These financial services sector disruptors continue to grow in accounts, numbers and influence. All financial institutions, however, can seize the chance to update ageing technology, evolve customer experience strategy and adopt a “challenger” mindset.

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The emergence of open banking and neobanks is entirely designed to create a more competitive marketplace, and Australia has seen the emergence of many competing banks, such as 86 400 (recently bought by NAB), Volt, Judo, X15 and Up Banking, to name a few.

As these competing neobanks continue to grow, their success can be a source of inspiration to boost traditional financial services organisations and banks in their digital transformation process. This is especially true when ageing technological infrastructure, new generations of customers, changing consumer behaviour and now COVID-19 create an opportunity for transformation.

I’ve outlined three ways below about how financial institutions and traditional banks can adopt a challenger bank mindset when it comes to improving the customer experience.

Transforming the customer experience

Challenger banks have done a great job at rethinking the customer experience. Everything from relevant features, intuitive design and display, simplicity of use, and even packaging for physical goods has been approached from the perspective of the customer.

These digitally born banks have leveraged cloud, APIs, industry-leading applications and data to deliver a modern, more agile experience. The integration of A/B testing for new features, machine learning to analyse information for next action, and more-frequent software launch cycles are all tools that these new banks are actively exploiting to continuously improve the customer experience. 

Building relationships beyond the transactional aspect

Incumbents have several advantages over their younger, digital counterparts: an existing customer base, strong GRC (governance, risk and compliance) capabilities and processes, and an earned trust factor.

These all form a critical base for success for those banks that can now make the digital pivot.

Organisations need to look at their line of business level and assess how they can digitally deliver the same, if not better, quality of service. Many processes need to be redesigned around digital interactions, as social distancing will require an alternative to in-person meetings. In retail banking, the system that is historically incredibly branch-centric will now need to separate banking from the branch.

Developing relationships with all segments of customers — individuals, small businesses and corporations — will require better digital tools and a mindset that allows customers to meet their bank over the channel of their choosing (voice, SMS, chat and video). This is how relationship banking will be done in the future.

Provide information and value through customers’ preferred channels

The “big four banks” have long enjoyed an oligopoly in Australia, but the global pandemic has widened the gap between what customers want and what banks and large financial institutions can deliver.

Financial institutions and banks need to rethink how they can provide timely, valuable information over the channel of their customers’ choice — and ensure that all channels are seamlessly integrated.

The challenge will be in how incumbents address their technical debt and modernise their infrastructure. Providing insights and serving up the right information via the chosen channel requires breaking down data silos and creating interoperability between systems. This is not a small task for most banks but another long-understood problem that COVID-19 will ensure gets addressed.

Despite the technical hurdles, traditional banks have a distinct advantage here. Their number of long-term customer relationships provides them with years of data. This information, coupled with modern tools like machine learning, chatbots and digital channels like SMS and messaging, can create powerful engagement and value drivers.

This new challenger mindset model is an opportunity to turn one-off interactions into meaningful conversations and deeper relationships. New digital services will form the backbone of customer relationships, increasingly driven via digital communications.

At a time when Australian customers are exploring their options and competition from neobanks increases, traditional financial institutions would be wise to follow the roadmap of neobanks and other innovative companies prioritising connected customers in their digital transformation.