In the digital-forward world we live in where consumers have increasingly high expectations, offering exceptional customer journeys is crucial for traditional banks. People want finance seamlessly at their fingertips – something leading challenger visionaries like Nubank, Monzo, and Revolut excel at.
With that in mind, at last year’s Summit, Maya Lawrence, Deputy Head of Product Marketing at Sopra Banking Software (SBS), Duco de Lange, Senior Vice President of Digital Banking at SBS, and Philippe Meret, Consulting Partner, IT & Digital Advisory at Sopra Steria Next discussed what incumbents can learn from those revolutionary neobanks. We dive deeper below.
Digital banking on the rise
According to research by Sopra Steria, Forrester, and Ipsos, four out of 10 customers have an account with an online bank, with 36% consulting their app at least once a day and 58% saying digital or mobile services are their preferred method of interaction. People are demanding hyperconnectivity, meaning banks need to enhance their digital offerings if they’re to stay competitive.
Many are already committed to that path – 71% consider digital transformation the highest priority this year. However, the other side of the coin – improving the customer experience (CX) – is often the sticking point, with transformation driven more by business and compliance needs.
To provide best-in-class CX – fast, frictionless, and personalized digital journeys – banks need to be truly customer-centric. Nubank, Monzo, and Revolut succeed here; their success stories are worth exploring.
Nubank
Founded in 2013, Nubank is one of the largest digital banks in Brazil, with a client base of 89.1 million in the third quarter of 2023, according to Nasdaq. The CEO, David Vélez, is passionate about treating people well. “We wanted to build a company that was obsessed with the consumer experience,” he says. “It drives every decision, from the type of people we hire to the products we design. That’s why we have one of the highest net promoter scores (NPSs) in the world.”
In essence, Nubank takes the core functions of a traditional bank and delivers them with a twist by providing a superb user experience (UX), being data-driven, and technology-focused. “Their founding philosophy is easy access and transparency,” says Duco de Lange. To achieve that, Nubank’s app has a clean layout, is very easy to use, and offers customers full insights.
Over time, they’ve become a one-stop finance shop, successfully advancing toward becoming a super app and fully embracing open finance. In terms of growth, instead of spending millions on marketing, they attract customers almost exclusively through referrals.
Monzo
In 2021, Monzo bolstered their product suite with Monzo Flex, a buy now, pay later (BNPL) feature. “We built that with a view of where the industry should go,” says Monzo’s CEO, TS Anil.
“We said, ‘let’s learn from the world of credit cards, BNPL, debit cards, and loans, and deconstruct that for it to be the best product, mindful of where the regulatory landscape could go, and so on.’ We future-proofed it in that sense,” he adds.
For Duco de Lange, Monzo’s success stems from:
- Starting with a great product
- Differentiating their products and features
- Creating the right product at the right time
- Building an intimate relationship with their customers
- Developing an active community
Revolut
The third success story is all about how Revolut concentrates on global digital natives and their specific needs and their focus on open banking. On top of that, Revolut was thinking about the super app back in 2015, before the notion even existed.
A product owner at Revolut says: “We wanted to contextually introduce customers to our new financial products in a way that was tailored to the needs of each customer. Using TrueLayer, we were able to instantly leverage open banking to do that.”
Through their marketplace, customers can benefit from myriad products and services, including third-party offerings spanning business and beyond, from equity investment, crypto, and connecting with accounting software and budget planners to airport lounge passes and travel experiences.
Roadblocks facing traditional banks
On paper, it’s clear what incumbents need to do, but in reality, they’re up against challenges. For starters, banks aren’t consumer-focused by design. As Philippe Meret says: “It’s not natural for them to think power is in consumers’ hands, or that customer satisfaction brings profitability.”
Furthermore, traditional banks often have big, complex, costly, and outdated legacy systems to contend with. Meanwhile, despite embracing the cloud, application programming interfaces (APIs), and tools like artificial intelligence (AI), they face difficulties reconciling different ends of the technological spectrum.
Alongside that, harnessing the power of data is tricky, whether it’s extracting information from legacy systems effectively or cultural barriers. Even if banks have the tech, there won’t be progress without a mindset shift, says Philippe Meret.
How can traditional banks move forward?
TS Anil believes incumbents are “analog businesses with digital storefronts”. To make progress, banks should commit wholeheartedly to customer-centricity. Research by EY Global supports that, suggesting they should “pivot toward genuine customer-led transformation” by:
- Obsessing over customer needs and behaviors: Analyzing transaction data, interviewing customers, and conducting external research to determine which products and services people will value.
- Defining and measuring key performance indicators (KPIs): Not taking NPS scores for granted, and using additional metrics to fully assess customer satisfaction.
- Channeling at least 15% of budget toward customer centricity: Using funds for research, designing journeys, improving the UX, prototyping, testing, and iterating.
- Investing in the human aspect: Upskilling existing employees (or hiring additional staff) to focus on analytics, UX, research, and testing, and instilling an organization-wide customer-focused culture.
- Appointing a chief customer officer (CCO): Achieving the above requires a CCO to oversee and promote the strategy and ensure it’s not an afterthought.
Similarly, according to McKinsey, CX is the “strategic differentiator for banks”, with front-runners in that area leading across metrics like total shareholder return, growth, costs, and consumer purchasing decisions.
McKinsey advocates reimagining customer journeys, helping people migrate to the world of digital, and building and fortifying trust. They also recommend using machine learning, predictive analytics, and big data to evaluate customer feedback.
Banks can also consider embedded finance – case in point is Apple Pay Later, where Goldman Sachs is the issuer of the Mastercard payment credentials used to complete purchases. Partnerships like that are valuable, acquiring the incumbent customers and vast swathes of precious data.
As part of an ecosystem approach, banks can also leverage the solutions of trusted third parties to decouple and break open silos and bring innovative and tech-forward products to market.
© Getty Images
Laser focus on the customer journey
A UK Sunday Times article discussed how CX in financial services will evolve by 2030, saying operators “can build trust and loyalty by embracing data and staying committed to understanding and supporting customers” – a sentiment leading challenger banks are firmly on board with and traditional banks should take note of. In short, the customer is king and the key to success.
Traditional banks can learn from the success stories of neobanks, be it their speed, agility, and willingness to leverage open banking, or their hyperfocus, use of new technology, focus on providing best-in-class customer journeys, and data-centric culture.
Watch the ‘Delivering Delightful Customer Journeys’ session here and head to Sopra Banking Software’s Banking Platform for information on our component-based, API-first software.
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