For many years, there was big money to be made out of cross-financing and high-risk mortgages with high-interest rates; a strategy that might have worked in the 90’s, but which proved to be risky throughout the years. The needs of the customer were greatly overlooked, because what was the bank if not merely a cash machine.
For many years, there was big money to be made out of cross-financing and high-risk mortgages with high-interest rates; a strategy that might have worked in the 90’s, but which proved to be risky throughout the years. The needs of the customer were greatly overlooked, because what was the bank if not merely a cash machine.
Everything changed when all mortgages busted and no one was able to repay the money borrowed in the financial crisis. States had to pump a lot of cash into the market to revitalize it and this is when they had to reduce interest. Little investment was made into digital transformation at the time. To this date, the banking ecosystem is still super analogue and all the services offered are regulatory-led, instead of customer-led.
The RISE of FinTechs
The banking industry is going through a radical transformation. Customers today expect personalized, meaningful experience via user-friendly, intuitive interfaces available at any time, from any device. The costs involved for acquiring a new customer are estimated at $200, whereas the revenue generated by that customer is only $150. On average, a bank makes a profit only in the 2nd year. With 80% of customers willing to switch banks for a better customer experience, the myriad of options out there should make the whole industry understand the battle for monopoly is real. 69% of customers who plan to leave their current bank said their decision was based on poor customer service rather than bad products.
According to Accenture’s 2019 Global Financial Services Customer Study, “50% of consumers expect financial providers to offer propositions addressing core needs, and not only traditional financial services.” Given the challenges mentioned above, new market entrants like Revolut, N26, Transferwise, and others - also known as FinTechs/payment startups - took notice and chose to transform problems into fully digitized solutions. One of the core needs of the people are no hidden fees and high inter-banking currency rates. To address these concerns, Revolut built a frictionless global platform capable of managing money without such hidden fees while also offering excellent currency exchange rates.
How banks are adapting to emerging changes
Some legacy banks are trying to adapt to change. In fact, 80% have cited the importance of having a digital transformation program in place to manage risks, drive efficiency, and benefit from added opportunities to achieve sustainable success. To protect themselves from the impact of a future plunge in business continuity and performance, the key is to “transition from regulatory-driven transformation to innovation-led change” (Ernst & Young - Global Banking Outlook).
The time to digitize is now. By investing in infrastructure that can drive efficiency across the entire value chain, banks can become digitally mature. Deutsche Bank, for example, seeks to accelerate innovation with its purpose-built innovation labs and digital factory, all set to compete with neobanks by adopting new tech stacks and allowing customers to benefit from open banking.
Inflexible IT infrastructure of banks
If we were to look at the industry as it is, banks want digital transformation. To strengthen their competitive advantage and develop a strong market share, 70% of banks will invest in advanced technology in the next 3 years. However, only 37% are expected to develop their technology in-house. In general, adoption is slow because most legacy banks don’t have the IT infrastructure of a digital bank. In this scenario partnering up with the Fintech’s might seem like a smart choice.
Benefiting from a platform economy
Creating ecosystems with technology startups helps banks manage their digital transformation and to reduce their huge cost base. In light of that fact, banks can collaborate with ETVAS.
ETVAS is a digital market for extra-services that enhance core banking products for increased customer satisfaction and revenue. In a single platform, ETVAS connects all providers of extra-services with customers of retail or SME banks.
While in the past, it took banks up to two years to source those value-added services, with technical integration being challenging & expensive, launching a new service program with ETVAS takes only a month.
To cater to the needs of banks willing to get back into the game, ETVAS seeks to become an umbrella marketplace where all services are readily available in one place. With ETVAS platform, the costs of running service programs are cut in half.
Value-added services: an opportunity for banks to thrive again!
The importance of digitizing the customer journey
Added-value services will enable banks to focus more on providing outstanding experiences. Digitalization is all about delighting the customer and FinTechs have proven to have what it takes to excel in this segment.
Today's modern customer has gotten used to buying everything online at the click of a button. Everyone is super connected 24/7, meaning that if banks don’t provide added value, eventually they will hit rock bottom. Nearly 60% of active banking customers are keen on using digital channels (mobile and online) and 80% of all interaction happens online (McKinsey analysis on 200 global banks). And yet, customers are not retailed because they’re not properly segmented and offers are still not personalised enough.
In banking, understanding customers needs to be done at a granular level. According to the McKinsey Global Institute, most banks have experience with using data insights. But even though 70% might use at least one type of technology based on AI, they still lack experience in developing scalable solutions that can add value to their customers.
When powered by AI and machine learning, segmentation can reveal insights that current legacy systems are missing out on. When customers know, think, or feel that a bank takes care of them (integrating self-segmentation that enables a bank's customer to feel special), it instantly instills a sense of trust and care; thus boosting loyalty and satisfaction.
Given the multitude of options out there, customers today can afford to have high expectations; they want to be spoiled. Driving costs down, improving customer experience, and adopting the omnichannel approach where the same services are made available both online and offline, are objectives banks want to attain with digital transformation.
ETVAS helps monetize customer relationships by building a service ecosystem and community around your end customer.
Where does ETVAS come in?
Integrate a value-added service in 1 month, instead of 18.
Today, every single insurer and every bank must go through the same process to offer end-customers value-added services. The time that a bank or insurance company must spend today on search, legal contract negotiation and integration is often up to 18 months. With our marketplace, there is only the choice of the right services, followed by a 10x faster go-live.
In our open API driven cloud platform, we offer the largest catalog of individual value-added services. Our business partners configure the right products for their target groups from a huge range of services; the integration of ETVAS is actually as easy to integrate as a Plugin (or Paypal, for example). The integration of additional services for banks and insurance companies has never been easier, faster or cheaper.
Costs down
We save our business partners expensive and lengthy processes such as the search, or the Due Diligence of service partners. We also save on expensive contract designs and facilitate, beyond that, better purchase prices by economies of scale. The operation of ETVAS is so simple that there is no need for expensive experts for program management.
Higher revenue from higher premiums and more customers.
Use case in action:
Bank X chooses value-added service directly from the ETVAS marketplace at 5 EUR.
Bank X sets a price tag for that service at € 7,50.
Bank X sells this service following certain customer events or in the context of other transactions.
Final thought
It’s time for banks to differentiate their services! Capitalize on the importance of giving clients what they need, with the help of platform economy partners, such as ETVAS - the marketplace for value-added services.