In the midst of economic change and mass technology adoption, financial institutions are entering a “reputation economy” in which their reputation and trustworthiness often matter just as much – or sometimes more than – their products and assets. To remain relevant and in good standing with the public, banks must not only continue to adopt new technologies, but they must become and remain inherently “good.” Demand for good banks comes from many different audiences, including customers, regulators, governments and society in general.
What must banks do to remain relevant, competitive and in good standing? These demands were explored on a recent SAP Radio broadcast, “The Good Bank: Re-establishing Trust Through Innovation.”
Innovation in Banking
In the wake of disruption companies like Square and PayPal, banks must learn how to leverage technology to bring the customer closer in a meaningful way. There is a rise of powerful intermediaries, ranging from mobile apps to retailers offering new credit offerings, and these companies are challenging banks’ relevance in a very real way.
“Over 70 percent of millennials would rather go to the dentist than listen to what banks have to say,” said Rob Jekielek, Vice President of Consulting at the Reputation Institute.
It is statistics like these that should motivate banks to take a more serious look at how they offer services to customers.
“If the front-end services of a bank are not accessible and tech savvy, what is left is the commoditized and regulated structure that isn’t appealing to the customer,” added Don Trotta, Global Head of SAP’s Banking Industry Development. “Banks need to focus on this accessibility as they innovate and update their offerings.”
Reaching the Unbanked
Another big thing banks can do is make their services available to people in remote locations who may not have easy access to a local branch. In many developing countries and rural areas around the world, banking infrastructure is still widely underdeveloped.
“2 billion people in developing markets will be using mobile money,” said Matt White, North America Editor at Finextra. “Banks need to realize this trend and put a plan in place to bring banking services to people without access.”
A few large regional banks, including The Standard Bank of South Africa and The Sharing Bank in Mexico City, are already making strides to reach customers in remote areas. Standard Bank has created a mobile platform through local hot spots like grocery stores and corner stores where customers are able to open up basic accounts. This program has helped the bank open thousands of accounts a week without any branches.
The Sharing Bank is making micro-finance loans predominantly to women to help them create their own small businesses that range from crafting to opening a roadside shop. In addition to reaching unbanked individuals, The Sharing Bank is also helping women provide for their families.
“Banks must go outside of Europe and the US. The strategy of relying on financially secure and banking-accessible customers won’t last forever,” said White.
Earning Trust
“Nowhere is the balance of a trustworthy and effective bank more important than when dealing with customer data,” said Jekielek.
Banks clearly have a responsibility to keep customer data safe from hackers and potential security breaches, but increasingly banks are also under pressure to use said data to address the issue of widespread financial illiteracy.
“The onus is on the banks to use the data available to them in a responsible manner,” added White. “Banks need to make it very clear how they are using data for the betterment of all their customers. Transparency is key.”
Despite the rise in people seeking secondary education, there remains very little understanding of personal finance management. Providing financial knowledge and know-how will cement the role of banking in customers’ lives, and this is a big area where banks have an opportunity to promote customers’ success in a very personal and tangible way.
“People with between 5 and 10 million dollars of investable assets have massive resources and advice on how to manage their wealth, but the mass majority of people don’t,” said Trotta.
