The Banking Experience Reimagined
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The Banking Experience
Reimagined
1
To compete in a digital world at a time Business of Experience. It entails the rewiring commodities and seek out the lowest-cost
when global events have accelerated of the customer-facing functions of the providers rather than trusted advisors for
the shift in customer expectations and organization: marketing, commerce, sales their financial health.
habits, banks must focus on personal and and service. The Business of Experience is
emotional connections with customers to an approach that allows organizations to COVID-19 has accelerated change in
strengthen their trust and grow. become customer-obsessed and to reignite banking, and customer behavior and
growth. demands have shifted rapidly. Digital
Banking customers are re-examining their engagement during the pandemic
relationship with money, their financial Here, we identify four opportunity areas for increased—50 percent of consumers now
resilience and their relationships with reinventing the banking experience. Each is interact with their bank through a mobile app
institutions after a year in which global significant and important. Combined, they or website at least once a week, compared
events massively accelerated change and represent a reimagination of banking as we with just 32 percent two years ago.1 Branch
shifted customer expectations and habits. know it. transactions have significantly reduced.
Today, businesses, society and individuals 1. Credit Where It’s Due All of this has forced those who have been
need banks to step forward as full partners 2. Pay It Forward: Embracing The reluctant to digitize—customers and banks
and align purpose with profit. This presents Shifting Payments Paradigm alike—to embrace digital for its convenience,
banks with an opportunity to emerge from 3. Banking with Purpose: Values-Based availability and accessibility.
a global crisis as heroes, or at least valued Growth
partners—a far cry from their personas 4. Banking On Personality: Investing In Now, a year on, with customer behavior
during the 2008 global recession. Empathy shifted, new digital-first habits established,
and new ways of working adopted, things
Momentum for change has been building for
years, but the conditions are now perfect for
The waves will not revert to pre-pandemic norms. The
rapid uptake of digital wallets and non-
an ambitious and fundamental rewriting of of change cash payment over the past 12 months, for
old rules. Banks’ compass for success should example, has resulted in new ways of paying
orient around how their customers and Banking today is a macro-environment that will remain popular well into the future
employees are experiencing their brand. where customer and employee expectations as new payment paradigms emerge.
are rising even faster than profits. Many
Now is the time for us to step up and banks, which have accelerated their digital Today, banks must find more empathetic,
reimagine the banking experience. This transformation, removing the human touch personalized and engaging ways of
requires organizing the whole business from many interactions, are now facing the operating and servicing customers.
around the delivery of exceptional danger that customers will perceive them as
experiences, which is what we call the
2
To sustain relevance and profit, they must segments and how they use money,
reconnect meaningfully with the minds, however, banks can develop new credit
hearts and wallets of customers. They can products and risk frameworks that can
begin by reimagining how their purpose and responsibly provide more people access
personality come to life in their products, to credit and, in doing so, reimagine these
services and operating models—especially customers’ credit experiences.
their credit and payment products.
Banks have also not always been in the
forefront of reducing the friction and waste
Time to rethink of time that many people experience around
payments. They have not provided sufficient
credit and payments new propositions in the payments domain to
show a commitment to providing new value
to their customers—whether it be the end
Obtaining traditional credit can be a draining,
consumers or the merchants who depend on
confusing process for customers. Even in
payments for their commercial health.
segments with all the necessary financial
history and means to obtain credit (those
Digital disruptors and non-banks have
who anticipate a “yes”), customers can face
been actively innovating with new formats
challenges, including:
and propositions, going after payment
“replacement revenue” in the form of value-
• Antiquated, confusing application and
added services and experiences. However,
decisioning processes
no single player in the ecosystem of issuers,
• Complicated terms and conditions
wallet providers, payment facilitators and
• Burdensome duplicative documentation
retailers has delivered a holistic solution for
• Unclear credit criteria
enabling a frictionless connected-commerce
• “One-size-fits-all” products
experience. This is an opportunity for banks
to step in and provide this kind of experience
For mid-market borrowers with responsible
for consumers, small businesses and
financial behavior but limited credit history,
merchants alike.
or those who are adversely affected by
risk models, rejection helps shape their
perception that traditional banks are not
their ally. By deeply understanding these
3
Purpose
and personality
Banks that aim to be more than a utility need interaction, internal and external, and be
to face up to some challenging facts: sustained over time. To be experienced,
it should be woven into the core of a
• While money is essential and powers company’s business model and operations.
people’s lifestyles, people rarely find
banking and banks relevant, let alone In an increasingly digital world, where
exciting. people are left seeking more empathetic,
• Those who stand for nothing increasingly human connections, banks have become
stand alone. functionally complete yet emotionally
detached. The resulting vicious cycle—where
Banks need to connect more authentically banks are seen as largely homogenous,
and emotionally with the communities offering similar products and services—
and individuals they serve; functional leaves them heading into a commodity and
competence isn’t enough to drive human margin trap.
connection and loyalty.
Banks have a unique opportunity to align
Yet banks’ traditional reticence about many value and values, by focusing on consumers’
issues has made it hard for customers and and communities’ financial well-being in a
employees to tell if their bank really cares win-win relationship that delivers long-term
about or stands for anything. This matters, trust, relevance and profits.
as across every sector, the pressure is on for
all organizations to take a stand on topics Our opportunity areas highlight where banks
ranging from the environment to social can reinvent the banking experience for the
justice, and to ensure their operations benefit next era.
all stakeholders, not just shareholders.
