According to leading research and advisory firm, focused on technology for financial institutions globally, Celent.
Most US adults trust that their money is safe at their primary financial institution, but far fewer believe that their bank is actually helping them improve their financial lives. This sizable trust gap is a problem for banks — and closing the gap will not be easy.
A number of banks are doing so, however.
In a previous Celent report, Platform Banking in the US: Positioning to Be at the Center in Retail Banking, November 2018, Celent described the market forces that will bring a variety of platform banking business models into the US market, foundations for building a successful platform model, and the compelling first-mover advantages doing so creates.
The report addresses a remaining prerequisite for successful platform banking, high levels of advisory trust. Compared to transactional trust (e.g., “My money is safe.”), advisory trust is lacking among customers of most US financial institutions.
Developing high levels of advisory trust is imperative for any successful customer-focused platform, but it is also good business practice for retail banks with or without their own platform ambitions.
This Celent report explains how to develop it by embracing a new paradigm of customer experience.
Low advisory trust is considered the underlying cause for 5% of bank retail revenues being at risk as regulators and digital competitors act to help consumers avoid the cost of bad decisions. According to Alan McIntyre, Senior Managing Director – Banking Accenture, based on an Accenture feature article. To address this, banks need to build customer trust and create win-win relationships that endure over time by demonstrating understanding, empathy, speed and agility, particularly in times like the current COV-19 pandemic.
“Quick action to provide payment holidays for consumers, liquidity for SMEs and other relief efforts are helping customers deal with challenging economics—and should be built into their operations going forward”
This is a perfect time for banks to do a reset and “rediscover their original purpose” That purpose is rooted in responsible financial management advice with a focus on the long term, something which may have no immediate benefits. Things like cutting bank fees, interest rates and gouging of prospectively “bad revenue”.
Commercial banks have a good understanding of how data, advanced analytics and artificial intelligence (AI) are potentially powerful instruments for navigating the market.
Despite compressed margins, high costs to serve and disruptive competition in key segments such as small and medium businesses (SMBs) and from challenger banks and non-traditional finance players. In the UK alone, twenty million customers have opened accounts with digital neo-banks and only 14% of consumers turn to their bank when they have a major life event affecting their finances, according to Accenture’s Purpose-Driven Banking study.
There has to be a recognition that a good understanding of the customer through perfect master data is essential for harvesting the full value of customer data. This harvesting can be slower and more difficult than anticipated and requires bankers to overcome the common barriers to effective data use, namely organizational silos, incremental progressive improvements in data curation vs. wholesale broad-based initiatives, overcoming the fatigue of “digital” everything and assignment of business ownership and elevated profile for customer data in the banking C Suite.
At Pretectum we view Customer Master Data Management and customer data syndication flowing from a centralized MDM as a pivotal technology in this quest. Learn more by contacting us on this topic today!