Banks are experiencing a gradual loss of their monopoly, due to the arrival of new players born from digital transformation. To face these new challenges, banks need to develop new strategies in order to compete with this developing market, says Professor Catherine Karyotis from NEOMA Business School.
The development of technology and the subsequent introduction of open banking systems, payment automation and instant payments has meant that there have been many upheavals within the banking community that require drastic transformations.
One of the biggest competitors for traditional banks are Neobanks – financial technology firms that offer internet-only services and lack physical branches. Neobanks appeal to consumers who don’t mind doing most of their money management through a mobile app.
But how can traditional banks compete with these direct banks that operate exclusively online?
“In order to contend with these new platforms, traditional banks must adapt in order to stand out and capitalize on the trusted relationships that have been established between them and their customers,” says Professor Karyotis.
Therefore, banks must focus more on their customers to continue offering an added value to them in order to have the edge on these digital players. It is about understanding consumers and thinking about their behaviour in order to respond to them in the best way possible.
“A new type of customer relationship needs to be established and the sources of value creation need to be revised to improve customer experience. To be customer-centric is to put the customer, and not the product offer, at the center of the company’s concerns.” says Professor Karyotis.
The traditional banks appeal is disappearing. They need to reinvent themselves and make innovations to their economic models and/or partnerships with the new entrants to emphasize their knowledge and skills that are built on trust. And to accomplish this, their employees must capitalize on their social skills too.