In these and other customer interactions, banks should be sure to maintain the human touch. Digital interfaces are essential, and desired, but customers tend to need person-to-person experiences to boost loyalty. For instance, educating consumers on better debt management and being empathetic in debt collection efforts could help strengthen banks’ customer relationships and engender trust. First, they should prioritize retaining first-time users of digital channels by using targeted offers and engagement strategies. At the same time, banks should continue to invest in digital, customer-facing technology to provide the seamless experience the industry has been seeking for a while.
This is especially true for respondents in North America, at 56%, and Asia-Pacific, at 61%. Needing to make these investments in a low interest rate environment, some banks, especially smaller ones, may pursue mergers and acquisitions (M&A) opportunities for scale. Among respondents from smaller banks (annual revenues between US$1 billion and US$5 billion), 57% said their institutions could pursue M&A opportunities over the next 6–12 months. Meanwhile, one-third of respondents indicated their banks may also look at rationalizing assets or divesting noncore operations. For instance, they may consider nearshoring some offshore positions to embrace a true multilocation model. This may build in some redundancy, but it would help reduce operational risks. In our survey, a majority of respondents reported implementing or planning to implement some of these resilience measures.
While banks have made good progress on sustainable finance, there is much more that can be done. The net impact of these megatrends, combined with macroeconomic realities such as the low-interest rate environment in the decade ahead, should fundamentally reconfigure the banking industry.
For instance, banks’ IT departments have used agile practices successfully for software development and testing. But agile methods should now be integrated into business operations. While cultural and other factors may make it more challenging, implementing these changes can result in material outcomes. It has to be seen as a continuous process improvement, leading to competitive differentiation.
Until now, cloud migration efforts were predominantly focused on cost reduction, modernizing the technology stack, and more recently, virtualizing the workforce. But the real promise of cloud may lie in enabling banks to reimagine business models, foster agility, achieve scale, drive innovation, and transform customer experience. Moreover, transitioning to cloud-native, API-driven core systems could help bank leaders radically rethink product design, as neobanks and bigtechs have done. Indeed, our respondents indicate spending on cloud will increase over the next year.
These enhancements may not only cover digital-only channels but also in-branch experiences, such as self-service digital kiosks/interfaces. Nearly one-half of respondents indicate their institutions are considering live interactions with bank staff via ATMs, and installing self-service, contactless touchscreens. In addition, banks could incorporate artificial intelligence -based banking assistants and sensor-based augmented reality and virtual reality experiences.