Even though the channels and the platforms have changed, banks have been offering the same value proposition since the 1950s.
This is according to Dr. Mark Nasila, chief analytics officer for the consumer banking and chief risk office at FNB, speaking at the BusinessTech Digital Banking Conference in Johannesburg on Wednesday (13 February).
Nasila said that technology has changed rapidly over the past couple of decades, providing new tech-driven platforms through which banking customers are able to interact with the banks – but banks have fundamentally fulfilled the same purpose: being a place to store money.
Throughout history, and during each industrial revolution, there has been a major disruptive technology that has forced a change in dominant industries – but banks have remained fairly free from any major disruption.
Banks base their value propositions around their products; while they purport to be customer-centric, they still build products and services and sell those on to clients.
But customers are changing, and new value propositions will need to be built around customers and their life experiences and expectations, Nasila said.
Customers want to be identified for who they are as individuals, and require services that cater to their unique needs.
Banks have already started moving away from just seeing customers as an account number and are allowing them to sign up to services using unique identifiers – like selfies and biometrics.
But banks are still catering to clients in a formal and structured way – specifically banking segments (based on income and risk profiles) – while future customers will seek out unique offerings.
Banks, Nasila said, should be looking at individual customers and, if their profiles don’t match the services, look at how they can build those clients up, or help them change their behaviour.
Value propositions should also look at social experiences (in terms of education, community, etc) – as these are things that are integrated into the lives of banking customers, and are things that drive their needs.
Artificial Intelligence, Machine Learning and Deep Learning
Before now, building such a deep, personalised banking value proposition would require immense resources and manpower – but in a digital age, technology available, and technology being developed, will make this a reality.
Specifically, things like AI, machine learning and deep learning (a more complex form of machine learning) will enable banks to do this – but it requires a complete shift in thinking, Nasila said.
In terms of becoming digital, this too requires a complete change.
Complete digitisation of banking services is extremely rare, with about only 5% of banks globally having accomplished complete digitisation, he said.
“At some point banks today will need some form of documentation,” he said.
Nasila also stressed that digitisation and AI aren’t infallible – “algorithms aren’t trained to think, and need to work with humans.”
Thus, with the fourth industrial revolution likely bringing the disruption that has been missing from the banking sector, there will also be a change the job landscape and the skills required to survive it.
“You need to reinvent yourself and skillset for this future. Find a way to stay relevant, and see where you can make a difference,” he said.
According to Nasila, banks need to adapt and evolve by changing their value propositions – or face losing out to fintech companies who offer services that fill the needs of customers.