Purpose should not merely be claimed,
however. It should be experienced. To feel
authentic, purpose should pervade every
4
Experience Reimagination
Banking - Credit Where It’s Due
01
Credit Where It’s Due
Banks are falling short when In a world in which customer expectations
of having their needs meet instantly are
it comes to meeting customer constantly rising, the credit experiences
expectations around product provided by most banks are falling
desperately short.
variety and accessibility. By
addressing these needs, banks Klarna and Affirm have set the standard for
streamlining short-term credit in the form
can reimagine their credit of “buy now, pay later” loans. Yet most
products, models and corporate legacy banks find themselves stuck with
culture to deliver the next- outdated data and risk models, and credit
propositions and products that don’t align
generation credit experience. with what people need and expect.
5
Experience Reimagination
Banking - Credit Where It’s Due
In short, the credit experience is In the US alone, 45 million people are Slowly but surely these segments are
antiquated. And for customers, obtaining considered “credit invisible.”1 This means beginning to attract the attention of
credit—especially for homes, autos they lack enough information to generate new entrants and incumbents alike. The
or businesses—can be a draining and a FICO score, which is required to obtain foundation is in place for a fundamental
confusing process. Even in credit credit. Globally, meanwhile, roughly 1.7 shift of power away from banks, which
segments which have all the necessary billion adults with a net worth of $10,000 were previously the only option for this
financial history and means, making to $100,000—dubbed “the neglected segment, and toward consumers, who are
a “yes” likely, customers face many middle”—lack financial products and now able to find dignified financing from
challenges. services that adequately meet their progressive institutions like Capital One or
needs.2 fintech disrupters like Kabbage.
Terms and conditions are often difficult
to understand. The process can be drawn These neglected-middle3 customers—
out with seemingly endless requests for also known as “thin-file” or “no-file”
additional documents. There are lengthy customers—are not simply high-cost, high-
processing times, with little indication of risk credit seekers. Rather, they represent a
when a decision will be rendered. Credit pool of diverse potential borrowers, many
decisions are made by faceless, nameless of whom exhibit financially responsible
individuals. And despite the needs of each behaviors.
borrower being unique in a number of
relevant ways, credit products are often This group includes, among others,
one-size-fits-all. immigrants and foreign workers who often
lack the local financial data needed to
Further, a substantial portion of the obtain credit4, women5, and Centennials—
population is overlooked by traditional the generation born after 1997 who have
lenders—despite the fact they have sound not yet developed a credit history.
money habits.
The credit needs of these segments are
For a variety of reasons, these are varied yet vast—they encompass personal
individuals and small business owners who credit cards, unsecured personal loans,
may possess a bank account but have a home financing, auto financing, point-
thin or non-existent credit file. Many adults of-sale financing and other short-term
are unable to obtain personal credit due and long-term instruments. Small- and
to a lack of a robust banking and credit medium-sized businesses (SMBs) face
history. similar challenges in acquiring financing.
6
Experience Reimagination
Banking - Credit Where It’s Due
Financial institutions should also take to
heart the idea that serving these segments
can be good for both business and society.
Consider, for example, the US Paycheck
Protection Program (PPP) which, under
the new administration, is likely to focus
more on businesses led by women and
minorities. Banks that focus on them now
will be positioned to win in the future.
To close the gaps in credit provision, what
is needed is nothing less than a rethink
of banks’ value proposition as well as
the end-to-end customer journey—from
application to the decisioning process to
the reinforcement of loyalty. Information gathered by lenders will be
even more valuable over the long term. As
Inspiration:
Several promising developments in credit they use greater quantities and varieties
innovation—the use of alternative data, of data—spurred by API infrastructures,
Braviant Holdings looks beyond credit
new risk analysis techniques and credit regulatory evolution and shifting
scores to provide lending options to those
products, and greater automation—can, consumer sentiments—lenders’ ability to
who might otherwise be shut out.6 Using
and have already started to, provide the find new areas of growth will only increase.
automation, machine learning and alternative
cornerstone for the solution. UK-based
data sources, like cash flow, the lender has
OakNorth Bank, for example, leverages Developing solutions for thin-file and no-
built models to predict both willingness and
alternative data to keep non-performing file customers is possible. Lessons learned
ability to pay, providing their customers a
loans at an incredible rate: just two from such pursuits may ultimately provide
path to better credit scores.
defaults in four years of lending a net of new approaches for traditional audiences
€3 billion ($3.6 billion) to individuals and as well, as we pivot to the next-generation
SMBs. credit experience.
7
Experience Reimagination
Banking - Credit Where It’s Due
Challenge
Building a next-generation credit experience, Shift your organizational mindset and Leverage technology and existing and
especially for neglected segments, requires encourage new behaviors that leverage alternative data to reinvent credit models
thinking about new products, services and new tools and processes that extend the and processes
underwriting decision-making to leverage reach of credit.
existing and alternative data and new • How can we ensure the scale and
technologies. The challenge can be broken • How can we empower employees to efficiency of new credit models, and
down into three parts: match the creativity of the new tools and apply them to traditional segments?
processes? • How can we leverage open banking
Understand neglected segments, • How can we train them and build the as well as new, robust data sources to
scrutinize their experience of seeking skills they need to make better credit update risk models, boost predictiveness
credit, and use the findings to create new decisions? and improve services?
products and services. • How can we set appropriate incentives
for employees to think differently about
• What does human-centered research tell credit?
us about the traits, behaviors and pain
points of neglected segments?
• How can we develop new products,
services and models for underserved
borrower segments?
• How can we create seamless experiences
that are transparent, inclusive and
convenient?
