INSIGHT

The Digital Impact on Financial Services.

Emmet McEvoy

Emmet McEvoy

Search & Content Executive

It's time for traditional banks to embrace the digital age...

After years of stubborn resistance, traditional banks have realised that they need to adapt to the digital age or risk getting left behind.

They were reluctant to dive into the digital revolution predominantly because of the cost of maintaining or replacing legacy systems.

But the rise of challenger banks, neobanks and ventures of non-banks like Apple and Facebook into the financial sector has forced their hand.

Traditional banks already have the trust and loyalty of their customers and often hold a position as the centre of their community. The next step is to innovate and appeal to the customer of today: millennials and Generation Z.

So how do traditional banks stay relevant in the digital generation?

Adapting to changing consumer demands

Consumer demands have changed across all sectors. The traditional model no longer cuts it.

Look at Netflix for example. It was founded in 1997 as a DVD rental company but soon moved into online streaming. As DVD sales fell in the late 2000’s, Netflix grew. It had 167 million subscribers at the end of 2019. Blockbuster, their main rival and a traditional bricks-and-mortar chain, failed to evolve and folded in 2010.

In terms of the financial sector, 73% of people in the UK accessed their bank account digitally in 2019. That’s a 33% increase in the last five years. 35 million people are expected to have a digital only bank account by mid-2020.

Tech-savvy millennials born between 1981 and 1996 are now the largest generational workforce in the UK. They’ve become a significant driver of the UK economy, disrupting traditional business models in favour of digital solutions.

As a result, traditional banks aren’t just competing against each other. They’re not just competing against upstarts, Amazon Pay, or Facebook’s cryptocurrency.

They’re competing against the best digital experience their customer has ever had.

Providing the full package

Modern consumers expect digital services to expand as technology advances. It’s not enough for a bank to set up a simple app with a few basic financial services.

Look at Monzo or Starling. They’re thrown their weight behind technology and produced slick, modern, feature-rich apps that are quick and easy to navigate. Revolut and TransferWise have turned international payments into an asset.

Traditional banks need to innovate or risk becoming irrelevant. Danske Bank, for example, have completely revamped their mobile app and now offer quicker ways for customers to transfer money, block or unblock their card and login securely with facial or fingerprint recognition.

Danske hold an advantage over challenger banks because they can offer the full package. Customers can bank online, through the app and in branch. Traditional banks can balance the old ‘traditional’ way of banking with the digital expectations of the newer generation.

That’s how they can stay relevant.

Utilising their resources

Traditional banks also have the internal resources to adapt to the digital age.

The advantage of being an established bank is the amount of data they own. The likes of Barclays or Lloyds have millions of customers. The bank can dive into their existing customer base and analyse exactly what they want. This data can be used to develop products, inform their strategy, keep customer loyalty and evolve digitally.

Another key asset of traditional banks is their staff. They have an advantage over tech firms because their staff have knowledge and experience of customer service while mitigating risk and complying with regulations.

In the digital age – especially in financial services – maintaining staff loyalty is essential because rivals are circling, and employees are the first assets they’ll poach.

Innovate to thrive

Challenger banks like Monzo and Starling, as well as financial ventures by large non-banking companies like Apple and Facebook have changed the landscape of the financial sector.

Traditional banks have started to innovate and provide a full service in order to survive.

They are building on the trust they’ve already established with their customers and evolving to meet modern demand.

Of course, everyone still has to play by the rules. But as technology evolves so too should financial regulations.

Proactively adapting is key.

Change starts here

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