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Elon Musk stoked the automotive companies to have futuristic visions and actions. Now, automakers are rapidly testing and producing battery-powered vehicles. In the anticipation of mass 5G adoption, vehicle manufacturers are developing software operated driverless automotive models using V2X communication. These companies would not only sustain their business’ future but also create new opportunities for other businesses. And Elon Musk got the ball rolling for bringing in disruption in the auto industry. While the banking industry is still far short of finding the Elon Musk of the BFSI industry?
In recent years, significant investments in digitalization have steered the banking companies on the road toward modernization. While these actions resulted in moderate profitability and resilience, they cannot warrant future growth. Heightened customer expectations require banks to differentiate their products and services to stay ahead of their competition. Until 2021, only 65 out of 599 companies were found to have outperformed and made a considerable contribution to the gains in market capitalization.
Causing disruption will require finance companies to reevaluate their strategies. A good place to begin would be to take a few pages out of the automakers’ playbooks. Following are key automotive industry strategies that can guide banks toward a sustainable and profitable future:
Purpose that truly counts
Consumers are more discerning than ever. They get behind greater purposes and show loyalty when there is a feeling of mutually ‘saving humanity’ with the brand. For instance, Tesla’s Elon Musk has an alternative plan of colonizing Mars in case we are unable to stop the population collapse.
Banks and financial institutions can take a similar approach to attract potential customers. Purpose driven banking is gaining traction in the past few years. McKinsey believes that the purpose that resonates with your customer has the potential to generate a collective revenue of USD 300 billion. The objective is to ensure your purpose is clear and well-articulated. Only then, customers will feel connected enough to adopt it. For example, building a greener planet with deposit accounts that enable investments in sustainable initiatives or a credit card that rewards eco-friendly purchases can make customers feel good about spending on these initiatives and enable companies to support the government’s sustainable development goals.
Want more customers? Know their journey better
Have you ever wondered that if Volkswagen had not introduced the Type 1 Beetle, how would the masses be traveling? Probably by horse-drawn carriages. Or another automaker would have seized the opportunity to attract more consumers by building an affordable car. More recently, the drive to launch EVs has prompted increased investments in building charging stations in the race to capitalize on the emerging opportunity. Evidently, companies have realized that the competitive business environment considers every delay as a lost opportunity.
For banks as well, customer behavior analysis and personalization thereafter have become critical for staying relevant amidst the growing competition. A Capco survey of 2021 reported that 72 percent of respondents considered personalization in banking as ‘highly important’. Future-forward banks are launching personalized services through apps that leverage cloud, big data analytics, and machine learning technologies. These apps collect data about the customers’ habits in real time and analyze their spending behavior. The AI-powered apps’ algorithms can automate responses to engage with each customer with relevant messages based on their spending habits and search patterns.
Cosmetic changes are not enough
Facelifts and relaunch of old products fail to attract consumers anymore. Consumers need products and services reinvented to suit their needs and not just renovated with what has been in use for years. Throughout the past century, the automotive industry’s innovations – such as dual-clutch transmission, advanced turbocharging, rearview mirror, GPS satellite navigation, and the recent upgradeable cars – prove that providing more customer-focused features to the product has more value than introducing a new color palette or logo.
For the financial industry, the tremendous adoption of online financial instruments, such as Amazon Pay and Paypal are compelling traditional banks to rethink future operational models. Along with introducing online conveniences to customers, the companies must also digitalize their back-office operations for greater automation opportunities. The focus should be on simplifying employee workflows, facilitating channel switching, and improving response times.
Develop an innovation mindset at the core
Musk had once said that his long-term vision is to develop Tesla’s strength in factory innovation rather than on a car. He proved it by installing Gigapress, the die casting machine in their factory in Germany, for producing the EV chassis within minutes, with a lesser number of parts that require assembly, and at significantly reduced manufacturing cost. Engineers at GM similarly displayed their innovation prowess in developing the vaccine purifying machine in the 1950s and the Robonaut 2 for the International Space Station in the early 2000s.
The lesson to learn here is that the engineers did not leave a problem unanswered. Through brainstorming sessions and innovation spirit, they developed solutions to address the pressing challenges. This lesson could inspire banks to come up with innovative strategies to address their most pressing concerns, for instance, risk management. The rising number of cyberattacks, fraud incidents, and other digital crimes require the formulation of innovative strategies that can help secure customer data while enabling an inclusive and frictionless customer experience. The strategy necessitates a proactive approach for monitoring activities that is powered by an innovative and robust data architecture with machine learning technologies.
The future for BFSI companies is bright with the potential to grow at a rapid pace. The lessons from automakers can pave the road for developing successful strategies and having the right mindset to address challenges. At Xebia, we constantly strive to address our BFSI clients’ pressing challenges with innovative solutions that are powered by the latest technologies.