8
Experience Reimagination
Banking - Credit Where It’s Due
Solution
To address this challenge and pave the way
to next-generation credit, banks can:
1. Create new credit-related
products and services
Banks need to acquire both a qualitative and Amazon Lending, for example, is described
quantitative understanding of underserved as offering “working capital loans designed
borrower segments to design new credit with your business needs in mind.”
products that reduce, transfer or share risk Meanwhile Prosper, a fintech that connects
and deliver a better customer experience. people looking to borrow money with
individuals and institutions looking to invest
By identifying and understanding customers’ in consumer credit, has facilitated more than
beliefs and behavior patterns relating to $12 billion in loans to more than 770,000
money, banks can use their new products people.7
and services to more effectively establish
credit profiles for underserved segments. Even “buy now, pay later” (BNPL)
arrangements—such as those championed
From special-purpose loans that customers by online lenders like Klarna—should
truly value, for needs such as medical be considered when factoring in credit
emergencies, auto emergencies or vacation decisions. Currently, many BNPL providers
planning, to supply-chain loans attached do not help customers build credit history.
to small sales for businesses, the range of Yet the potential of using this information
options is limited only by the creativity of could be differentiating for traditional players
solutions. aiming to attract new customer groups while
managing risk.
9
Experience Reimagination
Banking - Credit Where It’s Due
2. Shift the
decisioning mindset
By implementing a more informed decision- about whether it is possible to give
making process, lenders can transition credit to exploring ways to make it
from a hard “yes or no” decision based on possible. Building a culture of ideation,
a traditional scoring mechanism to a more experimentation and learning will help
nuanced “yes, but/no, but” framework. identify behaviors that can be replicated
and scaled across the organization.
Banks should encourage employees to adopt
a new mindset, creating a corporate culture • Train employees, building new skills that
that facilitates a new customer experience, will provide the tool set for them to ideate
after the appropriate tools are in place. and operate differently. Skills such as
design thinking will allow employees to
From credit decision makers to relationship gain a deep understanding of customer
managers—and, even, chatbot coders—the needs and mindsets, and design and
principle of supporting applicants through execute new experiences based on
the whole process with a mindset of “yes” empathy.
will require creativity, flexibility and other
skills that help transition from a rigid credit • Set incentives to reward innovation,
process to a new credit experience that and incorporate performance metrics
increases new-borrower conversion and that measure the progress towards an
retention. “always yes” mindset. Explore new ways
of encouraging the search for customer
This can be achieved in many ways: needs and pain points in the credit
process and how to solve them.
• Encourage creative thinking by loan
officers, relationship managers and
other employees to challenge current
paradigms and shift from thinking
10Experience Reimagination
Banking - Credit Where It’s Due
3. Rethink credit
decisioning frameworks to
increase reach and access
Lenders need to leverage years of data • Updating existing risk models through
aggregation differently. This will reveal alternative scoring methods to
patterns that fundamentally change the complement traditional credit decisions.
structure and accuracy of risk models for In a reality where historical information—
both underserved segments and traditional the main assumption of current risk
customers. models—is failing to predict the future,
many banks are finding other types of
Extracting meaningful information with a predictors, such as social or lifestyle data,
different perspective can expand the reach to be increasingly relevant.9
of credit and allow access to segments that
currently are not served. • Leveraging bias testing frameworks to
understand where new or future risk
This can be done through a variety of means: models may unnecessarily and adversely
affect protected groups. These methods
• More widespread use of new analytical can leverage qualitative and empirical
techniques—such as association tests dimensions including biases in trust,
based on natural language processing, fairness, model, data or operations,
or other empirical testing frameworks— revealing practical opportunities to
to extract meaningful information from expand service.
existing and new data sources.
• Enriching scoring through data
augmentation, given consumers’ rapidly
expanding options to access credit. This
will provide the robust models necessary
to play in a world where customers will
have more and more credit alternatives.8
11Experience Reimagination
Banking - Credit Where It’s Due
4. Reinvent credit Providing financial education to potential
customers is a proven way to bolster
processes to ensure relationships and improve creditworthiness.
By leveraging digital channels to deliver
scale and efficiency education at scale, banks have an opportunity
to influence behavior, convert new borrowers
and create new data stream.10
Automated digital workflows with built-in
controls can enable the provision of credit to
Inspiration:
underserved segments at scale, with a cost to
serve that is attractive to incumbents. These
Mosabi is a digital platform which blends
workflows can be created through:
fintech and edtech to provide emerging-
market citizens with the skills and services to
• Straight-through processing design
better manage their businesses and money.
principles and segmentation of credit lines
Rather than viewing financial education as
(by type or amount).
a nice-to-have that is offered only after the
• Intelligent automation that enables
provision of credit, Mosabi flips this around.
automated processing and human
Its solution uses data generated by e-learning
intervention for exceptions-handling only.
to drive decisions for financial institutions
and help match potential customers with the
We have identified four enablers that can be
financial products and services they need.11
harnessed to achieve this:
Deliver financial education to support
business development, data collection
and the communities you are looking to
serve.
In the current COVID-19 environment, it
has become clear that technology can
play a major role in the democratization of
education. The case for financial education
and digital literacy will be no different.
12Experience Reimagination
Banking - Credit Where It’s Due
Partner with external data providers to an individual or business is a good credit risk.
boost predictiveness. Inspiration: Social data from social networks, internet
service providers and telecommunications
Access to alternative data will become The Australian government recently companies have the potential to be analyzed
essential to the value chain of next-generation enabled real-time economic data monitoring and used to create the 21st century version of
credit products. across the country to visualize how the this risk assessment practice, quantifying the
economy is performing and take action qualitative elements of risk analysis that have
The expansion of APIs has enabled partners in areas that need immediate support.12 It thus far been elusive.
to gain an early foothold into valuable pools worked closely with the financial sector to
of alternative data—Experian leveraging Plaid, help financial institutions use this data to As customers become more comfortable with
for example. This is just the beginning; we assess and respond appropriately to the data sharing between third parties and scaled
are likely to witness an expansion of such needs of SMEs nationwide. community-based lending becomes better
partnerships in the near future, such as: documented, direct or partnership offerings
are on the horizon.
