Automation is rapidly changing the way banks used to operate with almost all routine banking activities like fund transfer, balance check, viewing account statement etc digitized. Robotics is implemented to sell financial products, process loans, and build relationships with customers. Banks are going through strategic re-alignment with automation to process real-time data and gain deeper customer insights, offer better products, manage risk, save cost, and gain efficiency.
There is no denying that the driving force behind automation in banks was to improve the productivity of staff, free them from repetitive tasks and offer them more productive roles. However, the need to serve their potentially biggest customer group, millennial, has driven them to take digitization to next level. For millennials, digital banking is much more than using mobile banking to make fund transfer or bill payment. Let us find out what this digital-savvy customer expects from banks.
Who exactly classifies as millennial?
Millennials refer to the generation born between the early 1980s and 1990s, according to Merriam-Webster dictionary. This liberal and upbeat generation embraces technology from dawn to dusk and relies heavily on the use of smartphones and other mobile devices to access banking and other financial services. However, they still rely on traditional physical branch banking while making complex financial decisions.
Millennials and digital banking
Of all customer groups, millennials are more inclined to base their future investments through mobile banking platforms. A 2016 North America Digital Banking Survey by Accenture found out that millennials have an affinity for digital banking. However, according to a global survey by Jumio, 85.5% of millennials are dissatisfied with the mobile banking provision of traditional banks. This clearly shows there is a huge gap to fill in order to stay relevant to them.
The key insight from 2016 North America Digital Banking Survey with 1242 millennials out of 4000 respondents is worth a note. 45% respondents said that discounts on purchases of interest would be the primary reason for them to stay loyal to the bank and 46% consumers are willing to use robo-advice for services like planning for retirement and investment. 87% consumers have shown an inclination to use bank branches in future and expect human interaction there.
How to keep millennials happy?
Millennials expect their primary financial institution to offer a personal finance tool. According to 2016 FIS Consumer Banking Pace Index, 91% millennial smartphone users point to at least one personal financial management benefit they would like their bank to offer via mobile app. However, currently, FinTech is the one who is trying to fill this space. But the problem is they lack the luxury of data as enjoyed by banks.
Banks have significant amount of financial information about the user that makes them capable to design effective personal finance tools. Banks must employ Artificial Intelligence techniques like machine learning to create a personalized and seamless experience for users. The FIS Consumer Banking Pace Index also found out that 28% of millennials are receptive to robo-advisers and another 22% is willing to receive online financial coaching.
According to results from four different studies, 46% millennials said their banks don’t send marketing material in line with their future financial requirements whereas 2 in 5 millennials complain that the offers they receive are not personalized. Millennials also state that they would be receptive to personalized communication provided it is done through their preferred channel like email, text message or mobile app. So, it is important for banks to segment their customers based on their financial needs and communication medium.
Banks need to invest in automation tools that integrate seamlessly with their website and mobile app. Automation tools can serve different purpose like determining safety net goals for a customer based on his/ her financial situation. For instance, if a customer has other goals like loan prepayment, real estate investment, car purchase or vacation, these tools can assist the user to reach those goals. By using different algorithms, automation tools can decide for the customer how much and when money can be transferred to meet such goals without disturbing user’s day-to-day spending.
The balancing act
Nonetheless, automation should not be misconstrued with the elimination of human factor. Human intervention will stay significant wherever required. And banks must strive to strike a balance between the two. While personal touch is important, a bank will be regarded for its digital capabilities. For instance, BB& T’s U platform allows customers to create and customize a personal financial dashboard on a device of their choice. They can view accounts and investments from BB& T and other financial institutions, make person to person payments and schedule appointment with a banker.
Alternative payment options
Millennials are inclined to get their banking needs fulfilled by their primary service providers due to trust and familiarity. However, they are also open to alternative payment options. According to a research by FICO, millennials are 10 times more likely to switch to peer-to-peer lenders compared to those in the 50+ age group. Moreover, over 50% millennials are already using or considering non-traditional payment providers like PayPal and Venmo.
Banks can seize this opportunity to move beyond payment transaction to manage customer’s entire digital wallet. Banks have a lot of data which can be utilized for innovation in payments. Various value-added services that can be provided by banks may include digital identity management, payment advisory services, or cryptocurrency integration. Avidia Bank’s cardless cash ATM is a profound example where customers can transact at ATM with the comfort and security of their smartphones.
Better customer experience
Millennials look forward to a more refined customer experience. This can only happen through digital transformation where banks create new ecosystems to create smooth transaction experience, provide risk management and financial services. Millennials are accustomed to disruptive technology. The interactive user interface, visual appeal, and collaboration are some attributes loved by millennials.
Many banks are tying up with FinTech companies to enhance customer experience by adding value to existing financial space be its mobile banking, faster payments, or streamlined lending process. Machine learning is helping banks to use chatbots that understand and learn from interaction with customers. This enables them to improve constantly and ultimately resolve complex issues.
For instance, the virtual personal assistant called Nina by Swedbank is a landmark technology based on AI. It is capable to understand the root cause of a problem and answer queries automatically. This enabled Swedbank to reduce branch visits and calls to customer service center.
Banks can also use gamification tools for customer acquisition and attention strategies. The elements of the game can be brought into the financial landscape to educate and connect with non-financial savvy and relatively reckless millennials. According to a survey by George Washington University, researchers felt only about 8% of the millennials polled had a high level of knowledge about personal finance. Gamification tools can help customers to understand their financial health better and prepare them to save appropriately.
For instance, ICICI bank through its Games Platform offers a range of games aimed at improving financial literacy in areas like saving and money management. Rabobank, a Netherland-based company, has made its mortgage application process interactive by inducing elements of gaming. Mortgage application process is split into sub-topics like income, mortgage type, interest etc each accompanied by its own icon and as a customer moves through it step by step, a tick appears beside it and the next icon gets activated.
Millennials prefer digital advice through automated robots in contrast to traditional financial advice. Digital advice is powered by artificial intelligence and advanced analytics that not only offers independence to seek advice but also are quick to respond. Automated robots are empowered to interact with customers, listen to their queries and offer real-time advice.
Robo advisors have found an immense scale in wealth management due to their ability to understand the current market scenario, market dynamics, evolving customer goals and learn from it. With complex algorithms, robo advisors are capable to generate high customer value through cross-selling complementary services as well.
Automation is not a matter of choice for banks
Banks realize how important millennials are as a customer base due to their propensity to create huge wealth in future. Addressing the needs of digital-savvy millennials is crucial for banks if they want to stay competitive. There are many venues of investment open to customers, and they don’t mind switching banks if their digital needs are not met.
Banks must ensure that digital tools, human interaction, and value go hand in hand. Personal experiences and service quality are important service attributes for millennials and they are here to stay. It is a fact that millennials will proactively use mobile banking channels in future. But banks must take an innovative approach to automation if they want their loyalty.