The study adds there is now a demand for digital financial wellness as neobanks are moving to mainstream. These initiatives will be a core part of their digital offering.
Backbase regional vice president Asia Pacific Iman Ghodosi says banks are learning from their mistakes, but their response is still slow to the ‘buy now, pay later’ boom: “Traditional banks got caught on the back foot with the recent rise in buy now pay later. It looks like they don’t want to repeat that mistake with neobanks and their mobile-first personal financial management tools that are already adding value to the lives of many Australians.”
“Legacy institutions are now striving to build consumer trust, and assist with services such as spending analysis, budgeting, creating saving goals, and improving credit scores through these tools, “Ghodosi explains. “All the while benefiting from the deep well of customer data and insights that they can offer.”
Of the ANZ retail-banking business decision-makers interviewed as part of the report, 92% reported their financial institution was planning to, or actively expanding its financial wellness and money management tools, while 60% said it was of critical priority.
The fintech wolves are at the door
Ghodosi says neobanks, fintechs, and disruptors are waiting to take market share. He also sees the next six months as an inflection point in the space.
“Digital technologies can provide an aggregated view, along with alerts and insights across multiple accounts, and the likes of Frollo, Humaniti, Wisr, and myprosperity are all gaining traction and market share,” he says.
“People want the same high level of customer focus and flexibility for financial services they subscribe to like what Netflix and Spotify provides. They want access to their personal finances, anytime, anywhere, through any channel, and tools on how to manage it; traditional banks are getting left behind and they know it,” he explains.
He says that banks have now entered the “Engagement Banking Era,” an evolution that stresses a one unified platform approach for banking.
The priority, he says, is to “completely re-architect the bank around the customer, moving away from siloed technology investments.”
Ghodosi claims: “At Backbase, we help banks to adopt and build modern, cloud-native banking platforms to keep pace with changing consumer demands, gain a 360 degree view into banking behaviours, and grow market share across all lines of business. We focus on customers before products, and create digital money management tools that match individual needs.”
Unfortunately for Australia’s banks, the key challenges that stand in their way include a lack understanding of their customer needs and outcomes, a lack of a digital-focused culture within the organisation, outdated technology, and limiting organisational silos.
“There is also a lack of understanding within legacy institutions on who owns the budget for these types of initiatives; is it considered customer experience? Is it corporate strategy? Or is it marketing?” Ghodosi questions. “When in fact it is all three and more.”
More to it than just a customer retention strategy
Through digital financial wellness initiatives, banks can offer more care and protection to their customers than they have had the opportunity to do before, the study pointed out.
This pays dividends for the dwindling trust customers have for banks, and equally benefits both them and the institution.
72% of retail banking business decision-makers interviewed mentioned that preventing exploitation of vulnerable and older customers was a priority, and 60% said providing secure shared financial management solutions for vulnerable customers, powers of attorney, and caregivers was a focus.
54% said proactively helping customers with mental health issues or financial distress was in their plans and 74% are using financial wellness to encourage customers to build better financial habits.
Other more specific tools were also mentioned such as improving customer’s credit scores (80%), providing personalised recommendations for financial products (74%), and advanced pay and income smoothing with 64% of decision-makers mentioning it was something their company was planning.
“CommBank and ANZ are making headway in this space and have the technological capabilities to close the lead on the dynamic and nimble neobanks. As technology continues to redefine financial services, consumer expectations and demand fuel the sense of urgency for financial service providers to capitalise on the financial wellness opportunity,” Ghodosi concludes.