By Steve Morgan, Global Banking Industry lead, Pegasystems

A quarter of the way into 2022 and there’s plenty of change and adaptation afoot in the banking industry. Further economic dislocation caused by the war in Ukraine, alongside continuing supply chain pressures. This leads to a need to balance supporting customers through economic pressures as well as banks needing to adapt to different channel usage and close branches. These challenges clearly represent opportunities to understand new consumer habits in order to increase business performance and customer satisfaction.

Minor delays that customers will not accept anymore

Banks need to adjust to the patterns of remote, digital and face to face interactions with customers and among teams. This is a positive trend that nonetheless comes with tensions because of how impatience has intensified post-pandemic lockdowns. We are all super-sensitised to the slightest delay and buffering in a process given we are all remote and online so much. Slightest slip ups in design and functionality manifest themselves like micro-aggressions that customers will not accept anymore. Banks have to scrutinise all processes for friction, whether it’s a self-service facial ID process that clunks out when you wear glasses or a sluggish unintelligent chatbot, because the sales and service experience is the new battleground.

Shrinking margins will focus new tech investments

Regardless of how interest rates will rise in some markets, banks will continue to have huge pressure on margins that could otherwise be used to invest in new technology. That doesn’t mean banking technology investment will dry up but it will be more ruthlessly focused on where the needs and returns are greatest. This could be on using technology to be more agile in the sales and marketing around quick wins around unsecured credit purchases especially as customers return to their foreign holiday making habits. And where banks invest, their stakeholders will want to see returns. Witness the recent questioning of JPMorgan’s large increase in investment and the desire to understand the detail behind it.

Access to cash is an old argument because customers want choice not channels

There’s not been a month without branch closure announcements in 2022. Banks will be doing more pruning of branch networks as more consumers walk away from using cash in their transactions. The old model of how physical cash was delivered and collected within our communities is redundant. Yet, the branch has a place in banking because of how it facilitates face to face meetings that can secure valuable business like mortgages. So, expect to see more examples of some branches re-modelled into providing mortgage or wealth management services. 

There’s also a lesson that banks must learn from the underlying reason as to why branch closures are resisted. It’s less the ‘community’ argument, and more the need to go and the choice to go to a branch. Data clearly suggests that one in five customers who go into branch started in another channel. Many are being forced to go into a branch that in some cases may not exist much longer. What this tells me is how the omnichannel term is so wrong for banking. Customers want choice across channels. When they go into the branch it should be their choice and not something forced on them because of a broken digital process. Clearly there’s a conflict here of channel cost to be managed, but that process no longer available in a branch needs to work seamlessly in another channel.

Lend smarter automation a caring heart

The pandemic revealed banks were good at automating processes. Yet, the great focus will be on how automation can enable personalised interactions that are very human. This is not just about empathetic AI but how AI and intelligent automation can spot markers that allow the bank to make a meaningful interaction with a customer. For example, a customer is coming up for a date when they could refinance their mortgage, the system is automated to get the colleague who sold the mortgage originally to call up the customer with a new best offer and not just send out an automated email. 

Technology is key to this, because the volume of data analytics is so overwhelming that there needs to be an investment in intelligent automation. So to be successful in 2022, banks can do more to use AI to marshal better human, personalised interactions.

There’s no Planet B(ank)…

Banks should be positively embracing net-zero banking. Both reporting standards and expectations are increasing, and I think there’s a genuine desire on the bank side to do more. Following COP 26 there is natural pressure on businesses to make concrete steps towards net zero targets and banks can play a pivotal role here. There are obvious areas around bank supply chains and their lending, but there will be other areas where a bank has an indirect influence on spending habits such as providing information on carbon footprint spend, raising awareness of leading ESG partners to do business with and so much more. There is plenty of space to be filled and progress to be made in this space.”