Banks must give customers what they want.

The way people transact has dramatically shifted, but banks haven't. Here's why they need to overhaul their financial product lines, and fast.

In today’s digital age, banks must now invest in building a truly customer-centric product offering or run the risk of becoming obsolete. However, we're currently seeing banks attempt to put band-aids on broken limbs.

While they are innovating the delivery of existing products and services, there is a broader failure to overhaul the actual product lines in line with customer needs.

As a result, there is a clear problem in the banking industry whereby banks are at risk of losing customers to competitors, including rising FinTech’s, through ignoring their changing financial needs.

The disappearing act.

Consumers’ financial needs and preferences have changed dramatically as technological capabilities have advanced. The recent closure of a Commonwealth Bank branch in Kingston, ACT is proof of this shift, as consumers are moving to a more digital banking system. The Kingston branch closure is only one out of countless examples of physical branches shutting down following a steady decline of in-store transactions and the shift to digital finance.

This trend can be considered the new norm, with Commonwealth Bank data showing that branch deposits and withdrawals across Australia have fallen from $130 million in 2003 to $56 million in 2016. In contrast, internet transactions have climbed from $40 million to over $684 million in the last decade.

With the CBA recently commenting that cash and cheque usage is declining, cash will probably ‘disappear’ from most branches as it is evident that cash transactions will be increasingly conducted through digital channels rather than over the counter.

As more customers are choosing different banking channels such as online and mobile, banks must now invest in optimising their digital offerings and prioritise user experience.

First signs of innovation.

Over the past several years, we’ve seen banks focus on digitising the delivery of their products and services to better align with customer preferences, maintain security and reduce operational overheads.

Digital solutions are disrupting everything from back-end operations to customer-facing interactions. For example, automation in the banking industry is a topic that has been recently explored by ANZ and NAB to help banks to cut staff and reduce branches. Such investment in automation is an attempt to prioritise customer preferences as the demand for smoother, more expedient services and processes increases.

This can also be seen in ANZ’s recent move to embrace voice biometric solutions. Its incorporation of voice biometrics demonstrates that they are willing to dedicate significant time and financial investment in human-centric design to make their banking solutions as user friendly as possible.

It was recently reported that online retail giant Amazon was affecting what Australians expect from their bank. With Amazon’s clear prioritisation of user experience, banks are now being encouraged to completely overhaul their systems to offer products to retail and business customers on mobile and other digital devices.

However, digitising the delivery of products and services is the first of a series of steps required to ensure that customer needs are heard and actioned by banks.

The future of banking.

We still haven’t seen banks employ a truly customer-centric approach to overhauling and simplifying their actual product lines and services. By investing in thorough research, banks will be able to clearly determine what consumers really need and want.

Banks have neglected to ensure banking and financial products are relevant, fit for purpose and aligned to customers’ present-day needs. Steps must be taken to either cull or transform products or services that are no longer meeting customer needs, as well as identifying new customer needs that aren’t met by the current product line and developing solutions for them. Lack of action puts banks at risk of becoming obsolete and redundant both today and in the near future.

Fintech has now become the most prevalent industry for Australian start-ups with the likes of Douugh, Acorns, HashChing and Spriggy entering the market to provide greater customer experiences and deliver on unmet needs. For example, Douugh has embraced AI in banking to allow users to better manage their money and achieve true financial freedom rather than being confined by the strict protocols of traditional banking.

In a similar vein, Acorns gives users the opportunity to invest their change from everyday purchases, free of charge into a diversified portfolio unlike any offering available from traditional banking institutions.

These fintech solutions have recognised what customers want and have responded with offerings that are aligned to their present-day needs. If banks don’t become more customer-centric in their thinking, these legacy institutions are at risk of ‘getting Kodaked’ by more agile fintech players and challenger banks.

A shift in thinking is required to maintain viability, as while banks may have the monopoly currently, this might not always be the case. Banks must focus on adapting to consumers’ changing needs and approach digitisation as a necessary action. Yet, digital investment to improve the delivery of existing products alone will not lead to success. To ensure that banks are able to meet customer demand, they must invest in building a complete customer-centric offering that changes with customer needs.

Originally written by Hatchd Director Kristen Vang for Fintech Business.