these customer worries and helps them through the process rather than simply trying to get them to sign up to an account should be the key focus here.

When Somo meets with traditional financial institutions, we preach the value in modernizing and transforming the technical stack to enable a more efficient system and provide the foundation for the development of engaging customer journeys and products. The primary issue to address is not the transformation itself but the pace of transformation to keep aligned with the particular audience needs. We help clients through identifying and prioritizing audience needs and support internal teams to deliver at pace and scale against these. Ultimately transformation is a C Level ownership and focus - the speed of this transformation is dependent on the vision, the agreement of the shareholders and the funding of this ongoing journey.

Despite rapid changes, a conception sprint validating a particular journey and identifying key user pain points can be done in as little as eight weeks, feeding into the subsequent rapid design and build of Minimum Loveable Product (MLP).

We know that digital transformation has shot up the priority list in boardrooms across industries as digital uptake has accelerated at an unprecedented rate over recent months. As documented in Somo’s new white paper ‘Digital Leadership Priorities for 2021’ companies that sped up their plans now have a stronger chance of surviving and forging forward whilst those that did not prioritize change are finding it tougher. Where there is no quick fix, for banks the priority should be building a culture with an adaptive and agile mindset that recognises new customer behaviors and employee needs. This will lead to a deeper embedding of transformative thinking led by the C-suite and across the organization to develop a strategy for sustainable growth that can withstand the pressures of the ‘new normal’ and carve out a roadmap for successful digital transformation.

Ross Sleight chief strategy officer at Somo digital product agency

It’s been a well-used adage over the years, but “necessity is the mother of invention” — the idea that when you need something you have no option but to find it — seems particularly appropriate when it comes to the current COVID-19 pandemic.

From working remotely to the transformation of office life and greater automation, COVID-19 has changed the world we live and work in today, and the way we deliver products and services.

This is especially true in the training of skilled trades — occupations such as HVAC, plumbing, electrical, solar and facility maintenance. Other industries can learn from these trades, specifically in the area of technology.

Few industries have been impacted as much by COVID-19 as the skilled trades, where more often than not, the workers must be in a physical location performing what is considered an essential service, whether it be electrical, plumbing or HVAC. This on-the jobfocus also manifests itself in training, where skilled trades apprenticeships can take between one and six years, and often require months and sometimes years of on-site experience. With COVID-19’s continuing impact, there is a possibility that apprenticeships might now take even longer. The skilled trades industries cannot afford any delays with a perfect storm of growing demand and fewer people joining the profession. According to HR consulting firm Adecco, more than twice as many skilled workers are retiring than entering the U.S. workforce — a pattern that is being seen worldwide. Never has it been more important for companies, the industry and the country as a whole to have these essential skilled tradespeople job-ready within weeks or a few months.

Because of this, technology innovation is coming to the rescue, recalibrating skilled trades learning for the COVID-19 era.