Banking Technology: On the Road to Hyper-Personalisation

Banking Technology

Interview with Jonathan Stallard, Senior Account Executive at Backbase 

In the brave new world of neobanks, the traditional high-street banks have some thinking to do. How do they remain relevant at a time when their customers are changing how they want to bank? Jonathan Stallard of banking technology firm Backbase gives us his perspective. 

It’s a pleasure to meet you, Mr Stallard. Thank you for taking the time. Could you please share with our readers how your interest in the banking industry began?   

I remember back as a child collecting the WWF savings stamps and completing the NatWest piggy banks (which I still have). Those memories do not go away; that was my first introduction to banking. If we fast-forward to today and how children (my own included) are now having their own virtual cards and don’t know what a branch even is, possibly not even an ATM, it makes me think how far it will now go in the next few years. The physical world is being replaced by virtual across the board, which brings opportunities, but not without a bumpy ride. To work in such a sector is highly rewarding and, of course, has its challenges, but driving change and making an impact on people’s lives through better financial wellness motivates me to always want to do more. Having been involved in the banking and software sector since I started my career back in the mid-2000s, I have seen a fair amount of change and innovation. The exciting thing now is that software, technology, and infrastructure are at a point where they can deliver change at the speed and quality that the industry needs.  

As a senior account executive at Backbase, you have a unique perspective on the banking industry. How would you describe the current state of the industry and the challenges it faces?  

Banking has seen several significant events since 2008, with many external factors affecting economies and placing a strain on the sector. The sector has always been overwhelmed with regulation and a level of inertia when it comes to innovation. However, the pivotal point came when neobanks started to really challenge the status quo a few years before the global pandemic.  

This led to an entirely new level of competition in the sector that focused on the client experience – with banks that could survive without a high street presence or legacy trust. When coupled with the COVID restrictions, this meant that banks had to rethink their service model and operational frameworks to ensure that they could still run through a challenging time. Looking back, this was largely a success.  

Digitisation happened in what felt like overnight. Change programmes around digitising processes and operations seemed to become the priority it had long wanted to be. If we fast-forward to now, branches are becoming a hot topic once again. The virtualisation of branch activities has remained post-pandemic and shows no signs of slowing. Most people now believe that banks should fit around their lives, not the other way around.  

The virtualisation of branch activities has remained post-pandemic and shows no signs of slowing. Most people now believe that banks should fit around their lives, not the other way around.

But this has created a dilemma. Over 5,000 branches have closed since 2015 in the UK, with at least 300 more to close this year – a scale we have never seen before. The impact remains unclear at this stage, but virtualising and automating could be taken too far. For now, it’s about finding the balance between human and digital interactions across a truly integrated channel. 

With the recent incidents involving well-established banks like Credit Suisse, how important is it for banks to reassess their strategies and adapt to the changing landscape?  

It’s absolutely critical. If you don’t evolve, then you will stagnate and fall behind. The writing was on the wall for Credit Suisse a while ago, although no one would have quite predicted the speed of the downfall.  

Top-tier banks have always struggled with changing at speed. I have worked on programmes that have run for over 12 months only to result in the bank deciding to stay with the legacy solution. There are many reasons for this but risk appetite is often a factor. The larger the bank, the less risk they will take, because it could have significant consequences if it doesn’t work. The larger banks spend lots of resources looking at strategy, yet the model rarely changes, which is why the likes of Monzo and Revolut have established themselves.  

It often feels as if no bank wants to be the first. Any tier-one bank could have developed this – much like we are seeing now with Chase Bank – but no bank did. Unfortunately, banks are increasingly becoming less important to the consumer, with the likes of Apple now offering loans.   

As we see the world of tech take exploratory steps into banking services, banks must rethink how they remain relevant. Customers have changed how they want to bank, and not just in retail but SME, private banking, and wealth management. Financial institutions need to find the balance between renovation vs reinvention. 

Neobanks are often viewed as disruptive players in the industry. How do their motivations and priorities differ from traditional banks, and what advantages do they have in attracting and retaining customers? 

One of the most important distinctions is that neobanks and tech firms are not focused on profit, looking instead at customer growth as their primary KPI. This means that they can outcompete the traditional banks on speed to execute and a relentless focus on the consumer journey.   

The neobanks now have a niche in retail, mainly as a secondary account for day-to-day spending. However, this is not a long-term strategy, as they are not going to make a profit on retail. Where they will make money is by connecting to the ecosystem, just as Starling Bank is doing, such as partnering with Pension Bee, for example. This comes back to one of the pillars of the fintech ecosystem: why build it when it already exists? The key is to build smart.  

Although neobanks are successfully drawing customers, the long-term customer plans are still a long way off. Let’s not forget that Revolut is still not a bank. It is slowly trying to become one but, until that point, it will be a secondary account only. The SVB collapse has acted as a reminder to stick to banks with a licence and, with the established banks now adapting their digital offerings to compete with the neobanks, it makes for an interesting time.  

Open banking and APIs have transformed the banking landscape. How can these technologies be leveraged to enhance the customer experience and foster loyalty? Are there any potential risks or concerns associated with their implementation?  

