Engagement Banking: why the “people-first” approach is key to greater customer experience and retention

The relationship between banks and their customers has transformed significantly. As digital services play an increasingly prominent role in our daily lives – from the media content we consume to the way we shop – so too are banks changing the ways they interact with their customers. Today’s customers compare their digital banking experiences with the plethora of other digital services they use, and they expect banking apps that can match up.

For example, consumers no longer want banking apps that simply process payments. Instead, they demand the same interactive, intuitive experiences they get from other digital services.

As such, banks and financial institutions must prioritize the modernization of self-service capabilities by focusing on “engagement banking,” where banks work to complement the lifestyles of their customers. The problem, however, is that many banks continue to labor with legacy systems that can’t integrate different functions, creating silos across all departments. This results in banks that are unresponsive to rapidly changing market needs and too slow to cater to the demands of today’s customers. Banks can’t respond by simply implementing new technology, as this risks a big investment with the potential for an inefficient outcome.

In recent years, the financial sector landscape has been redrawn by the rise of online-only neobanks that operate more like tech start-ups than traditional banks. These neobanks offer a far wider range of easily accessible services to customers in the platform approach they’ve become used to. Many traditional banks are failing to keep up with these challengers, partly because they put technology before the needs of the customer and partly because their cautious corporate cultures make them unwilling to innovate and slow to make decisions. Modern banks must develop effortless, everyday customer experiences instead of focusing on technology for its own sake. Digital services have to be seamless and flexible to meet customer expectations for ease of use and convenience. Implementing facial recognition technologies, immediate new-account approvals, and app-based credit card requests are great examples of how banks can take the initiative.

In short, this means a move towards an Engagement Banking model. This requires a people-first approach to digital transformation by focusing on the end-user experience, as well as human connections. Digital banking enabled customers to access transactional banking services via websites or apps, which led to a weaker connection between customers and their banks. Engagement Banking instead leverages technology to deliver personalized digital experiences with consistent customer journeys across all digital and physical channels. Human connection and experiences are the heart of this model, strengthening the bond with customers.

According to the findings of a 2021 survey, 55% of customers think their bank doesn’t deliver a seamless experience across all channels. Engagement Banking is as much about fostering emotional connection as it is about financial transactions. This can be achieved by delivering flexible, interactive experiences across any touchpoint the customer chooses. Engagement banking is about exceeding expectations while always anticipating customer needs.

This is achieved by taking a top-down approach – changing corporate culture with incremental action. The key to building momentum and delivering competitive experiences is by starting small. Banks should choose one initiative to focus on and build on it over time. Once change is seen through improved profits, customer satisfaction, and more, banks will be able to break down silos within the organization.

Understanding what customers want is essential to this process. By identifying what matters most to them and using data-driven insights to pinpoint solutions they’ll want to use, investment can be prioritized accordingly.

Employing a single modular Engagement Banking platform will reduce reliance on fragmented legacy systems and technologies and offer banks the ability to easily add new services in future. Engagement Banking platforms sit on top of existing systems to break down silos, leading to lower costs and instant execution capabilities. Placing customers and employees together on the same platform will also enable superior service and engagement with a unified, cross-channel view of each customer.

Financial institutions that take up the challenge of engagement banking are far better placed to retain existing customers while attracting increasingly tech savvy new users to their platform. This opens up new avenues for business growth. Financial institutions that continue along the traditional banking path will be left behind by an ever-evolving industry and an increasingly demanding consumer base. The solution is to employ a customer-centric philosophy that focuses on building closer connections with people rather than taking a technology-first approach.