December 30, 2019
Vlad Lounegov, CEO of Mbanq, looks at the struggles that traditional brick-and-mortar banks take into the next decade.
As we move into the 2020s, the pressure on conventional banking increases. Why? One factor is that clients are becoming more demanding. It’s a digital world, and customers can easily engage with more than just a single financial service provider at the tap of a finger. This means customers demand a positive experience every single time.
Even if you think you’re familiar with your brick-and-mortar bank, there are certain aspects it does not want you to consider. Here are five things brick-and-mortar banks prefer you don’t notice:
1. Banks spend as much on IT as major technology companies like Google and GE
Banks are actually run by software and not the people you see in the branches. “Computer says no” is a common source of frustration for customers and staff. Jokes aside, the whole banking industry is strangled by the oligopoly of technology providers who create legal and technological barriers to innovation to retain their dominant position.
2. Your bank is not as future-ready as it should be
To be truly future-ready, a bank needs to upgrade its onboarding, KYC, payments, and security, among other aspects. This means doing away with many of its current workflows and systems, and involves a big change – but banks are notoriously reluctant to commit to rapid change; they instead would charge customers fees to cover these inefficiencies.
3. Your bank’s IT systems look like a bowl of spaghetti
Most banks rely on decades-old, “pre-internet,” legacy IT systems because they are perceived to be critical to service continuity. Legacy systems are not easy to patch if things go wrong and suffer from inefficiencies and cybersecurity risks, among a host of other problems.
4. Branches are sales offices that sell you more products and services
Branches are notoriously useless and will often refer you to a call center for help when there is a problem. Branch visits and the number of branches are on the decline, and the next generation of consumers avoids brick-and-mortar branches like the plague.
5. Time is money – your bank is slow
Today, customers have instant expectations; it is no longer just same-day – instead, it is real-time. With traditional banking, even basic transactions require some effort. New challenger banks try to be real time, but, like the entire financial system, often rely on legacy batch processing systems.
In conclusion, the impression traditional banks like to give customers is that each one is unique. But unless you are awarded special status by your bank, like a high-net-worth priority, you’ll likely be offered a very basic level of service.
Today, customization is a basic expectation for customers – if you can expect it from your local Starbucks, why not your local bank branch? But treating customers specially takes a special kind of effort – a digital journey!