Banks work as financial intermediaries whose main activity is to provide loans to borrowers and to collect deposits from savers. These financial institutions execute a variety of functions and provide services that are considered key to economic development, allowing the successful progress of a country.

A well-functioning financial system is fundamental to a modern economy. And a weak banking sector not only threatens the long-term sustainability of an economy but can also be a trigger for a financial crisis which can lead to economic crises.

The process of digital disruption revolutionized the industry of banking and has created an all-new business environment that has been challenging for traditional banks. Competition among financial institutions is now as tough as ever. Customers are knowledgeable and demanding. New products have to be developed, tested, and launched. Delivery channels are more varied and complex. And new financial regulations are being written at a rapid rate.

Banking transformation is not something new, but there is now a heightened urgency for traditional banks to modernize their business operating models and their technology components if they are to benefit fully from this period of growth. Moreover, banks also need to focus on changing their mindset and culture, evolve into a more agile posture. Indeed, if they do not so, they are likely to fail – not necessarily in the sense of going into liquidation, but in the sense of failing to maintain revenues and profits, and most importantly failing to satisfy and maintain their customers.

In the last few years, our economy and the way companies deal with their customers has been redesigned by technology. This wave of digitalization touched almost every industry, and banking is no exception.

Traditionally, banks conducted their services in bank branches through face-to-face interactions with their customers. However, innovative digital technology has created customer behavior changes, whose preferences are shifting to digital and highly personalized services. To meet these new demands, banks introduced digital banking channels such as telephone (t-banking), internet (e-banking), and mobile (m-banking) banking, transforming the way customers are being served and setting a challenge to traditional banks methods.

Today, customers can withdraw money, apply for loans, and make payments online or on their smartphones. People can manage their finances in a simple way, anytime and anywhere, without the need to queue in a bank.

Besides this, the pace of technological development and the investment in solutions more digital-oriented by banks has created the opportunity for a crop of nimble start-ups, known as Fintech enter the market. These non-financial competitors launch themselves in the industry by presenting more niche and customized financial services and products. The BigTechs (Google, Facebook, etc.) joined the game too.

Once a former protected and stable market is now engaged in a new dynamic of competition with an increasing number of challenger banks, Fintech, and tech companies in the race, making competition for the customer harder than ever.

Banks have embraced this digital era and are investing more and more in digital banking, which is about making services available through digital means and machine learning and artificial intelligence applied to banking, being entitled now as tech companies. But is this enough to achieve customers’ loyalty?

As the environment changes, so too does consumers’ behavior. Customer satisfaction is a key term in measuring how well banks meet or exceed customers’ expectations. When customers’ expectations are met, their satisfaction increases, which is a key part in increasing customer base loyalty. There has to be customer satisfaction first for there to be customer loyalty. Without customer satisfaction, customers will want to look elsewhere.

A bank’s relationship with its customers is among the most important aspects for the bank to be profitable. Customers are the bank’s bloodline as they are the ones conducting business with the bank and bringing revenue into the bank. For long-term survival, having customer loyalty is essential as loyal customers benefit the bank through repeat businesses with the bank.

The progress of digital solutions in banking created an increase in mobility among customers between banks. The extensive choice of products and services available allowed customers to have the driving seat and pressure banks to develop their infrastructure, financial products, and services according to their expectations.

To succeed in today’s extremely challenging business environment, retail banks need to show their trustworthiness in customers’ eyes. The challenge of keeping up with changing customer expectations is not new but increasing. Evolving technology and transformations result in constant consumer behavior changes and increased mobility among customers between banks, representing severe challenges for retail banks in satisfying customers and maintaining customers’ loyalty.

Traditional banks will have to adapt their operating models and incorporate strong digital strategies to keep up with new competition and meet customers’ expectations. Satisfied customers tend to demonstrate loyalty, leading to higher revenues and better financial performance.

For banks, it is important to provide the best customer experience and show to the customer that they are ready to evolve according to the market – agile culture.

Attracting customers is one of the hardest parts of running a business. Keep them is even more challenging. Providing good customer service is important, but that’s not enough anymore.
The success of technology firms today (and the best hope for banks tomorrow) depends on refocusing development – not to solidify the organization, but to adapt to the customer. This process requires transforming the entire business process to change an integral part of the process. The solution is an agile methodology.

One fundamental tenet of agile methodology focuses on satisfying customers’ needs rather than merely building products and back-end technologies. Improving customer experience through every touchpoint is the number one priority. Their four pillars of customer experience are to provide better choice, security, ease of doing business, and personalization.

Agile development refers to the iterative process of building and testing products rather than waiting until the completed project is delivered. With sharp, if problems occur or changes are needed anywhere along the line, they can be addressed sooner. And with less impact than having to scrap and rebuild a finished product from start to finish.

Banks hold a substantial competitive advantage in the depth, timeliness, and personal level of the customer data they possess. Harnessing powerful analytics, agile enables the swift and flexible development of applications that use such data. This practice helps in engaging with and serve customers with more innovative products — at crucial moments in customer journeys and life events. Continuously creating and refining such customer-focused products will help banks demonstrate that they know their customers. Understand their needs and suggest the most relevant offers at the optimum time.