Trusted relationships have been the bedrock of Australia’s financial services industry since lenders began issuing loans to customers in the early 1800s. Back then, the bank manager’s model for assessing someone’s capacity to repay a loan was a visual appraisal of how “trustworthy” they looked. Data analytics didn’t exist and risk profiles were, clearly, more art than science.
That’s a far cry from the personalised digital prompts and alerts that nudge banking customers toward better financial health today. Or the simplicity of a buy now, pay later transaction. Reserve Bank data shows that Aussies are averaging 560 digital payments a year, up from 200 a decade ago, with digital wallets and tap-and-go far outstripping any other payment method.
As with much of society, the pandemic has accelerated changing habits that have long been evolving. How and where customers engage with banks now compared to just 18 months ago marks a critical juncture in the banking landscape.
average number of digital payments made by Australians per year
The challenge for the financial services industry is finding new ways to provide seamless, secure, and personalised services, overcoming fragmented teams and systems, while building trust by keeping compliance and ethical practices front and centre.
Trust transformation
Trust in the financial services industry has rebounded following damaging royal commissions that investigated malpractice in the banking industry. The role of financial service providers acting as economic shock absorbers supported communities to ease economic impacts from the health crisis: deferring mortgage and loan repayments for customers; rapidly transitioning staff to WFH; and increasing digital channels to provide no-touch access for customers.
Seamless, two-factor authentication processes have also bolstered uptake in online payments and reassured cynics that internet and mobile banking and financial services can be trusted.
In turn, Aussies have shown renewed levels of confidence in technology designed to make life easier and safer and make banking work better. The payoff is too good to look back.
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In new analysis by The Demographics Group exploring the transformative impact of digital workflows in Australia (commissioned by ServiceNow), leading demographer Bernard Salt found we’re on course for a national “trust reset.”
Before the pandemic, citizens’ trust in Australian companies and government agencies had been declining for decades. The pandemic response from government and business has partly reversed this trend, promoting greater levels of trust. At the same time, demand for frictionless, connected, Netflix-like experiences is soaring. The pandemic has proved these principles can be pursued in parallel.
This trust reset will shape the next decade of critical services, including banking. To compete, banks will need to accelerate the digital transformation they’re already undergoing, embracing technologies like artificial intelligence and machine learning. They’ll also need to safeguard and make better use of the mountains of data at their disposal.
First, find the problems worth solving
Financial institutions have become increasingly siloed and complex in recent years, partly due to the pressure they face to meet stricter regulatory requirements. Fragmented operations degrade visibility, which breeds poor performance in the form of errors in fees and charges, slow responses to service requests, and inaccurate loan assessments. The end result is wary, unsatisfied customers.
For the enterprises creating the next generation of financial services, the race is on to enable a world where self-service and seamless experiences are the norm for both customers and employees. Banks like ANZ and NAB have already committed to multiyear employee transformation programs.
When banks get it right, the payoff is immense: Highly satisfied customers are two and a half times more likely to open new accounts or choose products with their existing bank. At the same time, the cost to serve improves dramatically: process automation and AI can reduce cost in the front, middle, and back office by as much as 40%.
Digital transformation leaders must find the problems worth solving. Many of these secrets sit with the bank’s employees and customers.
Untangling the messy middle
On average, nearly half of an employee’s working week is spent in the messy middle, performing highly administrative tasks. Employees struggle with a multitude of systems, retrieving risk items and operating procedures that are often missing data, or out of date. Without a holistic view of the information they need, employees spend far too much time rekeying information and are often slowed down by mistakes.
Digital workflows sidestep monolithic architecture and legacy system lags, closing information gaps and connecting across silos and systems. AI capabilities will let teams sift through the noise and identify root causes of problems, faster. Accessible information means problems can be solved from anywhere. This streamlines complex processes like quality assurance, so employees can spend more time responding to customer needs.
Automation creates a real-time connection between front, middle, and back office teams. Establishing an end-to-end view of data brings meaning to customer notes and predicts outcomes, so employees can quickly decide on the next action to take.
Accessible information means problems can be solved from anywhere.
When Afterpay decided email was “too slow and cumbersome,” they set up a dedicated Slack channel to help hundreds of new hires access HR and IT support services. The move proved critical during the pandemic, as the buy-now, pay-later provider remotely onboarded 300 new employees.
“Our most recent and largest integration has been ServiceNow integration for our IT support team,” says Simon Gowland, Afterpay’s enterprise technology director. Connecting the channel to the Now Platform to automatically generate global IT support tickets has been the “ultimate outcome” from adopting Slack, rapidly reducing the time to solve employee problems so they can focus on important work.
The future of financial services
While he never worked in loan approvals or underwriting, Albert Einstein was right when he said that “data without context is just organised information.” With access to so much rich data, employees and systems can deliver the hyper-personalised, predictive experience that customers increasingly want. Open Banking regulations are supporting this shift, by letting more fintechs and niche service providers access customer data that was previously accessible only to big players.
Analysing broader context helps financial service firms refine their interactions and engage on a deeper level. For example, intelligent workflows can track changing interest rates that may influence whether customers want to refinance their loans, and then notify an agent so they can proactively reach out to the customer with an offer at the right time.
Similarly: When a customer applies for a first-home mortgage, why shouldn’t their lender also be able to provide an electricity or home internet bundle, served up next to a personalised budget based on their retail and entertainment spending history?
Australians are placing greater trust in business, government, and each other, and our financial services industry is at the intersection of this shift.
We’re already seeing financial providers bundle multiple services through their mobile apps. In future, digital wallets may become digital data banks, used as data intermediaries, facilitating access and payment to multiple personalised services from energy to shopping.
The roadmap to success
Unlike their parents, Millennial and Gen-Z customers, enabled by Open Banking regulations, will switch financial institutions regularly in the quest for convenience and a good deal. As banks and insurance companies enter multi-utility plays to build better customer relationships, harnessing data with meaningful context is the next frontier in transforming from a product-based to a truly services-based enterprise.
The next decade of financial services can’t be defined by last century’s technology or manual processes. Australians are placing greater trust in business, government, and each other, and our financial services industry is at the intersection of this shift.
Financial institutions have a unique opportunity to connect and empower their customers and employees, using digital workflows as the glue that bring seamless, secure, and personalised services together.