3. Customers in a Digital Age Flashcards
What are the two main causes of the shift to become more digital in retail banking?
- Advancements in technology
- Smartphone consumption & usage being at an all time high
How many people have access to the internet globally?
4.1 Billion
How did UK Finance change following the 2007-2008 financial crisis?
Before, the traditional banks had little reason to change. Majoirty banked with the same 5-6 high street banks and they didn’t tend to switch as products were all very similar.
After, venture backed digital banks began to emerge. They had VAST marketing budgets and spotted a gap in the market for digital. They are now major competitors of traditional banks
What is an incumbent?
Long standing traditional bank, e.g Barclays, HSBC, Lloyds, Natwest, RBS
What are examples of challenger banks?
Starling, Monzo, Revolut
What proportion of UK have signed up to digital only banks (fraction & percentage)?
1/10 or 12%
Who was Open Banking introduced by? When was it introduced?
The Competition and Markets Authority (CMA) - 2018
What is Open Banking?
To compete with digital banks, traditional banks employed third party providers to develop digital services for them that they did not yet offer.
What does a third party provider need to be able to receive customer data to carry out open banking (2)?
- FCA approval
- Permission from the customer to share their data
Were incumbents quick to join open banking? Why?
No, they were reluctant. They thought third party providers were ‘dumb pipes’ going in one direction i.e. they are giving data away and not receiving any back
Missed that this was actually an opportunity to maximise the data held by third parties to generate revenue streams, i.e the third parties already had the attention of the custs the banks were trying to attract
When collaborating, what can a traditional bank offer a fintech? (7)
- Risk management
- Infrastructure
- Regulations
- Customer trust
- Economies of scale
- Brand name
- Capital
When collaborating, what can a fintech offer a traditional bank offer? (6)
- Agility
- Innovation
- Cost reduction
- Consumer experience
- New products
- Data handling
What affect did Covid have on online banking?
12 million more banking app downloads
People now used to around the clock access, this is too expensive to do in person, so banks need to offer digital
What must banks consider about the following when going digital?
1. Product design
2. Rebranding
3. Education
- Must be purpose made
- Must seem modern. Use more distribution channels to get more customers
- Both customers and employees need to be taught how to use the new tech safely
What was the AI Winter? How long did it last?
When experts knew AI was coming but we were technically ready yet. Lasted 60 years, now over
What were the 3 key breakthroughs that ended the AI winter?
- GPUs (Graphics Processing Units) - access to cheaper, better GPUs brought about by demand for computer games.
- Big Data - how AI learns through collecting or storing data.
- Algorithms - neuronets of algorithms stacked into layers allows AI to learn and react more quickly
When did branches start declining? What has happened since?
January 2015 - 3,588 closures since, around 55 a month
Which area has been hit hardest by branch closures?
The South East
How have customer visits to branches changed between 2012 and 2017
2012 - 140 visits per day
2017 - 104 visits per day
Why are incumbents finding it difficult to retain customer trust? (3)
- Financial crisis
Made worse by: - The arrival of Neobanks
- Growth of Tech Giants like Amazon and Google - these companies already have the trust and loyalty of millennials and Gen Z over other financial institutions.
When would you have to be born to be considered Millennial or ‘Gen Y’? How would you characterise this generation?
1980-1995
1st Gen digital natives
Confident, curious, question authority
When would you have to be born to be considered Gen Z? How would you characterise this generation?
Mid 1990s-Mid 2000s
Extremely tech savvy.
Financially focussed, competitive & entrepreneurial
What are the four main strategies banks can use to regain trust?
- Frictionless interactions/experiences
- Transparency - nothing hidden or unexpected, e.g. fees or T&Cs
- Excellent 24/7 customer service across all channels of communication and distribution
- Understanding customers & communicating with them as individuals (as opposed to as group demographic)
When was the data protection act introduced?
1998, but has been updated since
What does GDPR stand for? When was it introduced? What change was brought about? What was the main challenge surrounding it?
General Data Protection Regulation. Introduced in May 2018 to replaced outdated EU data privacy rules from the 90s.
Consumers have control over how their data is accessed.
Was good for protecting customers but very onerous for banks who needed to replace their IT systems
What role does the FCA play in customer data protection?
Collects and stores data on individuals and companies
uses the data to identify financial irregularities, alter the authorities and protect the public
What is SCA? When was it introduced?
Strong Customer Authentication - a two step identity process used to reduce fraud and protect assets.
Introduced in 2019-2020 (but online shopping and ecommerce had until Sept 2021)
What should banks consider with regards to personalisation based on AI and data analytics?
Banks should not become too focussed on tech that they forget about the human customer
What should personalised banking be? (4)
- Relevant
- Transparent
- Contextual
- Embedded in customer interaction - achieved through notifications, alerts & offers sent in real time
What is the most popular cloud service?
Amazon Web Services
What were the initial concerns over the cloud? (4) Do they exist any more?
- Speed
- Capacity
- Cost saving
- Data breeches
no longer concerns, now mainstream
What are AI and machine learning good at doing? What is it unable to do?
Good - making predictions about what products and services suit us best
Bad - lack emotion and reasoning
What are 4 examples of tasks where automated processes need human backups?
- To pay in a cheque - cheque images is possible on mobile phones, but only up to £500 limit
- To vent frustration to customer services
- To discuss investments
- Wet signatures for things like mortgages
