Can One Atom Change The Banking Arena?

New entrants to the market, new business models, changing customer expectations and fragmentation of traditional services are all contributing to put traditional banks under pressure.

The most recent entrant to take centre stage is Atom Bank, which was recently granted a licence to become the first digital bank in the UK. Meanwhile, services like Barclays PingIt and Zapp demonstrate that disruptive services can significantly move customers away from traditional banking offerings. The appetite for such services is clearly there from consumers, and the maturity and take-up of them can only move on an upward trajectory.

Indeed, changes are afoot and the physical manifestation of these changes is also apparent. At a macro level, the branch appears to be in decline with most established brands reducing their footprint. Cash is no longer king and mobile payments are increasing in popularity, with research from BuzzCity revealing that 42 percent of all mobile users now routinely make payments through their mobile devices. Banking is becoming more democratised by technology and new services are changing the way we think about banking, our money and the application and capability of technology.

Is the branch dead?

This is certainly to be determined, but the received wisdom and the empirical evidence indicates that the purpose of the branch is changing. This doesn’t mean that branch will totally disappear as some customers still value going into a branch, as revealed by a survey of more than 3,500 UK current account customers conducted by Accenture. Banks that develop differentiated branch formats that complement their digital presence can more effectively meet customer needs at a lower cost.

The good news is that this is not the death knell of the industry, more an evolution that sees the focus shift from the noun to the verb, from banks to banking. One where customer satisfaction, convenience and new services will feature more prominently. Where the commitment to digital banking and the support for new channels and services make it easier for financial institutions to build relationships with the customer.

How will the banks compete in this new digital world of banking?

The answer is in how they deliver services and products. No longer will it be competitive to just show account balances on a page or to provide online facsimiles of paper applications. Customers want a more holistic and engaging experience that spans online and bricks and mortar stores, and they expect a high level of service in all channels.

The majority of established banks already have the platforms to deliver new customer-centric services like mobile payments – the challenge is in the exploitation. The ability to shift product-centric thinking into a more customer-focused set of offerings will challenge traditional operating models. To compete in this new era of banking, successful banks are looking outside of the traditional banking fraternity. They are hiring designers, customer experience professionals, retailers and innovators, who have an understanding of customers’ needs and expectations from non-banking sectors. This strategy coupled with agile product innovation is providing a formula for success in traditional banking environments, which if followed will enable banks to compete with the new entrants and disrupters in the market.

Nic Merriman is CTO of Financial Services at Avanade UK

All checked up on mobile payments? Try our quiz!