EXCLUSIVE: ‘What we really, really want from banks’ – Mary Connor, Finastra ‘The Fintech Magazine’
Finastra took an unusual approach to gathering content for its research into what would help consumers manage their money and their relationship with banks. It’s a timely wake-up call, says Mary Connor, a Director in Finastra’s Retail Banking and Product Management Group
The first of many things about Finastra’s latest report that causes you to pull up short is the cover. It’s a montage of faces – of real human beings – not some abstract, concept of digital finance that has often been seen in similar types of industry reports.
And that’s because this one aims to shed light on the genuine views that ordinary individuals have about the relationship with their bank. It doesn’t pull any punches. In fact, you could summarise its findings with a phrase we’ll borrow from our school days (which, honestly, still sends many of us cold): ‘must do better’. Finastra bills the report, called Redefining Finance For Good: The Journey To Financial Empowerment, as a ‘first of-its-kind, ethnographic global study’, which was carried out between the second half of 2020 and early 2021, a period that caused many of us to reassess lots of things we’d taken for granted: our choice of financial services provider being just one of them.
It set out to ‘understand the consumer mindset about the current state of digital banking and uncover the barriers and perception issues that could limit consumers’ adoption of innovative products and services’ – specifically, those services aimed at helping them manage their finances better, and allow banks to build more meaningful relationships with them. To cut to the chase, the report’s main conclusion was that, according to those surveyed, financial services – the legacy providers, at least – had largely lost their way and must act now. They need to ‘redefine their sense of purpose, adopt more socially responsible and sustainable business models and put customers’ financial wellbeing at the core of their strategy’. That’s not an altruistic aspiration. If they don’t nail and communicate their values, banks will fail to drive customer engagement and, ultimately, growth.
The starting point for the report was the post-COVID impact on people’s financial wellbeing, amidst accelerating use of digital services. Yet the fact that increasing digital access isn’t widening uptake of new, non traditional services from their banks, is telling. Finastra’s hypothesis is that people experience a range of functional to emotional barriers, some due to inadequate digital interfaces and communication and others along the lines of ‘my bank doesn’t know me’.
Perhaps conscious that, as a supplier of core banking technology to the industry, it needed to demonstrate impartiality, Finastra engaged ethnographer and author Paula Zuccotti for the project, allowing her to take a more creative and human approach. She interviewed 72 people, aged 20 to 60, across Africa, Asia Pacific, the USA and Latin America. These individuals represented different demographics and included users of traditional and challenger banks, as well as the unbanked. Each was asked to talk about their financial goals and what financial empowerment means to them, then photograph seven items that told their financial story. The unusual methodology revealed some ‘unique and beautiful insights’. In total, 127 banks were mentioned and 504 objects highlighted.
The report concluded that three things were most important to participants: knowledge/education about finance; control/having the tools to do what they needed to; and freedom, made possible through provision of the right services. It’s what the survey dubs ‘the journey to financial empowerment’; people wanted banking to be done ‘my way, within my limits and according to my timings’. Finastra also discovered that banking is an emotional subject, some people saying it is ‘not for them’ and others not feeling competent to talk about it because they said banks use a language they don’t understand, i.e. small print and complicated phrases. As a consequence, some tend to ignore their bank and its messages.
Digital services are a clear enabler and, to use them, people deploy skills they’ve readily learned on other channels, like social media. But, worryingly, the report observed: “Digital acceleration does not mean that banks have suddenly developed an open and flowing relationship with their customers; in reality, it means that, in many cases, the relationship has withered. People don’t want to go into branches to talk to bank staff, and they don’t want to go back to remembering security details for phone banking. So, in one way, digital has cut customers off from the dialogue with their banks and this is preventing them from achieving their financial goals.”
According to Forrester’s more traditional The State Of Financial Wellbeing In The UK report, from April 2020, many online account holders, in particular, don’t feel in control of their financial situation: 43 per cent feel anxious about it, 37 per cent are living payday to payday, and 50 per cent worry about existential forces impacting their finances. Respondents in the Finastra survey wanted tools that would put them squarely back on top of financial management, so they could spend what they had left after bills, guilt-free –customisable interfaces, with fast and seamless actions; rewards for good financial behaviour; and inspiration to guide their choices. For those services, respondents were more likely to turn to challengers. People saw them as the ‘APIs for banks’, the report said.
“The relationship is similar to mobile network operators and smartphones. Banks are the network operators, in the background, almost invisible… digital banks and challengers hold the customer’s attention and have the closest relationship and daily interaction.
“People trust most established banks as safe places to put their money. But they are happy to use digital banks and challengers for their day-to-day transactions. Just because you’re trusted doesn’t make people want to use you all the time to manage their finances.”
