Banking in 2021: Digital, open, empathic and tailored to everyone

The coronavirus epidemic has affected all sectors, including banking services, and it’s clear that it will also significantly affect where banking is headed in 2021 and beyond. But the government restrictions and limitations enacted to prevent the spread of coronavirus have not only shown where banks are going, but also how much they have changed in recent years. What can we expect from Czech banks in the near future and how will their customer relationships evolve?

Digital from the very beginning

The forced closure of bank branches might not have even been noticed by a significant number of clients, as it’s likely they hadn’t been to the bank in person for months, if not years. But last spring and autumn’s lockdown will, from the perspective of the bank-client relationship, further accelerate the digitisation trend, which is clearly inevitable. Even clients who only started managing their accounts from a computer or phone this year will probably not return once all the restrictions on retail branches are relaxed. This will benefit both banks and the clients themselves, since digitisation means a major increase in customer comfort.

The ability to completely control an account through a computer or phone removes barriers to using banking services and significantly favours banks that provide this option. “The pace of digitisation will not decrease in the year ahead either. Almost all banks will allow you to not only open an account online, but also purchase other financial products, such as savings, investments or unsecured loans, via mobile and online banking – comfortably and in a few minutes,” says Karel Beran, head of products and innovation at Banking Software Company (BSC).

Setting up a new account, issuing a credit card or taking out a loan within a pre-approved limit are simple operations that require no assistance from the bank. In an intuitive banking app, the client can easily serve himself – whenever it suits them and with whatever device is convenient. For the bank, this means being able to attract more clients, provide new services and substantially reduce costs.

A positive experience for all

2020 has brought huge changes in the way we work, shop, communicate and have fun. Companies had to transition to working from home very quickly and on a huge scale. Brick and mortar shops had to start selling online and banks needed to serve clients without face-to-face meetings. But financial institutions need to be mindful not only of applicable legislation, but also of security and customer experience as they step up the pace of digitisation.

“Previously digital banking was used to a greater extent primarily by younger and more tech-savvy clients, but now conservative and older clients are also becoming digital banking users. This means that the bank must create an environment accessible to all of its client groups in order to provide a positive experience, regardless of their age or technical prowess,” explains Karel Beran of the BSC.

Clients’ comfort with the features and controls of banking applications can vary widely. So, while younger clients might prefer, for example, to communicate via WhatsApp, pay with their watch, send money quickly between friends, or execute cryptocurrency transactions, older users of banking apps will welcome simple controls with clear functionality and easy access to customer service support.

Individual banking

In the year ahead, it will be important for banks to identify what services are important to their clients in post-coronavirus times and to adapt their offers to the current and changing needs of their customers. Big data analysis or artificial intelligence technology can make it easier for banks to do the hard work. Data analysis will allow banks to tailor services to specific customers focused on their needs, life plans and, of course, their current financial situation. “Banks can now work with large amounts of data from different sources and, on the basis of these, precisely target personalized offers to specific client needs. Such personalised and precisely targeted offers are significantly more successful and provide a good return on the necessary investment,” adds Karel Beran of BSC.

Of course, data analysis and artificial intelligence technologies are nothing new for banks. These tools are already in wide use and are commonly used, for example, in detecting fraud. Some banks are also using them to score clients as part of loan approvals. The use of these technologies to analyse client needs and create targeted product and service offerings is also a big trend.

New services thanks to open APIs

The opening up of banking based on the European PSD2 regulation has certainly not yet exhausted its considerable potential. So far, most Czech banks are only using the basic possibilities of the open API to make information about all their accounts at different financial institutions available to their clients within a single environment and most services are limited to checking balances or making payments.

The BSC’s Karel Beran talks about the much richer possibilities of open interfaces for banking services: “For our clients, for example, we have implemented a service allowing simple integration of the business ERP system with the bank, which provides interesting options for automating corporate processes. For example, an open API can also be used to verify a client’s income and expenses by directly connecting to their bank accounts and to use it as an input to their credit rating, without the need for paper certificates.”

Investment in digitisation pays off quickly

Czech banks will enter the new year in a difficult situation. The coronavirus epidemic is causing significant losses in all sectors and margins on basic financial services are relatively low. Moreover, banks are under pressure not only from clients demanding new and better services for less money, but also from predatory neo-banks, operating exclusively on the internet, or Internet giants such as Apple, Amazon, Google or Facebook.

“One obvious way to stay relevant, retain clients and acquire new ones is to constantly innovate and come up with products and services that make life easier for clients. And most importantly to offer these products at the right time, in the right place and tailored to the client’s needs. Compared to multinational players, Czech banks have a great advantage in being able to take an individual approach to clients coupled with a deep knowledge of the local market,” concludes Karel Beran, head of products and innovation at Banking Software Company.