• Telecommunications providers (for Turn to social.
example, data about financial transactions Change the corporate culture.
done via mobile phone serves as an As social media continues to maintain its hold
indicator of cash flow). on our daily lives and interactions, lending Along with a change in bank employees’
• Utilities (whether and how often bills are instruments will need to account for and mindset, new behaviors and values will be key
paid, as a proxy for willingness and ability integrate social data in a meaningful way. to driving and sustaining the changes that will
to repay). In consumer insurance, Friendsurance has shape an improved credit experience.
• Wholesale suppliers (payment histories for long shown the efficacy of socially structured
small businesses, as a proxy for revenue financial instruments at scale. Initiatives that empower employees, build
estimation). skills that enable creative thinking, and
• Retailers (data about customer purchases, By creating pooled insurance deductibles strengthen employees’ ability to work with
which can help to estimate income levels). among friends, fraud can be substantially technology, will be key to the delivery and
• Government agencies (demographic and reduced. Similarly, lending circles have long scaling of a new credit experience. By
census data, which can indicate default leveraged the notion that social capital can nurturing a corporate culture that is more
risk). build credit histories among those who would empathetic, lenders will ensure that, once
• Financial institutions’ own, previously otherwise struggle to pay back loans. new tools and methods are in place, credit is
overlooked data (paper records that have given where it’s due.
not been digitized). Historically, community lenders have taken
a similar approach, knocking on proverbial
doors to understand whether peers believe
13Experience Reimagination
Banking - Credit Where It’s Due
Inspiration: Practices such as instant credit decisions,
data augmentation and shared-responsibility
Nubank, Brazil’s biggest digital bank, has a or socially-backed loans have the potential
culture articulated by mission statements to improve financial inclusion and bottom
such as “We are hungry and challenge the lines. But they also have the potential to be
status quo” and “We want our customers misused.
to love us fanatically.”13 The bank, which
grew from 5.9 million clients in late 2018 to Traditional lenders will need to tread a fine
25 million by June 2020, is recognized for line between making it easy to get credit
empowering all employees to be customer- and too easy to get into debt; between using
focused—to consider the customer from data to make better decisions and using
product development all the way through to information that’s too private; and between
the provision of customer services. leveraging the community and putting the
community at risk.
By accounting for these risks and starting
A Final Thought with underserved borrower segments,
lenders can achieve growth and develop
a proving ground for alternative data and
Lenders of the future have an opportunity risk models. Using this experience, they
to deliver a seamless credit experience in can apply their learnings more broadly to
which customers feel able to put their best establish efficient next-generation credit
foot forward without any missteps. And they models.
can be confident of having the insights they
need since customers have shown more
willingness to share the alternative data that
will drive this transition.14
Caution will be needed, however, as
all involved will need to contribute to a
responsible future.
14Experience Reimagination
Banking - Pay It Forward
02
Pay It Forward: Embracing
the Shifting Payments Paradigm
A new payments paradigm is Payments are evolving to the point where
a new paradigm is emerging. Payments
emerging where payment is used to be the final obstacle to taking
no longer the final obstacle to possession of a product or service;
obtaining an item purchase. now they are becoming an enabler
of a seamless, connected commerce
Rather, it’s an enabler of a experience.
more integrated commerce
experience in which customers Traditional payment form factors such
as cash, check or plastic are becoming
themselves become part of the obsolete. Payment transactions are
payments infrastructure. To increasingly independent of a physical
stay relevant, banks must drive checkout counter or online checkout
page, and money is increasingly not the
this shift and adapt commerce medium of exchange at all—instead, data
experiences accordingly. is becoming the key instrument of trade
in a modern barter economy.
15Experience Reimagination
Banking - Pay It Forward
In the future, consumers themselves If banks are to continue to play a valuable Simultaneously, banks should use
will be the form factor—completing and central role in the payments domain, data in smart ways to surface insights
a transaction with the blink of an eye they should focus on ruthlessly removing and knowledge, and partner with the
or the touch of a finger, so a payment all unnecessary friction and automating consumer to nudge them into smarter
may occur at almost the same time a the mundane and repetitive experiences and better spending behaviors that
purchase is desired. Payment options that waste time and mental bandwidth. allow them to control and optimize a
will be flexible, simple and tailored to the personalized commerce experience.
transaction at hand.
Imagine a time when a longstanding
relationship with a bank will not be
needed to ensure access to financing
because the consumer will be in control
and able to select the financial institution
of their choice on a per transaction
basis. Banks are vying for the consumer’s
attention at point of purchase, but the
time and place where payments occur
are rapidly shifting, as retailers and
brands proactively send products to
customers to try out and sample before a
payment occurs.
The payments infrastructure will no
longer be just a cumbersome conduit
for payment authentication. Instead,
it will facilitate greater transparency
and traceability through a frictionless
commerce experience.
