Banks of the future must maintain the human touch in customer experience propositions amidst the technology-driven changes in the industry.
Physical bank branches are disappearing across the country and a decreasing proportion of society still use cash in daily transactions. It wasn’t that long ago when everyday necessities such as contactless cards and mobile banking were novelties. Now emerging technology, new regulations and evolving consumer expectations are radically changing banking as we know it today.
Meanwhile, FinTech market activity has grown on a massive scale in recent years. Both incumbent financial institutions and new entrants are harnessing technological advancements to improve the overall banking experience for customers. Over the coming years, we can expect artificial intelligence, virtual reality and biometrics to dramatically shape the future of banking.
Despite this, our research shows a continuing consumer need for retail banks that they can trust, that are convenient and can be accessed immediately when things go wrong.
The banking trends of the future
To respond to this volatile backdrop, CYBG (the banking group that owns Clydesdale Bank, Yorkshire Bank, B, and Virgin Money) commissioned Foresight Factory to identify the key trends driving the future of banking for consumers and SMEs and evaluate their impact over the next 3, 5 and 10 years.
How we identified trends in banking
Knowing which trends to focus on and when to push for new product development is a significant challenge. To accurately anticipate when these trends will be disruptive and at what point widespread consumer adoption is likely to occur, we analyzed our own Foresight Factory research. We have consumer data going back over 20 years which allows us to predict changing consumer behavior.
We also incorporated banking sector innovation that is tracked on our online platform and interviewed leading thinkers in the financial services industry. This enabled us to ground the trends in evidence of how we will bank in three, five and ten years.
Four distinct themes were explored in the thought leadership white paper:
1. Money Management – assessing how spending and saving, budgeting, investing, and lending are likely to become more precise.
2. Customer Service – anticipating how interactions between banks and customers can be both digitized but remain warm and personalized.
3. Payment Methods – highlighting the future of integrated payment and authentication, in consumers’ bodily biometric identifiers and their homes.
4. Trust, Security and Verification – considering how banks can build trust through security and verification in light of growing cybercrime worries and data breaches.
Our research leads to several findings that can help retail banking prepare for the future:
1. Budgeting tools will become more precise and sophisticated
Monitoring personal finances will become more precise as new apps and services enable consumers to accurately track spending and saving. These budgeting tools will become more sophisticated over time, offering account aggregation and predictive analytics functionalities.
2. Artificial intelligence and virtual reality spaces deliver financial advice
Robotic advisors, powered by artificial intelligence, will be able to carry out an increasingly wider array of banking activities. These advisers are also set to become more human-like in their interactions with users. Furthermore, we anticipate that banks will gradually deploy virtual reality to enable more direct interactions with remote customers and provide an immersive overview of key financial information.
3. The mass adoption of biometrics will transform payment systems and authentication processes
Biometric payment will quickly replace contactless cards and wearable devices, promising both convenience and improved security. Moreover, biometric identification technology will improve consumer verification and will be beneficial in preventing fraud. We anticipate an increase in behavioral biometrics options, which more accurately verify a user’s identity through monitoring someone’s strokes on a keyboard or by checking a person’s location.
4. Banks will need to build trust by safeguarding personal data and addressing cybercrime worries
The financial services industry has been experiencing a trust deficit ever since the financial crisis a decade ago. Going forward, we anticipate that consumers will place higher importance on banks managing their money responsibly, but also strongly emphasize the safeguarding of their personal data. Additionally, given that most consumers believe that the risk of falling victim to cybercrime is increasing, financial institutions should take these issues more seriously and aim to become trusted partners for consumers.
Thom Almeida, Senior Analyst at Foresight Factory and author of the report commented:
“Despite the fast-moving financial services landscape, it is important to ensure that certain demographics aren’t left behind. Banks can consider which customer groups are currently underserved by FinTech innovation. Despite their huge market potential, new banking applications often overlook older consumers and SMEs.”
“The banking sector is therefore advised to promote financial inclusion and human-centered customer service to appeal to these customer groups. For incumbent financial institutions to take full advantage of future market dynamics, they must also identify their core strengths. Brand recognition and established branch networks could be and joined with key learnings drawn from FinTech innovation.”
How CYBG is responding to the future of banking?
Mark Curran, Director of Payments and Open Banking at CYBG, said:
“This report makes some bold claims for the future, for consumers and for banks. Wearables will revolutionize payments, customers will adopt budgeting technology making them much more aware of their finances, and biometrics will help reduce fraud. This is good news for customers but banks must raise their game to improve financial inclusion, maintain trust and, above all, make sure that they don’t lose the human touch.”
“At CYBG we have a clear vision of the type of bank we want to be in the future. We are committed to investing in technology to continue to increase convenience and functionality, but we will not lose sight of the fact that the customer is what matters the most and there needs to be a balance between digital progression and human contact.”
“Understanding what the future holds in banking is vital in helping us prepare our business, so we can best support our customers. This report provides invaluable insight into where we are and where we are going – not only as an industry, but as a society. And actually, in many ways, it has revealed that the Future of Banking is already here.”
You can find a short interview with Thom Almeida and Mark Curran here. The full report can be read on CYBG’s website.
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