In a face off against FinTech, traditional face-to-face banks must become more bespoke than ever
There’s no doubt digital banking is in demand. Last year, $4.1bn was invested into FinTech in the UK, accounting for just under half of Europe’s FinTech investment.
Since lockdown began this has continued to grow, with a 72 per cent rise in the use of FinTech apps in Europe as a result of pandemic restrictions.
But does this signify the death of “traditional” face-to-face banking?
While digital optimisation is crucial, it’s important to remember that customers are human, and want to be treated as such. Managing money is also personal, and can be emotional. Customers want to be treated as an individual.
The pandemic has pushed most of our social interaction online. Many people’s confidence or career goals have been damaged by restrictions, and as a result of this, banks who can demonstrate a level of empathy for their customers’ financial needs will be the ones who herald a return to traditional banking.
While living in a time of immense economic uncertainty, many people have delayed large financial decisions, such as buying a house. As many as 62 per cent of first-time buyers who are in a position to buy a home in the next two years have delayed that decision to keep saving, according to research from Trussle.
Buying a house and applying for a mortgage is stressful. Even more so while grappling with the immense work and life challenges of living through a pandemic. Technology has helped these experiences – optimising online mortgage applications – but the nuances of a customer’s financial concerns can’t be perceived through a digital interface.
The cornerstone of personalised banking is understanding a customers’ entire financial situation. Over the last year, many people wanted to discuss payment holidays but often struggled to contact their mortgage providers via digital banking apps, or get a hold of someone who could handle their concerns through clogged up customer service phone lines.
At Investec, private bankers were encouraged to reach out to clients to understand their position, rather than waiting for them to contact us. Banks need to be able to anticipate their customers’ needs, and demonstrate an understanding of their financial position.
This shouldn’t be limited to people with access to private banking. Ensuring a personal experience for customers and identifying those with the most significant needs should be the benchmark we aim for in banking.
Technology is an excellent opportunity to streamline digital capabilities, but this must not come at the expense of connecting with clients on a one-to-one basis.
It’s true that AI, data and automation has come a long way in making customer interactions seamless and value driven – but there’s no substitute for a face-to-face conversation. Banks’ future investments in technology must augment a bankers’ ability to build high-touch relationships with their clients and not replace them.
Relationships with money have also evolved, as many seek to align their money with their personal values. Environmental, Social, and Corporate Governance (ESG) factors have surged in importance as people become attuned to how their actions, and the actions of businesses, impact people and the planet.
According to Avaloq, 44% of people now demand ESG credentials from their financial providers. The pandemic has also heightened ESG demand among investors, who have reconsidered their impact on the world and thus put their money towards positive change. From our experience, customers simply want to know their money isn’t invested at the expense of others.
While FinTech and financial providers are recognising this ESG trend, with financial products such as automated ESG portfolios and ESG linked lending surfacing, it’s still an ongoing journey. EY finds that just 52 per cent of banks view environmental and climate change as an emerging risk over the next five years.
As people continue to align their money with their values, I expect we’ll see more customers speaking with their bank about how to save and invest responsibly. It’s clear people want their beliefs to be heard. The banks that can listen, and create a one-to-one dialogue on sustainability will be best placed to support their needs.
In this sense, it’s crucial that banks continue to innovate within the financial sector, but we mustn’t forget our roots and, instead, take a balanced approach. The pandemic has raised financial worries nationwide, and banks should see this as an opportunity to rekindle conversations with customers – on a human level – reassuring their financial futures.