American Banker: Go Digital, But Don't Forget Banking's Human Factor

By Mikkel B. Rasmussen, November 17, 2014

Type "the future of banking" into any search engine and you get the same picture. Global banks and management consultancies alike portray future bank branches as a cross between an Apple store and a spaceship — a big, open space with glossy white furniture, digital workstations and the occasional human being at your service. Going to the bank will be like checking into a modern airport.

It's easy to get carried away with this vision. Digital banking promises to fix most of the problems that modern banks are struggling with: low customer involvement, high cost of service and competition from entirely new players like Google Wallet, Apple Pay, Simple and Betterment. Turning banking into bits and bytes seems to be the perfect solution.

Digital customer experiences are based on rules and algorithms rather than human behavior. But human behavior does not always adhere to statistical models.

There's just one problem: customers are not bits and bytes, but human beings. Most large banks seem to be ignoring this fact. When President Obama has his credit card rejected at a restaurant because of a fraud protection algorithm in his bank's computer system and when Ben Bernanke can't refinance his home, it's a sign that the banks have lost their human sensitivity. These experiences are not outliers; they are the norm.

My consultancy firm's ethnographic studies analyzing customers' relationships with their banks have consistently found that people today feel that their banks lack interest in their wellbeing. Customers can sense it when their banks regard them as numbers in a database rather than as actual people. And while customers certainly want their banks to provide them with digital offerings, going digital will not in itself make them happier with their institutions.

The reason is simple: digital customer experiences are based on rules and algorithms rather than human behavior. But human behavior does not always adhere to statistical models — especially in situations with high uncertainty like changing your job, experiencing a death in the family, buying a new house or retiring. In these kinds of situations, customers need their banks to provide them with financial advice and solutions tailored to their personal experiences. If banks fail to do so, the trust that customers have in their institutions breaks down.

The problem is that banks operate in what social scientists call a "system world," with its own technical language and complex systems. Medical science, law and engineering also exist in systems worlds. Most people, however, live in the "life world." In order to understand the services and operations of the systems worlds, they need to have a translator on hand — most often a banker, doctor, lawyer or teacher.

As banks digitize more and more of their services, this human factor can be lost. The shift is slowly but steadily removing banking from the lived world and pushing it further into the systems world. As a consequence, the service model touted by banks breaks down.

If you build your bank's future on the idea that digital banking will solve everything, you are looking in the wrong direction. Instead of asking how you can digitize banking, you should ask how your bank can be relevant to the everyday life of your customers.

Spend more time and resources understanding what financial wellbeing really means to your customers. What are their goals and aspirations, and what are their pain points?

A deep understanding of what financial wellbeing really means and the moments at which people seek financial advice will allow your bank to better map the role it can play in customers' everyday lives. This will give banks a better sense of which banking relationships should be digital and when they should be personal.

Banks today are often tempted to think of themselves as technology companies. They would be better off thinking of themselves as providers of financial wellbeing, and working from there to figure out how digital offerings can support that mission.

This article originally appeared in American Banker.


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