Times, they are a changin” sang Bob Dylan, but as Harry Selfridge, the founder of Selfridges first said in 1909, “The customer is always right.”
Customers are demanding. They are very single minded around how they want to run their business and they expect you to understand their business as well as they do. No two customers are the same, they can be in the same industry, and the same size, but work in completely different ways to get to the same end.
This means that the traditional transaction-banking model, where a one size product fits all is no longer applicable. Trying to shoehorn customers into products, hoping that ‘X’ percentage of the functionality fits their needs is no longer acceptable.
Banking Model Based on Customer Focused Design
The corporate banking model of 2020, is the expansion of the fledgling customer centric model of 2018. With analytics leading a more data driven and adaptable approach, the opportunity to dramatically increase customer understanding from real time analytics leads to products that are not only tailored to meet individual customer needs, but are also priced individually based not only on risk profile, but also on trading partners and relationships.
The customer centric approach is central to significantly improving the lifetime value of the customer through a design lead to product development, delivery and pricing.
Open Banking & the rise of FinTech
When the FinTech revolution started, the initial fear was that these digital challengers were going to go head to head with the banks, competing like for like for customers. And because these FinTech challengers didn’t suffer from legacy environments and were built on agile and scalable platforms they would have the advantage of both speed to market and low cost of service.
The reality has been very different. Many have come to market on a wave of PR and promises, and have disappeared as quick after burning through the millions, and failing to capture enough market share.
Nevertheless, many are still with us and new entrants are still launching. However, in many cases, the business plan has changed – to one of complimenting traditional financial services organisations, opposed to directly competing. This in the main is because customers do not want standalone products, and what is probably more important – the banks hold the one thing that FinTechs or challengers really require to be competitive – (customer) data, history and understanding.
By 2020 thanks to Open Banking, many more FinTechs will be adding value to corporate banking platforms by enabling their customers to bolt on additional complementary service providers. For example, a bank that deals with manufacturing companies could incorporate logistical shipping services and insurance services into their trade finance platform, to provide a more holistic view and offering for these customers.
The customers benefit from no longer needing to engage separately with third parties, outside of their core transaction banking platform, and banks benefit by still being able to all intents and purpose, keep the customer (and their data) ‘in house’.
Errors using inadequate data are much less than those using no data at all. Charles Babbage
Without doubt data & analytics is the secret sauce that underpins the corporate bank of 2020, and beyond.
Data ties the customer / bank relationship together, and when consumed in a learning and constantly evolving manner, it should make it very hard for a competing services provider to temp your customer away, or offer a better-priced service.
By extracting value added transactional insights from within products, banks are able to understand their customers in far more depth, to tailor contextual offerings and offer next best products for increased revenue generation. In addition, they help their customers reduce risk and capital exposure, and improve cash management by understanding transaction patterns and requirements, enabling predictive action before negative occurrences can happen.
By 2020, we will start seeing more banks innovating discovery around their customer base. Using embedded analytics allows you to understand your customer bade in more depth and allows you to start making more connections between customers, their service providers and transactional contacts. This will allow banks to offer in effect network deals, as well as very targeted, third party services, in joint propositions.
In an age where corporate customers have more choice than ever before as to who they bank with, customer retention, and maximised customer lifetime value, should never be easier. This is wholly down to data analytics and machine learning providing real time customer service that improves in line with the customers platform use, growth in network understanding and insightful data discovery.