How Retail Banks Can Survive in the Digital Arena
Today’s financial services industry is a digital arena – and retail banks are facing new types of competitors in more intense challenges than ever before. Lorenzo Villa, Team Lead for Touchpoints IT at the Italian retail bank Credito Emiliano, shared this insight, as well as strategies that allow retail banks to win, in a recent Applause webinar.
A bit like the Colosseum in the time of the Romans, explains Villa, the digital arena is filled with diverse opponents. Some are digital-first challenger banks, others are financial services companies born from open banking, and the worst are non-financial big tech companies that, through next-level digital products, have precipitated soaring customer expectations around digital experiences. To survive in the digital arena, retail banks’ reactions need to be faster and more creative than the competitions’.
“Our biggest competitors are not other banks. They are the big tech companies that, through next-level digital products, have precipitated soaring customer expectations when it comes to digital experiences across all industries.”
Accenture predicts that retail banking is on the brink of experiencing what is already happening in automotive with the shift from gasoline to electric cars. What used to be a seemingly infallible business model in a well-established industry is crumbling in the face of disruptive technologies. In the financial sector, the commoditization of banking products and the growing maturity of open finance business models threaten to make retail banks, like gasoline cars, a relic of a bygone era.
If retail banks are to survive in the digital arena, Accenture’s research suggests that they need to combine clarity of purpose with digital maturity. Tesla achieved what it did not only thanks to its innovative digital products, but because its purpose was clear — that switching from a gasoline to an electric vehicle should be an upgrade, not a compromise. When the watershed moment in financial services arrives, Accenture believes that “purpose could be the characteristic that determines which banks grow and thrive in a world where high service levels and robust digital channels are taken for granted.”
When it comes to purpose-driven digital strategy, Credem is a leading example. For over one hundred years, the bank has weathered changes in financial services through a fierce commitment to its core purpose: providing innovative solutions that support its customers to grow and live financially healthy lives. Its latest financial product, Credem Wellbanking, is testament to this purpose. Besides providing current account access, the Wellbanking mobile app enables customers to manage multiple aspects of their finances, from purchasing travel insurance to paying taxes. In line with the “wellbeing” message, customers will soon even be able to schedule medical appointments with local doctors.
Through supporting local communities, Credem creates a symbiotic relationship that fosters mutual development. The healthier it can keep its customers and their finances, the more economic growth it creates for itself. In a case study covered by Harvard Business Review, Credem supports local Parmesan cheese producers to grow their business by accepting cheese wheels, which the bank stores in its own purpose-built warehouses, as collateral on loans. This way, the Parmesan producers can manage their need for liquidity during the lengthy cheese maturation process while Credem generates more profit.
“Innovation means understanding how to be part of an ecosystem. True growth doesn’t happen when you change to evolve with the local community, but when you support the local community to evolve with you.”
In the webinar, Villa and his colleague, Domenico Ferrari (System Manager, Frontend Digital & Mobile at Credem), shared their advice on how retail banks can combine clarity of purpose with technical maturity to achieve business growth and stand the test of time in a rapidly changing industry. They highlighted seven key takeaways:
1. Do not rest on your laurels
When Credem took on another customer in the cheese production business, the bank could have simply replicated the successful business model outlined above. Instead, as has been key to its survival over the past century, Credem looked for opportunities to modernise. In this instance, Latteria Soresina, its new customer, already owned cheese warehouses. Instead of building its own storage facilities to house the customer’s cheese collateral as it had done before, Credem employed blockchain technology to track each cheese wheel remotely. This way, Credem could keep an eye on the cheese collateral without having to invest in and maintain new infrastructure.
2. Know yourself
In Villa and Ferrari’s view, finding your purpose is especially important for smaller retail banks. Without the resources of larger, multinational financial institutions, knowing who you are and what you want is essential for resource allocation. If your goal is to grow the financial health of the communities around you, then investing in blockchain to reduce costs you would have otherwise incurred is money well spent. Just employing blockchain because it's a modern technology and you think you should, however, is not. Digital experiences are only worth the investment if they solve a valid business problem or improve services you already offer.
3. Think outside of the box
Knowing who you are is not the same as knowing what you do. Credem sometimes provides customers with services completely removed from finance. “Part of being a purposeful brand is providing customers services that are not strictly related to the bank but are helpful to the customer in the right moment,” explains Villa. In light of the current pandemic and the strain on medical facilities, Credem plans to build a feature that will enable customers to book doctors appointments through the mobile banking app. In doing so, the bank strengthens the “wellbanking” message.
4. Improve business agility
If retail banks are to survive in the digital arena, they need to decrease their time to market. For Credem, this involved adopting agile methodologies and reducing time spent on tedious technical tasks. The less time its team spends bug finding, the more it can focus on strategic product development concerns. Whereas traditional Italian companies often shy away from working with external partners, Credem recognised the value that Applause’s crowdtesting model could have for freeing up internal resources. The more efficient the SDLC, the more value Credem could bring to its customers.
5. Provide omnichannel experiences
With the current speed of innovation, retail banks must not overlook non-digital customers. For Credem, omnichannel is a way to provide the innovative digital experiences that customers demand while ensuring that less digitally-savvy customers can still access the services they need. When Credem created an in-app appointment calendar to enable customers to book in-person meetings at their local branch, it needed a fallback option for customers without online banking. In addition to still allowing customers to book in person, Credem put up QR codes outside each branch that directed customers to an online booking page. While some customers still struggle with this process, for many it provided a welcome middle ground.
6. Design for everyone
Villa recognises that many companies are only now starting to think about digital accessibility and inclusive design. In the past, many customers with disabilities relied on non-digital channels to interact with banks. As digital increasingly becomes the main (and sometimes only) communication channel, companies need to ensure that digital experiences work optimally for everyone. For Credem, this means designing for accessibility as default right from the start of the SDLC and ensuring it meets guidelines stipulated by the 2025 EU Accessibility Act.
7. Prioritise digital quality
With digital now by far the most important channel for retail banks to interact with customers, the quality of digital experiences is of immediate strategic concern. “With digital channels so crucial for our business, having bugs in production is risky,” says Villa. In the past year, Credem has drastically changed its approach to QA. Whereas it previously only tested internally, necessity has driven Credem to bring its app out of the lab and into the real world before it is ready. Thanks to Applause, Credem can now test its mobile banking app in advance of rollouts with real Credem bank account users. “Now when users find bugs, we rejoice, because it means we can manage them before they reach the hands of our broader customer base,” says Villa.
To find out more about how Applause supports Credem to create seamless mobile banking experiences and achieve its purpose, read our case study below.
Learn how Credito Emiliano draws on its heritage to build innovative products and increase customer retention.Read 'Credito Emiliano' Now