{"id":42410,"date":"2020-11-27T08:00:46","date_gmt":"2020-11-27T07:00:46","guid":{"rendered":"https:\/\/www.microsoft.com\/en-gb\/industry\/blog\/?p=42410"},"modified":"2022-09-01T08:38:33","modified_gmt":"2022-09-01T07:38:33","slug":"why-the-digitalisation-of-retail-banking-matters","status":"publish","type":"post","link":"https:\/\/www.microsoft.com\/en-gb\/industry\/blog\/financial-services\/2020\/11\/27\/why-the-digitalisation-of-retail-banking-matters\/","title":{"rendered":"Why the digitalisation of retail banking matters"},"content":{"rendered":"
The digitalisation of retail banking has been one of the most vital, and long-overdue, initiatives in finance over the last decade. We’ve seen how truly important it is this year as customer demand shifted to more digital channels. In Micrsoft’s report, Boosting the innovation of banking business models<\/a>, we look at how retail banks can succeed in the new normal. At Microsoft and the Financial Times, we firmly believe that now is the opportunity for banks to use new technology to improve customer service, pioneer new channels and products, cut costs and re-establish their social value with cynical customers.<\/p>\n Digital adoption has leapt forward two years in just a few months, both by choice and necessity. Bankers estimate there has been a sixfold surge in cashless transactions in 2020<\/a>.\u00a0Traditional lenders – with a cautious eye on fast-growing fintech startups – are each year investing tens of billions in innovation and upgrading their legacy systems. How can they ensure this money is wisely spent? And where and when will the sector start to see material return on investment (ROI)?<\/p>\n \u201cThere is no doubt COVID-19 has really changed and accelerated the pace of digital transformation,\u201d said Craig Wellman, Head of UK Financial Services Sales at Microsoft during a joint webinar with the Financial Times on the topic.<\/p>\n With the advent of cloud computing, he added that executives had already completely overhauled their ambitions. Their priorities are no longer only focused on cost cuts, but now also on AI-driven personalisation, cybersecurity and creating a faster, less cumbersome customer experience.<\/p>\n The normal ROI measures of customer loyalty, revenue generation and cost savings still remain relevant. Banks also have to invest to match to the high standards set by new consumer tech champions such as Amazon or Netflix.<\/p>\n \u201cThere\u2019s no question customer expectations have changed a lot\u2026 their experience needs to feel personal, relevant and seamless,\u201d said Josh Bottomley, Head of Digital at HSBC, Europe\u2019s largest bank.<\/p>\n \u201cThe \u2018computer says no\u2019 example still sticks with people,\u201d he added. \u201cIn banking there are still too many questions we can filter out from forms\u2026 We need to make it easier to log on to a single app with a personalised home screen.\u201d<\/p>\n Banks are also challenged by easy-to-use fintech upstarts that are attracting droves of loyal users, especially among the young.<\/p>\n Lavanya Menon, Head of Digital Transformation Risk at Lloyds Bank, said that since her bank started its digitisation programme five years ago \u201cwe have made the gap between a fintech and a legacy bank smaller by trying to focus our investment on the \u2018Amazonification\u2019 of banking,\u201d she said. \u201cWhat has taken off is friction-free finance\u2026 that timeline is ever changing and never ending.\u201d<\/p>\n Bottomley said another less obvious, but potentially more important, measure of return on digital investment was \u201cfuture cost avoidance.\u201d<\/p>\n He used the example of COVID-19. HSBC was able to participate in multiple government emergency financing schemes around the world in less than 48 hours by using secure, digital customer forms. This would have been impossible had the lender not migrated much of its data and processing to the cloud in recent years.<\/p>\n There must also be a balance between major long-term transformation and \u201cquick wins\u201d said Wellman. The latter \u201cgenerate excitement among customers and at the board level with an easily visible and speedy ROI.\u201d<\/p>\n \u201cYou can\u2019t just have a succession of unfinished five-year projects\u2026 When you get to the point previously thought to be a panacea, the market will have evolved again,\u201d he added. For example, these days Microsoft updates Windows every few weeks rather than every few years.<\/p>\n The panel also discussed the future of personalised, AI-driven, automated service and selling. Is this a panacea for pressurised earnings in consumer banking – sitting as they do on vast pools of data for tens of millions of customers – or is it perilous and risks exacerbating inequality or discrimination in finance?<\/p>\n Menon said that while Lloyds had made \u201chuge strides\u201d in personalised cross-selling and single-sign on authentication, \u201cas a risk professional what worries me is when we get into the field of AI and robotics, especially if we rely solely on algorithms\u201d because there are always concerns about biased or incomplete data.<\/p>\n \u201cI am pleased regulators haven\u2019t made progress in the space yet,\u201d she added. \u201cIt gives us a needed pause before we wade into a field we don\u2019t really understand.\u201d<\/p>\n Wellman concurred, saying \u201cimplementing AI processes on top of inaccurate or unmanageable data feeds risks simply speeding up the process of bad decision making\u2026\u201d<\/p>\n However, on a more simplistic level, AI can reduce frustrating and time consuming tasks like form filling, with intelligent systems prepopulating data across various platforms, he added. This addresses \u201cthe thing all consumers want first: simplicity and ease of use\u201d. It also means employees can be freed up for those more complex tasks and providing personalised service.<\/p>\n While regulators haven\u2019t reached the field of AI, banking organisations can take their own steps to responsible and ethical AI to reduce the risk of bias, security, and more. Microsoft have shared their responsible AI principles<\/a>.<\/p>\n The best way to get started is with a strong business strategy that includes utilising data<\/strong> to differentiate your value proposition, re-evaluate the potential of existing or new revenue streams<\/strong> and establishing trustworthiness<\/strong> in both customers and employees.<\/p>\n Organisations who focus on those key factors also heavily emphasise customer insights and intelligence, utilising technology to drive personalised experiences, using data to respond quickly to external and internal changes. They also find new ways to innovate and streamline operations, leveraging employees to be more agile and drive new opportunities.<\/p>\n Watch the on-demand webinar:<\/strong> The digital transformation timeline with Microsoft and The Financial Times<\/a><\/p>\n Read the blog:<\/strong> 3 ways the banking sector can innovate in the new normal<\/a><\/p>\n Download the report: <\/strong>Boosting the innovation of banking business models<\/a><\/p>\n <\/p>\nInnovation in digitalisation and ROI<\/h2>\n
Digitalisation for competitive advantage<\/h2>\n
Long-term transformation and AI<\/h2>\n
The future of digitalisation<\/h2>\n
Find out more<\/h2>\n
About the authors<\/h2>\n