Bank Customers Want Digital Substance Over Style

I recently asked a group of MBA graduates about what criteria they use to select a bank for their salary account. Their response surprised me. Not one of them mentioned Facebook banking, peer-to-peer payments or location-based offers. All they wanted was a free credit card, mobile banking services and perhaps a personal finance management tool.

Since then, I have asked similar questions of young people across various industries. None of them have listed much-discussed, cutting-edge features in their selection criteria. Based on this admittedly small sample size, it's safe to assume that efforts to get them to pay for features they're not that interested in will flop.

These conversations suggest a disconnect between consumers and the banking sector. Most banks are channeling a large part of their information technology investments into digital initiatives, driven both by the desire to stay ahead of the competition and by their belief that customers want the latest high-tech options.

But the truth is that people still want the same fundamental services from their banks. They want to save money securely, grow their savings with minimal risk, make convenient transactions without incurring significant costs and borrow when they are in need. What has changed in consumer behavior is their level of expectation. Constant, 24/7 connectivity and easy access to information has empowered consumers; now they want more from their banks.

Here's an example to illustrate the expectation mismatch between a customer's needs and a bank's offerings. Imagine a person named John who has a salary account and credit cards with the same bank. His direct deposit always arrives on time and he has never defaulted on his card payments. However, when he needs extra cash to buy a high-value item electronic goods item, the bank quotes a whopping 16% interest rate for a personal loan. Meanwhile, a consumer finance company that does not even know him is ready to lend him money at 0% interest.

As a regular credit card user, John wants to earn extra mileage points from his preferred airlines, get discounts or cash-back for supermarket purchases and avoid paying surcharges at gas station. But his bank sees these desires as three distinct needs and offers three different cards that cater to each of them separately.

It's likely that John would be far more pleased with a single credit card that had a multiple subscription-based model that allowed him to accrue and redeem rewards points. Instead, his bank is focusing on creating a mobile wallet so that John does not have to carry multiple cards, which wasn't his problem to begin with.

This is not to say that banks should stop investing in digital offerings. But they need to understand that digital is just the trigger for change. Tools like mobile applications, digital forms and interest calculators cannot be differentiators for banks — and neither can they excite customers enough to pay for them.

Real, meaningful digital transformation must be accompanied by changes across front, middle and back office in banks. Banks will have to rethink their fundamental business models and processes, from policy to risk management to distribution channels, in order to remain relevant to their customers. Otherwise, companies like Moven, Paypal and Wal-Mart will surpass banks in customer engagement and relegate the bank to providing only back-end services.

Shobhit Mathur heads the banking center of excellence at global IT services firm Mindtree. He is responsible for domain enablement, sales support and solutions.