Back to the branch? Banks must focus on digital experience

The popularity and growing usage of mobile and internet banking in the Middle East is without question. So much so, that a new breed of digital-only players has emerged and rapidly grown their market share. The pandemic certainly accelerated this trend, but interestingly, its lasting effects have been most pronounced for the banking sector. The latest research from Cisco, The App Attention Index 2023: Beware the Application Generation, reveals that use of banking and insurance applications has risen over the last two years, in contrast to most other sectors where there has been a marginal drop-off since the height of the pandemic.

This is of course great news for banks. After all, operating digital channels can be seen as more cost-effective than traditional branches. But before rejoicing, they must acknowledge the concerning caveat — the study also highlights the growing expectations people now have around digital experience and their complete lack of tolerance for applications that don’t perform as they should. Consumers are becoming increasingly fed up with bad digital experiences, to the extent that significant numbers are now reverting to engaging with brands through traditional channels.

Perhaps unsurprisingly, these shifts in consumer attitudes and behaviours are most pronounced within the cohort of users aged 18-34, the application generation. These young consumers have grown up with tech, and they relied on applications to get through the pandemic — for their education, to begin and progress their careers, and to stay connected to friends. And now they’re deploying them with great skill to live and thrive in a hybrid world. Indeed, they are heavier users of digital banking and insurance services, more than other consumers. 92 per cent use at least one banking application per month and on average, three on a regular basis.

While greater utilisation of digital services may seem like a prime opportunity for the Middle East’s growing number of neo banks, crucially, the application generation is significantly more discerning about the quality of the applications they use, and they’re constantly evaluating the relevance — or otherwise — of digital services. They’re actively looking to rid themselves of a sense of ‘application clutter’ that has built up over recent years. They want every digital experience to add value to their lives, and they pride themselves on only using the very best applications.

All too often, these expectations aren’t met by banks. The majority (72 per cent) of the Application Generation report they have encountered problems when using banking applications over the past 12 months and, as a result, as many as 27 per cent claim they are now moving away from digital banking services and applications and favouring other channels such as branches and contact centres.

This spells potential doom for neo banks, and established players that have invested heavily in transitioning customers to digital channels. To avoid an exodus away from their applications, banks urgently need to ensure that they are delivering the seamless and secure digital experiences that the application generation is now demanding. Otherwise, they risk alienating huge numbers of the region’s growing demographic of young consumers.

Poor digital experiences are making the application generation question the value of applications

Financial services are fundamental to how we live our daily lives — from supermarket purchases to loan applications, or cashing in credit card points to plan the next holiday. With so much at stake, consumers simply don’t have the time or patience to put up with poorly performing applications. 62 per cent of consumers report that their expectations for digital experiences are far higher than they were two years ago, and 64 per cent state that they are less forgiving of poor digital experiences than they were just 12 months ago. And in response to being disappointed by the brands they once depended on, many now delete applications and switch to alternatives, while also making sure to share their negative stories far and wide.

Due to the deeper and more dependent relationships people have with their banks, these organizations have largely been protected from users simply deleting the offending application and finding an alternative. They’re locked into a relationship with their bank or insurer, and going elsewhere can involve a lengthy and complex process. But far from being a benefit, this only translates to greater levels of frustration as consumers feel trapped knowing that they’re stuck with the brand in question.

Rather than taking things in their stride, people are increasingly willing to revert to other channels. The research highlights how poor digital experiences are making people want to go back to face-to-face and phone interactions with brands, and how consumers are feeling far more empowered to use alternative channels, such as face to face or phone, to contact and engage with brands, than they did just 12 months ago.

Application observability is key to satisfy the application generation

If banks hope to see a growing share of their customer base engage primarily via digital channels, they can’t afford to deliver anything less than the intuitive, seamless, and secure digital experiences that customers, and particularly the application generation, now expect as standard. And this means equipping their IT teams with the tools and insights required to optimize application availability, performance, and security, at all times.

Application observability has therefore become a must-have technology as it enables IT teams to rapidly detect and resolve application availability, performance, and security issues. With application observability, teams can correlate application data with key business metrics, to identify and prioritize issues which pose the biggest threat to customer experience.

Digital banking has been a boon for banks that have recognized the opportunity and risen to the challenge. But far from resting on their laurels, they must now see that the advent of the application generation heralds a new era of expectations. The progress they have made will start to be undone if application performance fails to keep pace with soaring consumer expectations for exceptional digital experiences. With application observability, banks can keep customers engaged and happy using their digital services and reduce demand on those traditional (and more inefficient) channels.

The writer is CTO adviser EMEA, Cisco Observability

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