16Experience Reimagination
Banking - Pay It Forward
Challenge
A seamless and connected commerce able to leverage and integrate the many new
experience will be a reality in the near innovations to deliver a holistic solution that
future as digital innovations keep coming, enables a connected commerce experience.
heightening consumers’ perceptions around
the art of the possible and driving the Solution
expectation that all things digital should be
seamless and connected. Consumers are clamoring for a fluid,
seamless and connected commerce
For now, however, the payments experience and will gravitate to businesses
infrastructure largely consists of fragmented that enable this future state. New entrants
legacy systems designed for plastic cards are harnessing technologies to meet this
and real-time bank payments, resulting in demand, but their advancements are
a lot of friction. Everyday annoyances that singular, independent solutions that simply
have plagued payments for decades are still lay the foundation.
prevalent, and some of the new innovations
introduced have unintended consequences. The opportunity exists for any player in the
payments ecosystem to lead the charge
Subscription plans with automatic recurring in assembling these building blocks into a
payments provide welcome respite from cohesive, frictionless, integrated commerce
going through the motions of paying the experience.
same bill every month, for example. Yet
keeping track of all instances where the If banks want to be the leaders driving this
card is on file, being aware of how much is change, they must step up and embrace the
actually being spent on recurring payments new paradigm. If they don’t and do nothing,
and making changes—such as cancelling the they will inevitably be pushed aside—forced
service—remains an onerous exercise. to watch from the sidelines as non-banks
capitalize on what the future has to offer.
No single player in the payments
ecosystem—issuing banks, processors, There are four enablers to reduce friction
acquirers, networks, wallet providers, and, in turn, create a more fluid, seamless,
payment facilitators and retailers—has been and connected commerce experience.
17Experience Reimagination
Banking - Pay It Forward
1. Liberate Point-of-sale
Typically, point-of-sale is a prescribed Opportunity lies in removing the physical personalize the in-store experience and
moment at the end of the commerce checkout counter or online checkout page deepen the relationship with the customer.
journey. Increasingly, point-of-sale will occur by using handheld devices and AI-enabled This reduces the risk of customers leaving a
before or during the shopping journey—with sensors and simplifying online checkout to handful of items behind and exiting without
or without a store associate and regardless one click. making a purchase because the checkout
of the device they are using to shop. line is too long.
To make the shopping experience more fluid,
A fixed physical checkout area can create some retailers provide handheld point-of-sale
long lines and, like a digital checkout, devices so that shoppers can register their Inspiration:
introduces a moment for consumers to leave purchases as they fill their basket. Apart from
the store before making their final purchase. eliminating queueing, this has the advantage Gap began to roll out handheld devices to
Both interrupt the shopping experience of minimizing any time lag between the its in-store sales associates in 2018 to better
by establishing a gate or barrier to taking decision to purchase and the actual payment serve customers not just at checkout but
possession of a product or receiving a transaction. with better information, such as price checks
service. and inventory availability.1
Equipping store associates with point-of-
sale devices allows the retailer to further
18Experience Reimagination
Banking - Pay It Forward
Where a self-service shopping experience Some online retailers have been able to
is preferred, some retailers have begun to simplify the checkout to a mere one-click
integrate payments into the entry-point of process by pushing the payment transaction
the store. This has the benefit of giving the into the background. In-app purchases
retailer an introduction to its customer early are as simple as a fingerprint, relying on
in the commerce experience, opening an auto-fill integrations for the shipping and
opportunity to activate loyalty programs or payment credential information stored on
personalized recommendations before the the shopper’s phone. Linked devices such as
moment of payment. e-readers or connected cards require only a
one-time set-up for the first payment.
Some grocery stores have in-aisle scanners
that also dispense digital coupons. Other Banks should consider ways to support
“smart” stores enabled by AI sensors and retailers, helping to drive the evolution of
cameras are combining the payment and the seamless checkout rather than scrambling to
shopping experience to eliminate the need keep up.
to scan items at the checkout.
Inspiration: Inspiration:
Amazon offers “Just Walk Out Technology” Amazon’s Kindle e-reader automatically
to retailers to enable them to provide the enables one-click ordering after the payment
Amazon Go store concept in their own method and shipping address have been
locations. It also provides “Dash Carts” with added during the first order. Future orders
AI and sensors installed in the shopping cart, are then placed merely by clicking “Buy
to provide the same experience without the now with 1-Click” on any product page.
retailer needing to modify its store.2 The order is then automatically charged to
the payment method and shipped to the
address associated with the initial once-click
settings.3
19Experience Reimagination
Banking - Pay It Forward
2. Provide Diverse
and Instantaneous Inspiration:
Financing Options Affirm provides consumers with immediate, American Express provides an alternative
transparent installment loans. This is not a payment option at point-of-sale by allowing
new credit option—loans must be repaid in customers enrolled in Membership Rewards
A good place to start connecting the installments over a set period of time, with to use accumulated points to instantly
commerce experience is by providing all terms outlined and agreed to upfront at pay for purchases when checking out at
a variety of immediate credit options— the point-of-sale. But by being transparent participating retailers. To date, Amex has
installment payments, for example—to ahead of the purchase about exactly what partnered with 14 retailers.5 On average, the
consumers when they want and need them, customers will pay each month, Affirm has value per point is approximately $0.70, but
instead of a credit line disassociated from created an experience that has no surprises.4 depends on the arrangement with each
the purchase. retailer.
Whether online or in-store, a consumer no
longer needs to have a credit card at the
ready. Nor do consumers have to apply
for credit long before they have a need.
A number of retailers, by partnering with
fintechs or e-commerce platforms like
Shopify are able to extend instant credit to
shoppers, even in some instances sending
products to customers without first securing
full payment.
Developing and offering holistic financing
options that go beyond credit and debit
cards is a good way for banks to avoid
disintermediation.
