Will banks suffer casualties in the battle to own the customer experience?

Sameet Gupte is global head of banking and financial services at Virtusa

Technology has infiltrated every facet of our lives, fundamentally changing our behaviour patterns and our expectations of what constitutes a good customer experience. The banking sector has not been immune to these changes; the industry has been forced to drastically transform its business processes and services in order to keep up with customers’ expectations. Today, customer satisfaction is judged not by the smile on the face of a cashier, but on the speed with which one can gain mobile access, writes Sameet Gupte

Having access to a seamless multi-channel experience is paramount to a new generation of customers, many of whom are more likely to choose a slick mobile app over favourable interest rates. 0% balance transfers at the click of a button mean the days of the ‘bank for life’ are well and truly over – convenience and connectivity are the words de jour. The fact is, today’s customers will go to a bank that provides them with a service that is easy to use, fast and offers a ‘wow’ experience – those that fail to provide this will find themselves increasingly unattractive.

As a result, one of the largest challenges that banks face is the battle to own the customer experience. This is particularly relevant in the payments space, where the lines between tech and finance are increasingly blurred. According to Gartner, worldwide mobile payment transaction volume was around $235.4 billion in 2013, ballooning to $325 billion in 2014, and is expected to grow to $717 billion by 2017; the mobile payment market in the U.S. alone was around $50 billion in 2014.

It’s not surprising, therefore, to see tech behemoths including Google, Samsung and Apple, trying to carve out their own piece of the payments pie. These tech giants have built their businesses on their understanding of what consumers want; they are cool, young and in-sync with today’s consumers – this makes them a dangerous adversary in the war for the customer. Banks must fight fire with fire, they need to innovate, and they need to put customer experience at the top of their priority list – but how? 

Are mobile payments reaching the ever-elusive tipping point?

Mobile banking is nothing new; nearly every retail bank today has a mobile app that allows customers to transfer funds or check their balance on the move, all features that are considered standard. According to the British Bankers Association’s ‘The Way We Bank Now’ report, mobile banking usage doubled in the past year, with more than 14 million people downloading banking apps. Yet much of this use has been focused on simply using mobile as an extension of online, without really capitalising on the unique characteristics of mobile.

Mobile payments, on the other hand, has taken a little longer to take off. While there have been many attempts to make mobile payments mainstream – mobile wallets, for example – to date, these efforts have eluded mass adoption. This is largely because new technology adoption hinges on convenience; if it does not save someone time, then they will continue to use their cards as they always have.

This, though, looks set to change; with the imminent launch of Apple Pay and Samsung Pay due later this year, mobile payment adoption is creeping towards the tipping point of mass adoption. For banks, this offers huge benefits; for example, the cost of printing cards and the delay in on-boarding customers while they wait for a card to be delivered, can all add up. From a consumer perspective, there are added security benefits, how often have you lost your card and not noticed for hours, possibly even days? Compare this with how often you have lost your phone, where the majority of people will notice within minutes, and it’s evident that using your smartphone as a payment device would have some perks. Yet with the tech giants leading this mobile payments charge, banks could be in danger of slipping into the shadows.

 Going head-to-head with the tech giants 

The good news is that the banking industry is starting to fight back; Barclays Bank has launched contactless, wearable mobile payment services, using its bPay wristband along with NFC technology. Through bPay, it will be easy for its customers to pay for his/her daily needs whether buying a coffee at Starbucks, or purchasing groceries from a local store, all with a wearable device. Further are solutions such as Mobile Photo Bill Pay, which allow consumers to pay bills simply by taking a photo on their smartphone of a bill.

We are also seeing the face of IT in banks change as they hire in talent from the tech world – bank CIOs are not the stuffy 50 year olds, they are young tech entrepreneurs and creators. Take for example, Capital One hiring Google designers to join their Payments Tech Development team. As time goes on, we will see more of this cross-pollination between tech and finance. For customers, this cut-throat competition to attract customers and increase market share is a bonus, as it is driving providers to re-imagine the consumer experience.

The payments market is being completely transformed through technological innovations, and banks that are able to adapt their technology systems to launch future services that ensure customer ‘stickability’, will be the ones to reap the benefits of higher market share and profitability. Yet to do so, they need to innovate and think about the customer in a different way, pushing the boundaries and being creative. We are in for an interesting ride!