Customers rarely behave in the way the product was designed for – especially when it comes to retail banking. In the UK, 14 million people use an unarranged overdraft each year, picking up high fees, rather than opting for a loan or arranged facility as banks intended.
75% of young people want to invest or are investing in the stock market – but less than 3% of the population have a Stocks and Shares Individual Savings Account – a complete divergence from the plan. If one thing is for certain, it’s that designers need to draw up their plans around the customer and not the product. This will be a major theme for 2022. The best banks will adjust existing products so that they can evolve around the customer. Products will begin to feel more like bespoke services as hyper-personalization takes effect, and excitingly, they’ll start to have intelligence “baked in”.
Customer focus makes a comeback
We are seeing transformation in the most powerful machine of all... the banking mindset. Rather than relying on an old suite of products, the best banks are pushing themselves to deeply understand the customer. As a recent study by McKinsey corroborates, “In a future-proof business model, the customer, not the product, is the focus”.
This means that we, as designers, should be thinking about the actual goal of the customer. And it’s NOT what the business thinks it is. Ultimately, nobody wants a loan. They want a car. And a loan is what’s on offer to be able to achieve that. Thinking in terms of the goal and not the loan will mark a revolution in the way products are designed going forward. Secure homes, not mortgages. A safety blanket, not a Cash ISA. A shot at a fulfilling and independent retirement, not a pension. You get the picture.
So, what will this materially look like? And how will the product shelf evolve? The overall direction of travel seems to be a more service-based model.
The best banks will ditch product buckets
One of the clear emerging trends we are seeing is the breaking down of silos. For decades, banks have categorized their business model into products. Saving and current accounts, mortgages, personal loans, debit cards, credit cards, and certificates of deposit generally have separate departments and entirely separate teams. From a profitability perspective, this makes cross-selling burdensome for employees and customers alike. From a marketing and promotion standpoint, it opens a can of worms as customers could receive too many, too little, or completely inconsistent communications from the same bank. And from a design perspective, it limits the ability of the product dramatically. To get ahead, the best banks need to reorganize their business model.
To do this, banks will need to get over the hump of putting financial products into buckets – or taxonomies – and creating a way that they can flow into one another. Building a design architecture to achieve this is not complex. But getting a whole bank on board and moving the system over can be. The best banks have already started this journey and are now beginning to enjoy the benefits.
Products will seem more like services
Over the next years, products will become so personalized and customizable that they’ll seem more like a service. The technology to do this is already here, as cloud technology and open finance fast become banking mainstream. What’s more, increasing numbers of incumbents now have the stomach and the software to ditch their legacy tech. All signs point – very excitingly - to the real-time hyper- personalization of products. A product so relevant that it feels bespoke – like a service.
Selling a hugely customizable product means customers enjoy the ultimate flexibility, allowing them to use a product in a way that suits them. Historically, the way that banks have thought about categorizing those products – for example, current accounts or savings accounts – don’t necessarily provide the perfect fit for what customers need today. But by following a service-based model, banks can get back to their roots and work around customers’ true needs, rather than forcing customers to work around them. And the banks who make life easier for customers are likely to be rewarded.
Creating this service-based model could also be hugely profitable for banks as a way of retaining customers and enticing them into relevant products. For example, it’s estimated that at any given time, between 2-4% of current account customers are hankering for a loan. Yet despite this, less than 10% actually get one with their main bank. Building products that understand and work around customers’ needs will prevent those profitable opportunities from slipping through the net.
To achieve this and ensure that banking products and services reach their full potential, designers will need to start “baking intelligence” into their designs.
Intelligence will be “baked into” products
Outside of Paul Hollywood cookery shows, it’s not often most people hear the phrase “baking intelligence”. But within the world of FinTech design, it’s sounding more common-place. Attracting customers with specific and relevant finance opportunities requires a data-led design process. The ideal banking experience should follow customers right from their first childhood savings up until the last pension is withdrawn. To the customer, it should – and probably will – seem like one constant service.
Creating this seamless experience means that the banking products need to evolve with the customer. Student accounts and mortgages need to be offered at the right time, at the digital convenience of the customer. The transition from one account to another should be frictionless. And ideally automatic, with little to no human intervention on the bank side. We’re talking about products that understand context. Products that understand the life stage of customers, their behaviour, and their goals, and that will behave according to these parameters. Products that react to what the customers do automatically.
So, when can we expect these “living” products to hit our smartphones? Truly intelligent hyper- personalized products won’t happen in 2022. But things will definitely start to go that way. We’re going to see that general trend.
If you’re beginning to feel like you’re in a banking sci-fi novel, welcome to my world! Following on from my first three predictions, here is another mind-bending one that I’m certain will happen over the coming years... the re-brand of the banking subscription model
In the future, we probably won’t have independent financial products like current accounts, savings accounts, or mortgages... we’ll have a subscription to a bank. Today, subscription models are taking the world by storm. A 2019 study found that a jaw-dropping 92% of millennials pay into at least one subscription service. And the likes of Revolut, Starling, Monzo and more have found the subscription model to be a success.
Blending all my predictions so far together, into one monster forecast, I feel that a hyper-personalized, super-intelligent subscription service will be the future for banking customers
This article is an extract from our e-book "Making Banking 10x Better in 2022". Download the full e-book via the button below.