20Experience Reimagination
Banking - Pay It Forward
3. Eliminate the Need
to Present Traditional
Payment Credentials
The use of on-file payment credentials A single authenticated on-file payment
in-app, online or in-store enhances the credential can affect payment to multiple
commerce experience by making payments online and brick-and-mortar retailers across
seamless after the credentials have been different payment channels and to different
provided for the first time. Specifically, on-file physical locations. All relevant purchase
payment credentials help enable recurring information is stored in one place and
payments for subscription services or for payment happens in the background as a
buy-now-pay-later financing options. seamless response to the customer’s desire
to make a purchase.
For consumers, on-file payment credentials
allow the payment to fade into the An unintended consequence of a frictionless
background—an important component experience is invisible or unnoticed fraud. As
of a convenient payment experience. For the number of stored payment credentials
example, being able to quickly exit a taxi at increases, security and authentication
the airport without having to think about become ever more important.
the payment reassures the consumer that
nothing will hinder the mad dash to the To ensure that a seamless payment does not
airport security line. Similarly, eliminating compromise the security of the transaction,
the mundane task of actively paying bills by banks should spearhead the development
ensuring monthly payment deadlines are of technology that is tied to a consumer’s
met automatically gives consumers peace of identity—for example, biometric behavioral
mind. authorizations, integrations across platforms
for single sign on, or gestures. Consumers
Devices enabled by the Internet of Things have come to expect this of their banks.
(IoT)—such as smart parking meters, smart
refrigerators and voice-activated assistants—
extend the capabilities of payment
credentials on-file.
21Experience Reimagination
Banking - Pay It Forward
Inspiration:
Bank of America, through its virtual
assistant Erica, can tell customers what
subscription services are tied to their
cards. They can use its budgeting and
spending tools to discover where recurring
transactions are taking place and take back
control of their expenses.6
The Groceries by Mastercard app, the first
to be integrated into a refrigerator, connects
consumers to leading grocers so they can
order groceries direct. It learns the family’s
shopping habits and makes personalized
suggestions on items and brands.7
4. Make The Digital Today’s e-Wallet is housed in a consumer’s
mobile phone, with apps from Apple Pay to
Since e-Wallet apps are agnostic with regard
to payment type, banks have an opportunity
Wallet Truly Integrated Google Pay enabling consumers to securely to vie for the top of the integrated wallet.
store credit card data and transact. Providing customers with more targeted
And Flawlessly Operable rewards that surprise and delight, offering
In the not-too-distant future, AI may be more financing options and, subsequently,
leveraged to automatically optimize a creating a more personalized experience at
The digital wallet—or e-Wallet—is the
consumer’s e-Wallet. It will take into account every transaction are all ways they can earn
backbone of the connected commerce
the maximization of rewards, interest top position.
experience when truly integrated and
payments, fees and other benefits, like free
flawlessly operable. If the next-generation
shipping, to establish a waterfall of preferred
point-of-sale bypasses the idea of a checkout
payment types that potentially changes with
line, then the integrated wallet is the
each transaction.
common denominator between all points of
purchase.
22Experience Reimagination
Banking - Pay It Forward
Inspiration:
Apple Pay offers an easy, secure and
private way to pay in-store, online or within
apps, using an iPhone, iPad, Apple Watch
or Mac rather than a physical card or cash.
Any credit, debit or pre-paid card may be
uploaded to the e-Wallet. Apple Pay can
also be used to send and receive money in
the Messages app with Apple Cash. Every
transaction requires authentication with Face
ID, Touch ID or a passcode.8
Capital One Shopping—formerly Wikibuy—
is a free browser tool that makes it easy for A Final Thought
consumers to save time and money while
shopping online. It does this by automatically
searching for online coupons, better prices The ambition for payments needs to be to Fintechs have been at the forefront of
and rewards at over 30,000 online retailers. be frictionless and integrated in the broader technological advancements in the
Capital One purchased the technology so customer experience. As such, the payment payments space. Yet no player in the
it could better serve its existing customers. experience should not be divorced from the ecosystem—issuing banks, processors,
By anticipating and solving users’ needs broader commerce experience and should acquirers, networks, wallet providers,
before, during and after point-of-purchase, not just mark the end of a transaction. Also, payment facilitators or retailers—has been
it’s building customer loyalty to its checking payments can no longer be specific to just able to remove the friction and fully integrate
accounts and cards. It is also gathering rich one channel or payments form factor. the infrastructure that would support a
data on non-customers’ shopping behavior— seamless, connected commerce experience.
information it can potentially leverage to There is technology that is helping to evolve There is still an opportunity for banks to step
proactively attract new customers.9 the payments infrastructure, yet many of up and be the ones who drive this shift in the
today’s innovations are one-off solutions that payments paradigm.
only set the stage for what is to come.
23Experience Reimagination
Banking with Purpose:
Values-Based Growth
03
Banking with Purpose:
Values-Based Growth
Customers and employees To most people, banks are by default neutral
and impartial. This is a double negative. It
expect the organizations makes them bland and boring from both
they deal with to stand for an employee and customer experience
standpoint. It also means they are perceived
something beyond selling as indifferent financial enablers of evils
a product or service, with ranging from environmental harm to social
injustice.
relationships built on shared
values and empathy. For banks, Purpose has been the corporate buzzword
this means truly standing for for some time. There has been plenty of talk
about purpose and business responsibility,
something or standing aside. but it has been outpaced by demands from
Now is the time to reframe customers, employees, regulators and
investors—spurred by a new generation of
purpose. social activists—that companies scale up
their corporate social responsibility (CSR)
policies and initiatives and, generally, abandon
traditional practices designed to advance only
their own interests.
