The pandemic accelerated several changes that were already under way in the global financial services industry: the shift to digitalization, changing customer preferences and product innovation, to name a few. Banks now face an imperative to reimagine their operations in four key areas: the physical network and virtual channels, revenue drivers, credit risk and the pace of decision-making. Rapid, reliable connectivity – delivered by high-performing and well-managed network infrastructure – will be key to supporting multiple innovations that take banking into the next era.
From paper to digital platforms – the next era of banking
For those who’ve never had to go to a bank to view their account balance, a check book may seem like a relic from a distant age. In some ways, it is, given that checks have been around in some form for over 300 years. Innovations such as credit cards and ATMs are more recent, dating back to the 1950s and 1960s respectively. All these mechanisms for depositing, withdrawing and transferring funds are still in use today – albeit in a more sophisticated form – but the way we ‘do banking’ has changed fundamentally in the last decade.
In the mid-2000s, the introduction of mobile phones and digital banking quite literally put banking in the hands of consumers. Online banking evolved into banking apps that offered speed, convenience and access to services that were previously available at branches only. Across the globe, consumers could now view detailed statements, pay bills, shop online and apply for credit in seconds from any device.
Industry changes accelerated by the pandemic
In this new era of banking, the number of brick-and-mortar branches is no longer a primary indicator of a bank’s size or success. Financial services organizations therefore started reducing their branch footprint – a trend that accelerated during the pandemic. Many banks restricted access to their branches and focused on transitioning to digital interactions, resulting in fewer customer interactions in branches and an increase in digital interactions.
The pandemic also fast-tracked consumers’ uptake of and proficiency with automated and self-service channels. Findings from the NTT 2021 Global Customer Experience Benchmarking Report show that those who had previously resisted using digital channels had to adapt quickly to finding and using automated systems. In the process, they acquired the skills and confidence to continue using digital – and their expectations of digital channels are now much higher.
Employees, too, have quickly adapted to new, digital ways of working that intensified during the pandemic. According to the NTT 2021 Global Workplace Report, employees now have a higher level of digital dexterity and, with the right technology in place, can be agile and productive wherever they work. Forward-looking enterprises moved ahead with digital transformation to enable employees to work safely and productively. The challenge now is for organizations to ensure a consistent and seamless user experience for all employees, whether they’re participating remotely or in-person.
Where to from here?
Reimagining the physical network and virtual channels
As a result of recent developments, the physical branch is no longer the hub of all banking activities and customer interactions. Research from The Economist Intelligence Unit shows that 65% of bankers across the globe believe the branch-based model will no longer exist in five years – up from 35% just four years ago.1
Digital platforms will enable the ‘branch on the move’, enabling customers to do most transactions from their personal devices. That said, online won’t replace in-person entirely.
To meet these human-led needs, we’re likely to see banks implementing pop-up microbranches in less-serviced locations, using video channels for bank employees to provide face-to-face assistance remotely, and deploying humanoid robots in branches to serve customers.
Rethinking revenue drivers to align with evolving customer needs
In addition to traditional banking products – home loans, savings, credit cards and so on – successful financial services providers are diversifying their product suite and creating an ecosystem of services that add value to their customers and create new revenue streams. McKinsey notes that top performers are bringing customers into an ecosystem that connects them with other services and builds a ‘dynamic and distinctive customer experience’.2
Reimagining the approach to credit risk
To manage credit risk in their portfolios, banks are using sophisticated data analytics to assess credit risk across the customer and product lifecycle, from onboarding to servicing. Real-time risk monitoring, based on transaction analysis, allows them to be proactive in identifying potential defaults and stepping in early to assist customers in distress.
Reinforcing the rapid pace of decision-making
The acceleration of digitization during the pandemic led to improvements in online functionality, response times and availability – creating a positive new norm for customers and raising their expectations of the customer experience (CX).3 Technology has improved the speed and quality of both back-end processes and frontline services, such as; authentication through the use of biometric data such as voice, video and prints, and customer engagement, with AI web bots, voice-activated interfaces and digital channels offering customers a range of options for connecting with the bank and talking to employees
Looking ahead: the future vision of banking
- Digital will become the default channel for most customers and the only channel for many across sales and service. Even branch-lovers will adopt, to varying degrees.
- Live, human-centered virtual channels such as chat and voice will become personalized and digitally enabled, end to end, with agents focused on complex queries, while simple requests are contained via enhanced ‘human-like’ interactive voice responses (IVRs).
- Remote advisory will become the primary way to provide advisory services for complex needs, with advisors working out of branches, from call centers and from home.
- The role of the branch will evolve dramatically to become focused on complex advice, with increased self-service (such as intelligent ATMs or kiosks in-branch) and limited cash at counters.
A high-performing network for a business on the move
Financial services of the future are enabled by connectivity – and that connectivity is delivered by the network. For financial services organizations to make the transition to a future state model a well-architected, high-performing, efficiently operated, and integrated end-to-end network will be required to:
- connect remote advisors, hybrid workers and customers from any location
- enable a seamless, quality customer experience over video
- connect edge instances in branches and head office locations with end-to-end security
- allow data from customer interactions to be analyzed rapidly and to full effect, without hindering cloud-connected networks
- enable high-performance robotics through connectivity that maximizes performance over any transport (broadband, 4G-LTE/5G, MPLS)
- support rapid changes in the business environment
Optimizing the networking revolution
Just as banking operations have changed, particularly in the last few years, so network operations have evolved from being largely manual to highly automated. The advent of new technologies has changed now networks are built and managed, as well as the value they can add to a business beyond providing secure, resilient infrastructure for connectivity.
Automation and predictive analytics cut through the ‘noise’ to accurately identify issues that may affect the health and performance of the network, in real time. In many instances, these issues can be remediated automatically. This enables businesses to reduce downtime and IT operations costs, and ensure the resilience and performance of the network.
In addition, modern networks allow for the application of innovative technologies such as AI to rapidly analyze the very rich data the network carries on location-based tracking, application performance, access to systems, security risks and a host of other information that can be used to inform business decisions. These analytics capabilities can provide valuable insight into what’s impacting the business, particularly as customer experience (CX) and employee experience (EX) platforms become more integrated, and organizations seek to link data from CX and EX channels to improve business outcomes. They also provide opportunities to collect and monetize data by enhancing products and services, and introducing complementary offerings into a broader ecosystem to add value to customers and differentiate the brand.
Having a secure, integrated and sophisticated network infrastructure is only the start. Network operations and management will be critical in supporting an increasingly dynamic and distributed banking environment, and achieving business outcomes.
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1 The Economist Intelligence Unit. 2021. Branching out: can banks move from city centres to digital ecosystems?
2McKinsey & Company, Dec 2021. McKinsey’s Global Banking Annual Review 2021.
3 NTT, 2021. NTT 2021 Global Workplace Report.