Five Myths Keeping Banks From Winning in a Transformed Financial-Service Landscape 

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Propelled by technological innovation and social-distancing strictures imposed by the coronavirus pandemic, the banking industry is in a state of rapid transformation.  

By 2026, nearly one in four top decision-makers in the financial-service industry expects “substantial” or “significant” industry transformation, according to Gartner, a US technology consultancy. In fact, one in five expect the industry to change out of recognition by then — especially with reference to: 

  • Business growth (faster) 
  • Value proposition (more attuned to clients) 
  • Revenue mix (less purely transactional. More service-oriented) 
  • Sales and service channels (more online, especially mobile) 
  • Technology, operations, and processes 
  • The customer experience (faster, more accurate service delivery, aided by intuitive interfaces) 
  • Talent (more aligned with forces of rapid change such as artificial intelligence and decentralized finance

[download]

Meanwhile, two-thirds of commercial bankers Gartner surveyed say their digital strategies are too crude for the realities of a tech-driven marketplace, and they feel poorly equipped to  “navigate or lead needed change,” according to Gartner. Only 21% of the survey pool express “high confidence” in being able to achieve strategic goals with legacy processes and systems.

“Saying what needs to be done is easy,” observes Dmitry Voronenko, co-founder and CEO of TurnKey Lender, a leading provider of financing software to banks and non-banks in more than 50 markets around the world. “Getting it done is something else entirely.” 

In Voronenko’s view, executing a strategy calls for “a 360-degree understanding of the issues and obstacles” in play — and there are few more substantial bars to understanding than deep-seated myths.

With this in mind, we present the five primary myths keeping banks and other businesses from making the changes they need to make.

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Myth #1: As competitors, fintechs are nothing to worry about 

The work fintechs have done in the past decade or so to overcome perceptions around “the bank value proposition” is paying off. Particularly when it comes to payment products, consumers are just as likely to pick a fintech startup as they are to choose an established bank. While 44% are more likely to consider using bank-dependent payment products, 54% say it’s a toss-up. Meanwhile, 57% of Gartner’s survey sample have used a retail fintech service in the last six months, as opposed to just 43% who haven’t. 

Myth #2: “Relationship primacy” will save the day 

In fact, having a cornerstone financial-service relationship with a customer doesn’t pay off to the extent bankers have been trained to assume. Gartner’s new research shows the percentage of current, multi-product relationships are profitable to the following extent.  

Product type  Percentage of customers with product types  Percentage of profitability in product type per relationship 
Checking account  100  47 
Checking account and debit card   95  47 
Checking account, debit card, savings account, and credit card  82  49 
Checking account, debit card, savings account, and credit card  62  52 
Checking account, debit card, savings account, credit card, and mortgage  56  25 

Myth #3: Customers have begun to care less about human support  

Recent developments on that front are mixed — a fact traditional banks can use to their strategic advantage.

Bank-branch transactions were trending down and self-serve interactions were on the rise before the coronavirus pandemic. As a result, many observers assumed that lockdowns would herald the demise of branch banking altogether. That assumption has proven incorrect — so far anyway.

While branches took a hit in the first months of the public-health crisis, demand for in-person interactions in banking had bounced back by late 2021. In December 2019, Gartner found that 53% of bank-customer interactions took place online. By October 2020, seven months into the pandemic, in-person bank transactions had shrunk to 46% — only to snap back to 53% in December 2021.

This suggests that ingrained habits die hard. Before bankers start taking victory laps, however, it’s telling that bank-provided mobile-app usage went from 23% at the end of 2019 to 30% in October 2020 to 28% — a modest decline — in December 2021. The most useful takeaway from this data point? While a segment of customers has turned back to in-person banking in the later stages of the pandemic, app-based banking remains more popular than it was before Covid-19 barged into our lives.

In fact, the biggest loser during the pandemic (so far) has been website banking — likely because most consumer-oriented fintech offerings feature superior functionality in apps rather than website formats. In other words, besides everything else going on in fintech, mobile is beating laptop/desktop even more than it’s edging out in-person interactions between consumers and businesses.

Myth #4:  What constitutes customer-centricity never waivers 

Patently, it does. Machine learning and artificial intelligence are turbo-charging customer insight while enabling functionalities that are redefining what it means to be customer-centric in a digital age.