24Experience Reimagination
Banking with Purpose:
Values-Based Growth
COVID-19 has accelerated this, pressure- On the employee side, one in three
testing the talk beyond CSR in healthcare employees worldwide strongly agrees that
systems, governments and also banking. the mission or purpose of their organization
As banks were called to the frontline of makes them feel their job is important.3
supporting economic life upended by the
crisis, many stepped up by forgoing fees to As the recession brings additional financial
provide advice and access to government- pressure and banks need to improve
sponsored assistance programs—especially profitability, it will be tempting for banks
those for small businesses. to revert to business as usual. This means
the purpose momentum built during the
Historically, very few companies have pandemic might dissipate quickly.
managed authentically to live up to
their stated purpose—their expensive Committing to an enduring purpose-driven
communication campaigns are often approach will require bold leadership and, at
perceived by customers and employees as least in the short term, economic trade-offs.
shallow or, worse, as purpose-washing. This It also means navigating an uncertain political
dissonance can erode trust in any industry; landscape and balancing the interests of
in banking, which people and businesses customers and shareholders. This is more
depend on to safeguard their livelihood, this challenging for traditional banks, which need
erosion is even more problematic. to manage the transition from their legacy
model, than it is for newcomers, many of
In the summer of 2020, according to our which have designed their business model
Global Banking Consumer Study1, 29 percent around helping customers manage their
of customers trusted their bank to look after finances more effectively.
their long-term financial wellbeing, down from
43 percent two years before. This is a critical Building on our Purpose-Driven Banking
finding, not least because our Purpose-Driven Survey, we believe that banks now have a
Banking Survey revealed that the most trusted unique opportunity to reframe purpose from a
banks achieve revenue growth that is on branding exercise to a strategic asset, to drive
average one-third greater than that of their enduring business value.4
peers.2
25Experience Reimagination
Banking with Purpose:
Values-Based Growth
Challenge
Purpose should not be claimed, it should be ecosystem toward more equitable and
revealed and experienced. To feel authentic, sustainable value-creation opportunities.
it should pervade every internal and external
interaction and be sustained over time. To Banks also have a unique opportunity to
be experienced, it needs to be woven into align value and values. They can do this by
the core of a company’s culture, business focusing on customers’ financial well-being
model and operations. In the US, 89 percent in a win-win relationship that delivers long-
of consumers surveyed agreed that the most term profits through increased retention
important way for a company to articulate and long-term customer value. This value
its purpose is from within, operating in a way is driven by increased trust, which makes it
that benefits society and the environment.5 easier for banks to cross-sell advisory and
other products, and by more entrenched
Banks can become hyper-relevant by relationships with customers whose financial
embracing their meta-purpose—being the status improves steadily.
infrastructure for systemic values-driven
growth. Banks are uniquely positioned to The challenge is to build experiences that
influence the direction of capital in their bring purpose to life.
26Experience Reimagination
Banking with Purpose:
Values-Based Growth
Solution
Banks can build experiences that
bring purpose to life by capitalizing
on opportunities in four areas of their
business.
How Can Banks Build Experiences
that Bring Purpose to Life?
Connect the front-end (product, services,
communications) to the back end
(operating model, governance, data) to
create fundamentally differentiated value
propositions for all stakeholders.
27Experience Reimagination
Banking with Purpose:
Values-Based Growth
1. Customers: Re-establish the role of the
banker as a trusted financial wellness
partner for customers and communities.
Historically, the bank—along with a place There are 2.2 billion people worldwide whose
of worship and a market—was a pillar of net worth in 2019 was between $10,000 and
town, and the banker was a key figure $1 million.7 Those above $1 million typically
in a community’s local economy. With have access to financial advice, but this
increasingly diverse communities served by group does not. As a result, many consumers
large and often impersonal, homogenous from this “neglected middle”—especially
bank networks, this connection with local the younger ones—don’t see the value of
communities has been lost for the next having a relationship with a bank and turn to
generation of customers. neobanks to minimize friction.
Low-income communities in particular Relying on predatory strategies with
lack safe and reliable access to personal these segments is not sustainable. Some
and small-business banking services. As 5 percent of banks’ retail revenue is at
of May 2019, 21 percent of Americans risk as regulators and digital competitors
were “underbanked,” meaning they act to help consumers avoid the cost of
need to use alternative (often predatory) bad decisions, our analysis shows.8 The
financial services to make ends meet. It real opportunity lies in re-establishing a
is a phenomenon that is twice to three trusted partner relationship by proactively
times as likely to affect Hispanic and helping customers avoid the fees that these
Black communities compared to white decisions result in and, generally, become
communities. better at managing their finances. This is
a long-term play that will require banks to
This disengagement from the bank is invest in these relationships in the short term.
also problematic among mid-market
communities.6
28Experience Reimagination
Banking with Purpose:
Values-Based Growth
In the past few years, banks’ response has • Optimize branch formats to ensure
been to start reimagining their branch maximum accessibility (with a virtual
concepts into “lifestyle spaces,” offering branch combined with a service kiosk, for
convivial perks such as co-working/coffee example, or a “bank on wheels” that can
spaces. COVID-19 has put a stop to these rotate across neighborhoods).
efforts, however, raising questions about
their future business case. Embracing long-term strategies to co-
develop wealth locally.
We can reinvent the role of the banker as a
trusted financial wellness partner by: This involves empowering customers to
build up their wealth, something that will also
• Adapt payment form factors to support
Anchoring local relevance not on a benefit the banks that serve them, as they
local ecosystems—from mobile-based
physical space but on personal intimacy. graduate to become higher-value customers
money transfers such as M-Pesa in
with better prospects of contributing long-
Africa—to local currencies based
This is enabled by the right blend of digital term profits.
on distributed ledgers that support
and physical.
the constant flow of cash within
• Develop affordable banking offerings
communities, as with the Bristol Pound.
