Grand Prize Challenges of banks facing the next wave of technology innovation
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Woori Bank CEO Lee Kwang-goo, third from left, cuts rice cake with Small and Medium Business Administration Minister Joo Young-sup, second from left, during an opening ceremony for the WiBee Fintech Lab in Yeongdeungpo-gu, Seoul, Aug. 10. / Courtesy of Woori Bank
By Kim Hong-il
The growth of technology has significant implications for banks. The traditional interaction model between bank and customer has been rapidly transformed as mobile phones get equipped with more and better functionality, and this trend seems to even accelerate its speed as the technology is developed at faster pace than ever.
Sleek-looking branches and fancy websites will no longer be enough, and customers will expect more sophisticated and intricate services through various channels. Such trend can be epitomized by the recent advent of internet-only banks, and Korea’s banking industry is once again expecting its largest cataclysm in decades.
So how should banks welcome this drastic wave of change?
The answer lies in taking full advantage of the cutting-edge technology and cherishing human interaction with customers at the same time. Banks should seek to reinforce speed and convenience through intensified digital interaction while providing the “human touch” at the core branches to sell higher value products and services.
Shifting routine banking transactions from the branch to lower cost channels such as mobile or online can significantly reduce costs, and this will allow staff at branches to concentrate on more value-added tasks.
More specifically, banks will have to create an open platform where customers can experience a breakthrough in financial inclusion. Banks such as KB Kookmin or KEB Hana have already geared up to expand their online banking platform to defend against the incoming internet-only banks.
The “Hana Members” launched by Hana Financial Group features an integrated membership program combining finance and IT, which allows users to convert the points they accumulated in multiple stores into cash as well as providing traditional transactional services through mobile.
As such, simply focusing on mobile transactions is not enough and banks will have to develop total solutions offering an unprecedented joy of integrated service that broadly covers customers’ needs.
While it is clear that the key to preparing for the new digital innovation is harnessing technology to improve service and enhance differentiation, this shall not be progressed at the expense of personal interaction with customers.
Banks must find the right balance between self-service and providing the human touch to sell higher value products and services, for branches will still remain an important interaction point for customers. Branches will continue to play an essential role in providing complex products like mortgage loans or private banking services, and face-to-face interaction is paramount in such grave matters.
Thus, banks should build all-rounded multi-products at branches that are not replaceable by automated services. Customers will be visiting to resolve complicated transaction problems and branches shall be ready to provide one-stop services encompassing various sectors of finance.
Recently, KB Financial Group launched a complex branch that covers all sectors of banking, securities, and insurance. This was in an effort to focus on customers’ wide choice on more various and broad form of service that can be differentiated from limited non-branch channels. Likewise, banks should actively engage their customers in the full customer satisfaction rather than simply offering traditional products.
Banks will also need to offer more compelling wealth management service by using new technology, as the asset and wealth management markets could be poised for significant growth.
People will live longer thanks to the advances in medical technology and the need to fund extended retirements will require returns better and safer than traditional deposits. At the same time, they are likely to avoid aggressive investment approaches since any unexpected disaster could pose a significant threat to their lifelong plans.
This will trigger increased demand for a more reliable asset management services, and the recently developed robo-advisor technology may create valuable growth opportunities in this. Woori Bank has already begun to provide robo-advisor services to customers, in which computer algorithm analyses customers’ financial data and advises on relevant financial products.
Such robo services-based products do not seek big gains but steady profits, thereby satiating customers’ conservative appetite for their wealth management. Banks should invest in such technology-driven models to respond to newly emerging needs for customers of aging population.
By executing on these coordinated sets of actions in technology and human touch, banks can reinvent themselves and find a new path to the next phase of growth. Embracing new concepts such as convergence of different financial sectors or robo-advisory technologies on top of inclusive mobile platforms will open up new opportunities for banks towards bigger potential.
To take a giant leap forward amidst the storm of change, banks will have to be bold in building deep, lasting relationship with customers through cutting-edge technologies and sincere interaction.
Kim Hong-il, 23, is a business administration major at Chung-Ang University in Seoul.