A new era of digital banking: How banks are turning what their customers want into a business advantage

The sheer amount of data available to financial institutions has revolutionised the way they can decipher consumer needs and build long-lasting relationships around trust and understanding.

As a result, new product roadmaps prioritise innovative solutions that allow consumers to understand their environmental impact, while also helping them achieve financial wellbeing. There is an intrinsic link between the two, as financial insecurity and climate change are two very serious consequences younger generations have to grapple and come to terms with.

Deep dive into the modern customer experience

Tech-savvy consumers have access to a wide range of resources to help manage their personal finances. To launch products that stand out, banks should be actively tapping into their customers’ experiences in order to understand and align with their needs, aspirations and values.

Consumers are increasingly showing an awareness and preference for banks that take definite actions toward climate change, and they expect transparent and engaging financial services that are able to reflect and support these needs and preferences.

Globally, the bar for change is high:

● 73% of global consumers say they would change their buying behaviour to reduce their impact on the environment.

● 51% of consumers believe they are doing all they can to make purchase decisions that shape a more sustainable future, but 68% expect policy and companies to take a lead.

● 55% of consumers believe they should drive companies and organisations to lead on better social and environmental outcomes.

(Source: EY, 2021)

Improving financial literacy levels for users globally

While environmental sustainability is a primary concern for many, sustainability goes beyond just climate change. Real, holistic sustainability also means recognising and addressing the financial concerns and stressors of younger customers.

Financial resilience has been a key topic in the road to recovery from the economic fallout of COVID-19. Financial stress has a direct impact on customers’ mental and physical wellbeing, as well as overall productivity levels in our societies.

To bolster financial literacy, banks can equip consumers with the right tools to achieve their financial goals. As such, the accelerated rate of development for digital banking offerings as a consequence of the pandemic has been a silver lining for banks across the globe.

The biggest, most innovative banks are looking beyond simply providing consumers with simple personal financial management (PFM) tools and looking to more holistic solutions designed to truly help their customers improve their finances. Consumers are more likely to adopt new financial management techniques if they’re presented with a contextual stream of valuable personalised content and actionable insights that will manifest into improved financial behaviour in the long run.

A good example of a holistic financial wellbeing approach is ANZ Australia’s online Financial Wellbeing Challenge. The challenge encourages customers to sign up to receive coaching, missions and tips around how to get more “financially fit”.

Such campaigns provide customers with an engaging and free resource to help them plan their expenses, manage their debt, set savings goals and start investing. This kind of long-running programme aims to not only set financial wellbeing in motion, but hopefully to instil better financial habits for individuals in the long run.

Another Australian bank that is helping its users by developing a more robust financial wellbeing tool is Commonwealth Bank of Australia. CBA now offers a benefits finder that helps consumers understand and discover their eligibility for concessions, rebates or tax relief. What had originally begun as a system for consumers to process COVID-19 affected flight refunds has now developed into an innovative financial wellbeing tool applicable for both personal and business banking, thus supporting users across the board in understanding what benefits they are able to access through and beyond the pandemic.

The lifeboat

The race towards holistic, sustainable transformation, spurred on by demand from today’s savvy, conscious consumers, presents a unique problem for legacy banks: in the age of “cancel culture”, how can they continue to keep the ship of legacy services afloat by improving functionality and usability, while encouraging the loyalty of informed consumers?

Partnerships are a lifeboat for banks in a sense that they provide ready-made, specialised tools to enable agility and quick action in an increasingly competitive and changing landscape. The partnering of fintech innovators Moneythor and Cogo, for instance, enables banks to provide their customers with both financial wellbeing and climate-conscious banking solutions.

Banks using Moneythor’s data-driven personalisation platform integrated with Cogo are able to offer their digital banking customers the ability to track their carbon emissions and therefore understand their carbon footprint off the back of spending habits directly via their banking apps. When it comes to staying ahead of the curve, collaboration and partnerships are key to overcoming seemingly impossible challenges.

Combining forces gives banks the ability to quickly enrich and add contextual information to customers’ spend at scale and enabling them to assign ’emissions’ to each of their transactions – giving customers accurate insight into their carbon footprint. What’s more, an actionable “nudge engine” helps shift customers towards more responsible financial choices, including climate impact reduction.

This kind of supercharged, multi-functionality enables a personalised, engaging experience that spurs excitement and loyalty among customers looking for value-added service.