• Combine the convenience of digital leveraging digital-only models, as Banco
channels for everyday efficiencies Santander, with its Superdigital platform,
with meaningful human touchpoints has done in Chile, Mexico and Brazil.10
Inspiration:
supporting key “moments that matter”
in the consumer’s life, where advice and • Develop credit access programs.
American Express has a “Designed for
education are best delivered in-person Open up access to financing to
Small Business” mantra and, with its seven-
(face to face or remotely). otherwise excluded consumers and
year-old Shop Small campaign, it has
small- and medium-sized businesses
demonstrated a long-term commitment to
• Engage customers on tailored “financial (SMBs) by building new approaches
SMBs that is now deeply associated with
wellness” learning paths by combining to underwriting, leveraging new data
the brand and perceived as authentic.11 In
rich immersive digital experiences sources and the power of artificial
response to COVID-19, Amex committed
and community connections, taking intelligence, and equipping customers
$200 million to Shop Small and $1 billion to
inspiration from fintech players such as with the financial literacy and nudging
an action plan to promote racial, ethnic and
Ellevest, a membership-based financial mechanisms to pay back in time.
gender equity for colleagues, customers and
coaching app for women.9
communities.12
29Experience Reimagination
Banking with Purpose:
Values-Based Growth
2. Products: Differentiate We can help customers put their money to
work in alignment with their values by:
offerings with purpose.
Recognizing consumers’ unique sets
of values
Until now, competitive rates and
convenience have been the leading criteria • Articulate transparent investment
in customers’ choice of banking services principles, explaining how the bank’s
providers. But soon, neither will be a funds are used and allocated and
sufficient differentiator. clarifying trade-offs, using plain language
and relatable examples.
Some eight in 10 consumers say purpose is
at least as important to them as customer • Allow customers to prioritize the
experience, according to our Business of dimensions that matter the most to them
Experience study.13 And when it comes to (local community support, environmental
their banking habits, consumers are growing impact and so on) by selecting from a
increasingly uncomfortable as they suspect set of differentiated, modular product
their money might be working against their offerings.
own values.
Innovating with “win-win” offerings
Mighty Deposits in the US and Moralscore
14 15
in France are among the growing resources • Harness the power of community
now emerging to help customers analyze banking by offering customers the
corporate practices that conflict with their opportunity to invest in their community,
set of priority concerns and values. taking inspiration from successful
initiatives like immigrant saving groups.17
As this accelerates, customers are adding Envision new models, such as adapting
ethical considerations to the value they micro-credit to the developed world
expect from banking products. Some 57 through crowdfunding-type platforms.
percent of consumers would want advice The Italian banking group Intesa
and tips from their bank or insurer on how Sanpaolo’s For Funding18 crowdfunding
to act more sustainably, our 2020 Global initiative is one example.
Banking Consumer Survey found.16
30Experience Reimagination
Banking with Purpose:
Values-Based Growth
• Develop targeted savings products,
including savings accounts and CDs, Inspiration:
taking inspiration from green deposits,
that enable companies to contribute Triodos, a Netherlands-based bank with
towards projects that benefit the over 720,000 customers in five EU countries,
environment.19 is a pioneer of a new approach to banking.
It commits to lending money deposited by
Developing tools that help consumers consumers (through certificates of deposit,
align their spending behavior with their checking and savings accounts) exclusively
values to positive-impact projects, and provides
transparent visibility into the companies and
• Offer checking accounts that help track organizations where it is invested.21
carbon footprints, as well as offer a
credit card that prevents customers from New players emerging in this dynamic
overspending their carbon budget—as market segment include Ando, which
Mastercard did with its DO Black card20— launched in the US in January 2021 and offers
or reward them with carbon offsets. best-in-class mobile banking services paired
with transparency of initiatives supported
• Offer preferential mortgage rates for through their deposits.22
energy-efficient properties, like Barclays
has done with its Green Home Mortgage
in the UK.
31Experience Reimagination
Banking with Purpose:
Values-Based Growth
3. Talent: make banking a dream job
again, super-charged with purpose
and diverse perspectives.
Banking is no longer the dream job for top Until now, inclusion and diversity policies
university graduates; tech is. This is because have failed to penetrate most organizations
there is a crisis of purpose. Banking jobs used and meaningfully transform banking culture.
to have huge prestige, earning bankers social Companies and regulators may have set
currency in addition to financial rewards. But quotas around diversity, but minorities and
since the financial crisis of 2008, both seem women are still starkly underrepresented and
to have diminished. experience higher-than-average turnover
rates.
This talent appeal crisis is even more
problematic at a time when banking is under In the US, the boards of directors of the
pressure to reinvent itself and needs top largest financial institutions are comprised
talent to do that. of only 29 percent women and 17 percent
minorities, compared with the population
In order to become the systemic make-up of over 50 percent women and
infrastructure of more responsible capitalism, 40 percent minorities. Further, less than 1
banking needs to broaden its approaches percent of megabank spending is devoted to
and skillsets to include non-traditional diverse asset managers and suppliers.23
disciplines such as behavioral science and
environmental sciences. The new emerging We can make banking the dream job again
roles that require these skills and outlooks by crafting purpose from within, co-creating
don’t have a pipeline of senior talent ready jobs of tomorrow and investing in diversity as
to step in. In this respect, diversity is the a core differentiator.
answer. Diverse teams are proven to solve
problems more creatively and to reach better
outcomes, starting with the ability to attract
a more diverse customer base.
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