Over the last several years, consumer-focused companies have made significant improvements to the way they interact with their customers. Many retail businesses, for instance, are using data analytics to deliver more personalized user experiences. Visit your favourite store’s website, and the homepage will show you items you’ve purchased before and may need again. With predictive analytics, streaming services know what kind of songs or shows you might like even before you’ve listened to or watched them.
These kinds of experiences are now expected in the consumer world, but entrepreneurs, executives and employees also want the same from their business partners. According to Accenture, 90 percent of business-to-business (B2B) executives cite customer experience, of which digital is a major part, as being very important to achieving their organization’s strategic priorities. Yet, the company found that just 20 percent of B2B companies excel at providing an adequate customer experience.
While problem is pervasive in the B2B space, it’s an especially noticeable issue among banks, which can be a company’s most important business partner. A report from BAI, a non-profit organization that provides training and thought leadership to financial services companies, found that businesses still lack digital options from their banks. The vast majority of survey respondents still visit branches to open bank accounts, yet 70 percent of business owners said that they would rather open a deposit account online, and half want the ability to take out a loan online.
That’s just basic banking. With the amount of data financial institutions collect, they should be able to provide the same kind of personalization that consumer companies provide. In this post, we look at some of the things businesses want from their banks today.
More context needed
One of the most important and emerging banking sector trends is what is referred to as contextual banking. It’s a term used to describe banking-related products that are tailored to a customer’s specific situation. Banks use big data, personalization tools and predictive analytics to better understand the context a client is operating in and it then provides them tools that meet their individual needs.
People want this kind of context. Accenture’s customer experience report found that nearly half of all consumers, banking and otherwise, expect special treatment for being a good customer, with 33 percent of people saying they’ve switched brands because of a lack of personalization. Businesses specifically want to do things like increase their line of credit without having to fill out mounds of paperwork, pay vendors in real-time without having to interact with their bank’s clunky systems, they want better insights about their business, and more.
Here’s an example of how contextual banking works. An algorithm might notice a corporate customer’s account is running low, but based on past cash flow history, they know the customer is due for a payment soon. In this case, the system could, for instance, automatically extend a line of credit before the customer is even aware of the low balance. The better they’re served, the better they can serve their customers. (Find out more in our contextual banking white paper.)
Start with embedded banking
Becoming more predictive – and serving up relevant suggestions at the right place and time –has a lot to do with data. Banks and financial institutions are sitting on teraflops of valuable customer information, everything from transaction histories and customer journey information to performance metrics and financial forecasting. But so far the banking industry is not using that information to provide an enhanced, contextualized customer experience.
Contextual business banking experiences can start with “embedded banking,” where a financial institution works with a fintech provider to integrate their banking services directly into their client's existing business application (such as an ERP or accounting platform). Once integrated, the bank can use data to predict and automatically suggest products and services based on their client’s unique needs in real time.
One way to provide this kind of service is to partner with a fintech, which can help a financial institution provide direct connectivity with ERP and accounting systems and provide a better customer experience. Integrating these systems allows an organization to manage all of their primary business processes through their own platform in a centralized location. Many cloud-based bookkeeping systems like Xero can also connect directly to business bank accounts. This ensures transactions are designated to the correct account, eliminating exhaustive manual work for operations, auditing and reporting teams.
Big opportunities for banks
Institutions that don’t understand what their clients truly want – and fail to provide a more contextual experience – are missing out on a massive opportunity. A recent McKinsey study said that companies that use analytics and data to their advantage experience growth three times faster than those that don’t. According to the report, “Broader analytics reveal transformative opportunities and enable interfaces with third-party vendors, allowing development of external capabilities, knowhow, and assets."
Another Accenture report also found that 28 percent of banks don’t validate or examine the data they receive from ecosystem or strategic partners most of the time, while 5 percent said they either rarely or do not validate at all. This must change. With customer needs becoming more complex, it’s more important than ever for financial institutions to utilize the data and technology that allows them to put customers first.