While banking has gone through some exciting changes in recent years, 2019 may just prove to be pivotal. Accenture believes this year is a potential tipping point for the industry and one key trend is the greater adoption of cloud and data analytics – which will enable retail banks to raise the bar on delivering financial advice.
The use of digital assistants in banking has become what Accenture describes as ‘table stakes’: many banks now allow customers to interact with Siri, Alexa and others to check their balance, review spending and even make payments. These services are often underpinned by a basic financial advice offering, which tracks spending habits and savings goals, allowing digital assistants to make recommendations or predictions based on this data – although as Accenture points out, the level of advice can be akin to ‘parental scolding’.
Globally, many banks are still missing the mark when it comes to offering true financial advice. As we head deeper into 2019 and conversations around cloud, data and analytics continue to progress, what can we expect the future of financial advice to look like?
A new class of digital advice
Ideally, people want to feel that their best interests are being catered for – meaning personalised, tailored advice that guides them towards their financial goals. Unfortunately, the financial advice available today isn’t entirely fulfilling this need; it’s often merely summarising historical data and giving recommendations based on previous financial decisions.
The future of financial advice needs to focus on true financial wellness: by aggregating the wealth of data they have at their fingertips, banks can see not only what individual customers are spending, but also what other customers are spending on similar products and services. Using this data, in association with non-banking data, banks will be able to make hyper-relevant financial recommendations. This could come in the form of notifying customers if their peers are getting better rates on their utilities or financing offers and suggesting changes to improve their current financial situation.
With trends such as Open Banking gaining greater prominence, the amount of data available to banks will potentially increase massively, meaning they will be even better placed to improve the financial lives of their customers and their overall financial wellness. However, to achieve this goal, banks will need to carefully consider their associated cloud, data and analytics strategy.
Head in the clouds
The business case for cloud has been effectively made in the past few years and the debate today is not so much around cost and scalability benefits of being in the cloud, but rather the data and analytics it offers. According to an IDG survey, 45% of organisations plan to migrate their data warehouse and data analytics applications to the cloud within three years.
With its limitless storage capabilities and improved data analytics tools, banks can use cloud to deliver advice that make their customers’ financial lives better and more rewarding. Through effective data collection and analysis, banks will be able to create much broader financial profiles of their customers, drawing on not just historical data, but also previous and existing habits to give predictive, and, even better, prescriptive advice.
If banks delight their customers with unique and personalised experiences, whilst also steering them towards better financial health, they will reap the benefits through long-term customer relationships. The cost of not delivering those unique experiences may be high – one survey suggests that 89% of Kuwaiti customers would be willing to change banks to achieve a better digital experience.
However, banks will need to work hard if they are to secure a competitive advantage through financial advice. As commercial cloud offerings become more widely available, simply being in the cloud won’t be enough. As Accenture points out, the winners in digital banking will be defined by offering creativity and data quality. Banks will need to create unique experiences for their customers and draw actionable insights from data to provide unique financial advice.
Cloud adoption in this region still lags behind other markets – last year Gartner estimated that the MENA region has one of the lowest rates of cloud spending worldwide. But that picture is rapidly changing, with IDC seeing the regional market growing 24% a year to reach US$5 billion by 2022. Banks and financial services providers are inevitably going to be at the vanguard of this market.
As cloud increasingly becomes the ‘new normal’ for data warehousing and analytic applications, banks in Kuwait will need to start thinking differently about the role they play in their customers’ lives. The youthful population here expects to receive digital banking services and on-demand assistance as standard and banks will come under increasing pressure to adapt and provide new, innovative offerings. Banks must take advantage of data to reinvent their services and become trusted advisers to customers.