On trust, data and privacy, the report found that consumers had ‘low expectations of what banks will do with their data. The logic is that if banks can send them an inappropriate mortgage offer that shows little customer understanding, they don’t think banks are smart enough to capitalise on their data’.
Mary Connor is a director in Finastra’s retail banking and product management group, which provides the solutions that could help banks reverse such customer perceptions, such as its Cloud-based FusionFabric.cloud platform which gives banks and financial institutions access to transformational open APIs. She explains why Finastra felt it was important to conduct the survey in the way it did.
“When you’re working with banking technology, as we are, you make certain assumptions about what your software should look like, and you’re dealing with banks that are also making presumptions about what their customers want,” she says. “We felt that nobody had really gone out into the marketplace, globally, and sought people’s perspectives, in different parts of the world, about their experience of working with banks and consuming their services. We wanted to know how they felt, and explore the emotional side of people’s relationships with their banks. At the highest level, we’re hearing that, generally, consumers are not totally satisfied with their experience. They don’t feel they have the understanding and knowledge of their finances they should have, and so feel disconnected.
“The new banks have been very perspicacious, because they have noticed that the user experience needs to be more playful, more like the experience somebody gets when they go on Instagram or TikTok, or uses Apple services. People want that same kind of interaction with their bank, but established banks have been much slower to move in that direction.” It is the individual stories that the report unearthed that are most powerful, Connor believes, because they highlight that finance is more about personal aspirations than it is about money.
“People’s photos of what’s really important to them are fascinating,” she says. “Some were obvious, like somebody’s picture of a property that it was their aspiration to buy. In one place in Africa, somebody who wanted to go into the catering industry shared a beautiful visual of food. So, it was like a deep dive into the consumer’s life story: what was motivating them, their ambitions, dreams or struggles.
“If banks look at this, it will give them a completely outside-in expression of what consumers want.”
Personalisation will be key to fulfilling the crucial part banking plays in people’s lives – as a means of achieving things they hold dear… a broad definition of finance for good, believes Connor.
“It’s about enabling finance to make it a better experience for all of us,” she says. “If I think about my own situation, I quite often get adverts from my bank, offering me things that are completely irrelevant to what I want, or my stage in life. They don’t really know or understand me, and, as a consumer, I start to see them as just a repository for my money. But people – particularly younger people – want something that tells them how they’re doing; helps them manage their money.
“So, there are two things banks could do better. They could have better e-wallet capability, which helps people control their finances, because you just put X amount of money in there and that’s what you spend. And then there is personal finance management – apps that can help people manage their finances and give them a pat on the back when they achieve their goals.”
So, what do providers need to do to achieve that?
“There are three things that I would make sure were woven into my digital channels: analytics capabilities that harness the power of artificial intelligence and machine learning, because this gives a bank better insight into its customer base. I’d marry that with contextual messages – and so many organisations are not doing this – combined with a good customer relationship management (CRM) system. Embed all that into my channels’ capabilities and, that way, I’m projecting the bank way ahead of the competition.”
But getting there requires a much more considered approach than many have so far adopted.
“A lot of banks have tried to put digital channels in front of legacy technology. The problem with legacy technology – and by legacy I mean banking systems built pre-internet – is that they were never designed to work 24/7.
“Banks are trying to create a fancy front end, when really they need to transform behind the scenes so that they are truly digital, end-to-end – because they have legacy systems, which are not open, which don’t generally operate 24/7, and which don’t have the API enablement that’s a must for organisations that want to have innovation on tap so they remain relevant to their client base.”
Given all that, she wasn’t entirely surprised to find that customers aren’t completely happy with their banks. Finastra had, in fact, intuitively anticipated it. “About 10 years ago, we invested hugely in designing our own core banking system, which has now matured to the point where it’s surrounded by APIs with digital enablement, end-to-end. We are providing next-generation banking capabilities that, if banks combine with the other elements, like contextual messaging and CRM capabilities that we typically plug into every project, put them in a good place.”
Banks can, she believes, avoid the fate of the telcos in the past, which gave brand awareness away to handset manufacturers. In finance, the handset manufacturers are fintechs with great UX, backed up by data insights that people can turn into action. There’s still a chance for the established banks to make their mark, she says: “SME lending, services around mortgages… the established banks are masters of these, whereas the newer banks haven’t got to that point yet – but they will.” In the meantime, her advice is to make the most of open banking.
“Enabling customers to contrast and compare what they have with different financial institutions, and assistance with achieving financial fitness are important, because it didn’t matter where they were, the story was more or less the same for a lot of people we interviewed. They have aspirations, they want to be in control of their finance, and they need banks to help them more.”
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