Between 2015 and 2022, banks saw a 53% hike in technology submissions, with ML and AI proposals leading the pack. The focus of ML and AI initiatives should be functionalities aimed squarely at improving customer service, such as:

  • Natural language 
  • Deep learning 
  • Facial recognition 
  • New mobile-device apps 
  • Real-time delivery/execution

Because these and other AI innovations let financial-service providers “mine” data to sharpen their understanding of customers, even down to behavioral insights and predictions, technology has changed the formula for client-centricity in two ways.

  1. ML/AI allows for greater and more precise customization
  2. Instead of the mixed messages and redundant communications bank customers complain of, they get accurate, real-time information — the kind of time-sensitive information that can help customers avoid overdrafts and get their bills paid on time.

Myth #5: Decentralized finance is just a fad  

Four in 10 CFOs plan to use cryptocurrency or stablecoin within the next few years, according to Gartner. In other words, if banks lack the strategy and don’t have the infrastructure in place to accommodate such planning, these financial decision-makers will simply go elsewhere — whether to another bank or a fintech company. 

If banks don’t in fact want to be in the crypto business, fine — but if they’re watching trends, and noting that 13% of US adults bought decentralized currency in 2021, they may wish to rethink, or at least refine, that stance, and include it in their high-level plans. 

For Gartner, the implied power of questioning these financial-service myths is greatest for hard-wiring adaptability — a quality enhanced by: 

  • The shift from product centricity to service centricity 
  • The depth of digital customer engagement 
  • The variety, volume, and velocity of data 
  • The complexity of analytics, including AI/ML modeling 
  • The extent of integration into ecosystems within and outside banking 

For TurnKey Lender’s Voronenko meanwhile, dispelling myths around digital transformation, which are “holdovers from the analog age, puts you on the verge of making your strategic plans more realistic, more feasible.” In turn, he adds, “these new approaches will increase positive customer engagement, improve interactions between employees and customers, and support changing financial needs through scalability.” 

 

Share:

Propelled by technological innovation and social-distancing strictures imposed by the coronavirus pandemic, the banking industry is in a state of rapid transformation.  

By 2026, nearly one in four top decision-makers in the financial-service industry expects “substantial” or “significant” industry transformation, according to Gartner, a US technology consultancy. In fact, one in five expect the industry to change out of recognition by then — especially with reference to: 

  • Business growth (faster) 
  • Value proposition (more attuned to clients) 
  • Revenue mix (less purely transactional. More service-oriented) 
  • Sales and service channels (more online, especially mobile) 
  • Technology, operations, and processes 
  • The customer experience (faster, more accurate service delivery, aided by intuitive interfaces) 
  • Talent (more aligned with forces of rapid change such as artificial intelligence and decentralized finance

[download]

Meanwhile, two-thirds of commercial bankers Gartner surveyed say their digital strategies are too crude for the realities of a tech-driven marketplace, and they feel poorly equipped to  “navigate or lead needed change,” according to Gartner. Only 21% of the survey pool express “high confidence” in being able to achieve strategic goals with legacy processes and systems.

“Saying what needs to be done is easy,” observes Dmitry Voronenko, co-founder and CEO of TurnKey Lender, a leading provider of financing software to banks and non-banks in more than 50 markets around the world. “Getting it done is something else entirely.” 

In Voronenko’s view, executing a strategy calls for “a 360-degree understanding of the issues and obstacles” in play — and there are few more substantial bars to understanding than deep-seated myths.

With this in mind, we present the five primary myths keeping banks and other businesses from making the changes they need to make.

[related-solutions]

Myth #1: As competitors, fintechs are nothing to worry about 

The work fintechs have done in the past decade or so to overcome perceptions around “the bank value proposition” is paying off. Particularly when it comes to payment products, consumers are just as likely to pick a fintech startup as they are to choose an established bank. While 44% are more likely to consider using bank-dependent payment products, 54% say it’s a toss-up. Meanwhile, 57% of Gartner’s survey sample have used a retail fintech service in the last six months, as opposed to just 43% who haven’t. 

Myth #2: “Relationship primacy” will save the day 

In fact, having a cornerstone financial-service relationship with a customer doesn’t pay off to the extent bankers have been trained to assume. Gartner’s new research shows the percentage of current, multi-product relationships are profitable to the following extent.  