Open Banking and the age of transparency

With Australia looking towards the next stage of open banking with Consumer Data Right (CDR) and gearing up for open finance, it is important for banks to educate their customers on how it benefits them as well. The benefits of open banking (and open finance) for the end users are significant.

Through the various ways it is interpreted globally, open banking enables consumers to have a holistic overview of their finances across any financial institution they might be banking with. The application of open banking is key to the deployment of programmes promoting financial wellbeing as it allows both banks and consumers to consolidate and access all financial data centrally.

This consolidation empowers end users significantly as traditional banks will now have to work harder to provide better options in order to not lose customers to challenger banks and direct-to-consumer fintech firms. The transparency that open banking provides also enables consumers to decide which products meet their needs best.

The evolution of personalisation

The demand for personalised financial management tools and services that focus on sustainability and wellbeing has never been more prominent. Banks need to evolve and look beyond providing consumers with basic PFM tools to stay ahead of the curve, especially in mature markets like Australia that are progressively applying open finance.

As such, the personalisation of digital banking services should allow banks to build a rapport with their users, support them in their financial endeavours and allow them to feel empowered enough to achieve their short- and long-term financial goals. When applied accurately, personalisation in digital banking has the potential to drive real revenue by increasing levels of customer engagement and reducing support costs for financial institutions.

However, data-driven personalisation is not without its own set of challenges. To focus solely on developing robust technology is not enough.  Key tenets of focus while planning the application of personalisation should be consumer behaviour, human nature and cognitive biases built around lived experiences of users. Personalisation initiatives should strive to first and foremost be human centric and financial institutions (as well as fintechs) must not get carried away with data analytics, AI/ML models and technology at the expense of a customer-centricity.

There is a fine balancing act between embracing data analytics, behavioural science and respecting customer preferences. No organisation will own the consumer - rather, the focus should be in empowering consumers to own themselves. Digital banking solutions need to therefore be modular, flexible and be able to acclimatise to the widening array of customer needs and preferences.

The Moneythor solution enables the delivery of data-driven insights, contextual recommendations and actionable nudges tailored to every individual customer, preconfigured or uniquely crafted by the financial institutions to suit their financial wellbeing journeys, and leveraging behavioural science techniques.  

Cogo's Ethical Nudge Framework also uses behavioural science to personalise data in complex sustainability journeys. Depending on a user's motivation and ability, banks will be able to help users move from a position of understanding to improving their impact by taking specific climate actions.

Bottom line benefits

Making sustainable lifestyle and financial choices more accessible to customers is a game-changing strategy for banks and financial institutions looking to differentiate themselves. But what are the tangible benefits to the bottom line, apart from regulatory requirements and customer demands?

Cost reductions

While committing to ESG (Environment, Social and Governance) might seem like a significant investment with no financial return, banks that score higher on ESG reports show higher ROI overall. Cutting carbon emissions and reducing waste and water use helps lower operating expenses (Source: McKinsey) and can increase overall profits by 60%.

Innovation and differentiation

Tackling ESG challenges will require banks to innovate. Whether it be through climate credit cards, integrated carbon tracking solutions, or even holistic financial wellbeing programmes catered to different age demographics for end users; financial institutions can create value through differentiating existing products or creating new products/services.

Business growth

According to PwC research, 83% of consumers think companies should be actively shaping ESG best practices. Banks need to create sustainable products and incorporate ethical business practices that will enable customers make feasible changes with their financial and sustainable habits, which in turn helps grow the business.

Improving employer brand

In the hunt for talent, employer brand is becoming more important than ever, and research shows that workers are driven to find jobs that align with their values. In fact, it’s reported that 76% of millennials consider a company’s social and environmental impact before accepting an offer.

As the cost of living and levels of inflation continually escalates globally, companies that commit to ensuring financial wellbeing for employees are making a valued difference to their employee's overall health and wellbeing. Not only that, but a commitment to financial wellbeing in the workplace also creates an environment for employees to flourish and maintain good standards of living, which improves organisational image and retains talent in the long run.

Attracting investors

Investors are looking for ways to generate returns from socially and environmentally responsible companies, so disclosing data around your company’s impact is a sure way to attract interest from investors.

As the saying goes, the best time to act was yesterday. The second-best time is now. Banking customers are looking for greater transparency around their spending footprint and towards managing their spending for a more sustainable, prosperous financial future.