Most traditional banks have had decades to build up their customer bases, implement thorough and rigorous processes, and solidify their market position. These advantages are considerable, and incumbent institutions have used them to dominate the market for years.
But customer expectations are on the move.
COVID-19 has fundamentally changed how consumers conduct their day-to-day banking, accelerating digital adoption rates and reducing time spent in-branch. Some banks now find themselves struggling to keep up with these evolving customer demands.
In order to compete with neobanks and tech challengers, financial institutions must learn to do four key things:
- Embrace an agile mindset
- Focus on the long-term viability
- Stay customer-obsessed
- Understand that there is no single “correct” path to modernization
Let’s explore each of these to understand what they mean for banks.
Embracing an agile mindset in the engagement banking era
Digital challengers are now in the driver seat of financial innovation, offering new value propositions and superior customer experiences. But that doesn’t mean that traditional banks should aim to fully emulate them. Rather, banks should ask themselves how they can get up to speed faster while retaining their hard-won customer base.
The answer? Agility, in terms of mindset, technologies, and operations.
According to the Backbase Fintech and Banking 2025 IDC report, 50% of tier 1 banks in the Asia-Pacific region have implemented agile frameworks. This allows them to drastically speed up their go-to-market times.
The Bank of the Philippines Island (BPI) is one example of this. BPI was guided by the belief that the future of banking lies in innovating faster than the market’s changing needs. In 2016, the bank’s leadership foresaw the need to develop foundational capabilities that would allow them to quickly respond to market changes. Now, the bank is able to roll out products and services that meet – and exceed – customer demand within weeks, rather than months. This has resulted in huge growth, even during COVID-19, with the bank seeing more than 100% growth in it’s digital customer base.
Noel Santiago, Chief Digital Officer at BPI shares how building foundation capabilities helped BPI. Watch the full insights here.
So, how can your bank increase its agility? For one thing, you can stop focusing on point solutions to short-term problems. Instead, ask yourself what problems you can see on the horizon and proactively strive to innovate beyond your bank’s current limitations. If traditional banks can do this, they will start taking large strides towards competing in the same league as challengers.