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As the financial sector continually evolves, banks are facing a new truth. Once positioned as customer-facing service providers, they are now becoming more like a utility that provides the foundational layer that supports new front-end consumer tools. This change is not just skin-deep; it’s redefining the core of traditional and digital banking. Services such as Open Banking and digital banking apps have meant a plethora of new financial instruments have emerged which layer on top of banks to offer consumers new valuable products & services.
Unlike a service which often comes with a personal touch, a utility provides necessary functions with minimal frills. Banks were once at the forefront of the consumer financial markets - where most services ran through their branches and accounts. However, the rise of fintech and digital banking has changed the game. These tech-savvy players brought a new promise: simplicity and efficiency in banking from your device, which in turn shifted customer expectations.
In this crowded market where both age-old banks and fintech startups are competing for customer attention, the unique brand identity of banks has taken on a new meaning. Nowadays, most banks offer similar services which make them appear more as utilities rather than personalized service providers. Yet they are still highly valued as secure places to store your money as a result of their long-standing reputation.
Payment and finance offerings by tech companies like Google and more importantly, Apple have been a big part of this shift. Their Pay gateways which connect to a banking service are in use on such a large scale - estimates say Apple has 500 million regular users and Google has 150 million. Apple also has their own Card offering for Credit and Savings accounts via Goldman Sachs (US only for now) - with 6.7 million users and an estimated $10 billion held in savings.
An interesting report by publication The Information highlights this new relationship between banks and technology, and its pitfalls. A quote from an insider within the report highlights those fractions pointing towards this burgeoning trend, front-end = tech and back-end = banking utility:
“Former employees at both companies who worked on the Apple Card said executives weren't prepared for how difficult it would be to combine Apple's West Coast tech approach with Goldman's New York-style banking culture. While Apple was more focused on the sleek technology and product pizzazz that drew in customers and kept them happy, Goldman prioritized regulatory compliance and profitability.”
In our opinion this new reality presents an opportunity for both traditional and digital banks. For those who want to capitalize on this transition - their focus should shift from branding allure to operational efficiency and reliability to unlock new growth avenues.
An overlooked industry that banks can learn from is energy providers - who themselves have faced similar labeling yet managed to strengthen customer relationships. For all of these providers they have learned core lessons; Don’t take up too much time, make it an easy decision and make it happen fast. This allows them not just to focus on the lowest rate possible but building a utility that people want to stay with.
‘Don’t take more of my attention than you need’
Aim to provide seamless, hassle-free services that work reliably in the background. This means having robust systems that require minimal intervention from customers unless absolutely necessary.
‘I have a problem - fix it’
Have multiple channels of communication open - phone, email, live chat, and even social media. Ensure that customer service representatives are well-trained and equipped to resolve issues promptly.
‘I don't understand you - it doesn’t seem obvious’
Clear, straightforward pricing without hidden charges helps in building trust. This also includes being upfront about the terms and conditions, fees, and any other costs associated with the services provided.
Use simple language in communications, contracts, and agreements to ensure that customers can easily understand what is being offered or required.
‘Make it tailored to me’
Utilize data analytics to understand customer behavior and preferences. Offer personalized financial products, services, or advice based on individual customer needs and financial situations.
‘Help me be more environmentally friendly’
Implement and promote environmentally-friendly practices within the organization. Offer products or services that align with sustainability goals, like green loans for energy-efficient home improvements or paperless banking services.
‘Help me make informed decisions’
Provide educational resources such as workshops, webinars, or online content that help customers make informed financial decisions. This could cover a range of topics from budgeting and saving to investing and retirement planning.
‘Keep me up to date before things change’
Notify customers well in advance about any changes in terms, rates, or policies. Use multiple channels for communication to ensure the message reaches everyone. This could also include alerts for unusual account activity or reminders for upcoming payments.
For instance, these utility providers have leveraged these strategies:
Customer-centric approach: OVO Energy focuses intensely on providing excellent customer service, leveraging technology to offer user-friendly platforms and streamlined service. They provide clear communication and transparency regarding pricing and usage.
Sustainability initiatives: With a strong commitment to renewable energy and sustainability, OVO Energy appeals to environmentally conscious consumers. They offer incentives for using green energy, which fosters customer loyalty and engagement.
Sustainable focus: This company has successfully distinguished itself by focusing on 100% renewable energy, appealing to environmentally conscious consumers. Banks can similarly emphasize and promote their corporate social responsibility and sustainability initiatives to connect with like-minded customers.
Customer education: Through consistent communication and education efforts, Green Mountain Energy helps customers understand their energy consumption and environmental impact. Banks can adopt a similar approach by educating clients on financial health, investment strategies, and the social impact of their financial choices.
By focusing on these customer-centric strategies, banks can navigate through the changing perceptions and continue to add value in the lives of their customers, keeping them engaged and loyal even as the industry shifts towards a utility model.
Navigating the shift from service to utility requires more than just a keen understanding of the banking sector. It demands a deep dive into customer expectations, operational efficiencies, and the emerging market dynamics.
At Untold Insights, we specialize in leveraging the 'Jobs to be Done' framework to uncover deep customer and competitive insights that help financial institutions redefine their strategies.
Want to learn more? Reach out to start a conversation.