These technologies are complete game-changers. They allow companies to create a seamless experience much faster. If there is a company leading in a specific area or technology, banks have realised they can partner with them instead of trying to rebuild and compete with what already exists.  

This has created a much richer supply chain in banking. For example, Codat allows SMEs to connect their company accounts to their banks to enrich the cash-flow forecasting and therefore provide cross-selling of products that allow clients to better manage and grow their business.   

The more data a bank has about you, the more they can tailor your experience – whether that’s useful products or support with financial wellness. This level of hyper-personalisation is becoming a key part of creating loyalty and now we’re seeing banks play more of a non-banking role in society.  

What are some practical steps that banks can take to shift their focus towards consumer customers and prioritise their retention? Are there any successful strategies or best practices that you would recommend? 

Banks need to understand the important role they can play in their customers’ lives, making sure they support them when they need it most. That’s how to create sticky relationships.

To improve retention, banks first need to focus on what their customers are doing and why they like using that bank. For example, banks shouldn’t be thinking in terms of what features we offer across web / mobile / branch. They shouldn’t be thought of in isolation and banks need to think about the integrated experience when they deliver journeys, be that digital, physical, or hybrid.  

Banks need to listen to their customers and understand what they are looking for to find areas of improvement. For example, retail banks can learn a lot from private banks, whose service levels are second to none. They know their clients in depth and, with the data available to banks, retail clients should be no different. It’s perfectly possible to tailor products and services to ensure they empower their customers’ goals.  

Banks need to understand the important role they can play in their customers’ lives, making sure they support them when they need it most. That’s how to create sticky relationships.  

Backbase specialises in digital banking solutions. How can technology and innovation help traditional banks address the challenges they face in retaining customers and staying competitive? 

Even though we have seen more account switching in the last 12 months than ever before, banks still don’t seem to think it’s a threat.   

Banks often offer switching incentives or high interest rates to attract customers, which ultimately increases the cost of acquisition. But this masks the underlying issues with the end-to-end journey and, crucially, means the relationship becomes product-led instead of being based on any brand loyalty.  

Banks need to address this problem and invest in their underlying technology to ensure they can offer a fully integrated, seamless experience. The first step is ensuring that the business is fully engaged with technology. While this has been happening in banks for several years now – with horizontal value streams that start with business value – many are still just starting on this journey.  

To stay competitive banks must be able to up-sell and cross-sell in a hyper-personalised way to the customer. Using the vast data they have available and enriching this through open banking, they can provide hyper-personalised services and products that will ensure long-term relationships and increase retention.  

Generative AI models like ChatGPT can generate human-like responses, but they also have limitations. What are some of the challenges or drawbacks associated with using ChatGPT in banking contexts, and how can banks address or mitigate these concerns?  

AI is talked about regularly. It’s a topic that comes up at the exec table. Most banks remain sceptical about its uses but don’t want to be left behind. 

Personally, I am not a fan of it. We are moving too far into automation. AI models like ChatGPT are useful concepts and have their part to play, but they are only as good as the data that powers them. They are being applied to thematic investing and seeing how it can help sharpen prospecting of clients, but this is more applicable to wealth management. 

Of course, AI has its uses for navigating vast data sets and looking at trends and pulling MI reports together, etc. But it must be used delicately from a user-experience perspective. Chatbots are becoming more common in digital apps and they have a place, but if you are using them to make product offers and cross-sell to consumers, it could cause problems. You need to be careful that the complete picture is understood.  

Ultimately, banks can use AI to improve decision-making processes and streamline operations. No doubt it will accelerate smart decisioning, but it requires careful application in the financial markets. 

Looking ahead, what trends or developments do you anticipate in the banking industry, and how should banks adapt their strategies to remain resilient and customer-centric in the face of these changes?  

We have a backdrop of economic instability and costs-of-living challenges that will drive the banking agenda. Customers need support from their banks more than ever, as default loan payments and monthly arrears will increase. Banks need to step up and take more responsibility to support their customers. This means having a full 360-degree view of their financial position, supporting their financial well-being and making sure that products and services are aligned with this model. Some banks are doing this today, many are part way on their journey, and others are far behind the curve. Investing in the right orchestration layer to service the client lifecycle from prospects to clients and employees is critical in delivering seamless digital experiences across an integrated channel. With better technology and software readily available, the opportunity to reduce costs to acquire and service clients has never been greater. Banks need to evolve faster than their customers and their competition, which means having a continuous delivery model and a 100 per cent focus on customer- and employee-centricity. A key battleground will be the renovated branch model. How this will pan out is not clear, but reducing the face time with clients and shifting to a fully digital offering will not support all customer demographics, which will remain a key grey area for neobanks and challenger banks to focus on. One thing that is for certain is that banking is evolving at a rate never seen before and banks must be matching that pace or else the consumer relationship will move to the tech firms. 

Executive profile

Jonathan Stallard

Jonathan Stallard is senior account executive at Backbase. He has spent the last 15 years working within the global financial services sector, working with senior management on various digital transformation initiatives ranging from software development and delivery to advising on how to leverage the market-leading fintech and regtech software. He is currently working with financial institutions on their digital strategy and advising on how they can best optimise their digital engagement channels, building a customer-first, outside-in approach for an ever-changing, digitally driven banking ecosystem. 

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.