Product type  Percentage of customers with product types  Percentage of profitability in product type per relationship 
Checking account  100  47 
Checking account and debit card   95  47 
Checking account, debit card, savings account, and credit card  82  49 
Checking account, debit card, savings account, and credit card  62  52 
Checking account, debit card, savings account, credit card, and mortgage  56  25 

Myth #3: Customers have begun to care less about human support  

Recent developments on that front are mixed — a fact traditional banks can use to their strategic advantage.

Bank-branch transactions were trending down and self-serve interactions were on the rise before the coronavirus pandemic. As a result, many observers assumed that lockdowns would herald the demise of branch banking altogether. That assumption has proven incorrect — so far anyway.

While branches took a hit in the first months of the public-health crisis, demand for in-person interactions in banking had bounced back by late 2021. In December 2019, Gartner found that 53% of bank-customer interactions took place online. By October 2020, seven months into the pandemic, in-person bank transactions had shrunk to 46% — only to snap back to 53% in December 2021.

This suggests that ingrained habits die hard. Before bankers start taking victory laps, however, it’s telling that bank-provided mobile-app usage went from 23% at the end of 2019 to 30% in October 2020 to 28% — a modest decline — in December 2021. The most useful takeaway from this data point? While a segment of customers has turned back to in-person banking in the later stages of the pandemic, app-based banking remains more popular than it was before Covid-19 barged into our lives.

In fact, the biggest loser during the pandemic (so far) has been website banking — likely because most consumer-oriented fintech offerings feature superior functionality in apps rather than website formats. In other words, besides everything else going on in fintech, mobile is beating laptop/desktop even more than it’s edging out in-person interactions between consumers and businesses.

Myth #4:  What constitutes customer-centricity never waivers 

Patently, it does. Machine learning and artificial intelligence are turbo-charging customer insight while enabling functionalities that are redefining what it means to be customer-centric in a digital age.

Between 2015 and 2022, banks saw a 53% hike in technology submissions, with ML and AI proposals leading the pack. The focus of ML and AI initiatives should be functionalities aimed squarely at improving customer service, such as:

  • Natural language 
  • Deep learning 
  • Facial recognition 
  • New mobile-device apps 
  • Real-time delivery/execution

Because these and other AI innovations let financial-service providers “mine” data to sharpen their understanding of customers, even down to behavioral insights and predictions, technology has changed the formula for client-centricity in two ways.

  1. ML/AI allows for greater and more precise customization
  2. Instead of the mixed messages and redundant communications bank customers complain of, they get accurate, real-time information — the kind of time-sensitive information that can help customers avoid overdrafts and get their bills paid on time.

Myth #5: Decentralized finance is just a fad  

Four in 10 CFOs plan to use cryptocurrency or stablecoin within the next few years, according to Gartner. In other words, if banks lack the strategy and don’t have the infrastructure in place to accommodate such planning, these financial decision-makers will simply go elsewhere — whether to another bank or a fintech company. 

If banks don’t in fact want to be in the crypto business, fine — but if they’re watching trends, and noting that 13% of US adults bought decentralized currency in 2021, they may wish to rethink, or at least refine, that stance, and include it in their high-level plans. 

For Gartner, the implied power of questioning these financial-service myths is greatest for hard-wiring adaptability — a quality enhanced by: 

  • The shift from product centricity to service centricity 
  • The depth of digital customer engagement 
  • The variety, volume, and velocity of data 
  • The complexity of analytics, including AI/ML modeling 
  • The extent of integration into ecosystems within and outside banking 

For TurnKey Lender’s Voronenko meanwhile, dispelling myths around digital transformation, which are “holdovers from the analog age, puts you on the verge of making your strategic plans more realistic, more feasible.” In turn, he adds, “these new approaches will increase positive customer engagement, improve interactions between employees and customers, and support changing financial needs through scalability.” 

 

Share:

RELATED SOLUTIONS

img_Turnkey-Lender_Benefits-of-Buy-Now-Pay-Later-services-for-consumers-and-businesses-1920-scaled

Benefits of Buy Now Pay Later services for consumers and businesses

img_Turnkey-Lender_Just Some of the Things TurnKey Lender Standard Platform is Capable of -1920

TurnKey Lender Standard Platform Capabilities (With a Bonus White Paper) 

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