How UK banks can meet customer needs in the future

Firstly, it’s important to understand the megatrends that will shape the world by 2030 and how they could disrupt the financial services industry.  

Rapidly changing consumer concerns and priorities  

The EY Future Consumer Index tracks changing consumer sentiment and behaviours over several years. These are some of the trends that may affect the business models of banks: 

• Sustainability: Consumers are increasingly strident about putting the planet first. Many are willing to pay more for greener products and expect their banks to be actively developing these.  
• Affordability: As the wealth gap continues to widen, banks will need to consider how they can support people of all financial standing.  
• Experience: Other sectors have shown what’s possible here – delighting, not simply serving customers. Banks have traditionally focussed on transactions, but need do more to improve customer journeys. 

Access for all   

The increased use of virtual channels driven by the pandemic has made banks more accessible. Video calls allow sign language translators to be called upon to offer instant access for deaf customers in a way that was often overlooked pre-pandemic. 

But banks can do more. For example, some new debit cards have replaced raised lettering and numbers with sleeker, flat designs – making them significantly harder to use for visually impaired customers.  

Banks need a clear strategy on how they can improve accessibility and there is a financial incentive to get it right. The spending power of UK households with one or more disabled people is estimated to be worth £274 billion per year¹.

Tom Groom, Partner, Ernst & Young LLP has contributed to this chapter. 

An example of this shift is, instead of designing a mortgage application process, a bank could help someone become a better homeowner through ensuring they build their credit score ahead of application, explain the mortgage process to them and even connect them with tradespeople and professionals they may need. 

Such human-centric design can generate a 50-80% increase revenue and 30-60% increase in efficiency for banks. Importantly, it can also help banks respond to the societal pressure to have a clear and positive purpose by actively helping its customers and being a force for good. With the rise of technology and open banking, if banks fail to act here, others will be able to. We see two possible roads banks may travel in this area: 

1) Rise of the bank super app – focussing on aspirations not transactions. 

Some banks will develop super apps, which provide customers with an invaluable one stop, concierge type service. Using open banking, these apps will centralise a customer’s transactional behaviour, to help them understand key insights about their financial life and offer advice on how they could do more, such as saving more for retirement, reduce their carbon footprint or even find the best way to purchase a new car. 

Other banks may look to suggest actions every time a customer interacts with them, providing a helpful nudge to change behaviour over time. While customers can choose to ignore these suggestions, it could help them become better homeowners and business owners. Using such behavioural dynamics and allowing customers to avoid engagement if they wish could help banks stay relevant in the long-term. 

2) Banking will be wherever customers want as embedded finance .

Personalisation builds intimacy but needs to be relevant. The bank of the future will be present where its customers are present. It will be embedded within the variety of digital experiences we all use, using open banking or an application processing interface (API). Banks will know when customers prefer a different type of engagement – say a video chat for a loan or a branch meeting for a mortgage.  

Customers will be able to personalise these channels and banks need to strive to ensure they are present wherever their customers are (see chapter six for more on this in the metaverse). 

As non-banks look to seamlessly offer banking services to their customers, there will also be an opportunity for incumbent banks to raise revenues through banking-as-a-service. This will allow non-banks to white label or partner with banks to offer banking directly and easily for customers. 

What banks should do now 

• Banks need to truly understand their customers. Once they establish what their customers want, they can use that to shape their future strategy – is there demand for the bank to be a central ecosystem or do customers prefer their banking to be embedded as part of a third parties’ ecosystem? 
• As they look to transform, banks will need to tap into their ecosystems, so they can offer relevant expertise to customers without moving from their core strengths. 
• Banks should use diverse teams when building and testing transformations – in terms of age, experience, ethnicity and gender, but also using design and technical experts. 
• It is essential to involve key leaders from the outset. This increases empathy to drive change. EY recent research shows how organisations who put humans at the centre of transformation are 2.6 times more likely to succeed. 

Peter Neufeld, Partner, Ernst & Young LLP has contributed to this chapter. 

Customer-facing roles are changing dramatically. Frontline employees are expected to handle more complex issues, as well as navigate the omnichannel digital and in-person customer service landscape.  

As a result of this shift, there will be higher demand for individuals who are able to embrace new technology (including AI) and manage customer relationships, whilst remaining agile and aware of cyber security risks. This will mean that banks need to prioritise hiring in or re-skilling to meet these needs. 

EY and the Financial Services Skills Taskforce (PDF) identified the critical skills for the future of financial services in the UK. We found demand for core banking skills will remain, but we will see a significant shift to more digital and higher value work skills, as outlined in the visual below. 

People, not technology alone, will deliver success 

Successful banks will be large employers of design and engineering experts, as well as those with digital, data and technology skills. These new roles will sit across human-centred design, cloud, cyber and data analytics, as AI, automation and analytics become core to banking. Certain roles will become more and more automated, including manual testing, maintenance and many project management roles. 

In parallel, banks will need critical thinkers to interpret digital information and develop strategies to best serve their customers. They will also need advanced social relationship skills to provide a personalised service for complex customer issues or to support vulnerable customers who may not wish to use digital channels. 

The right skills will be scarce and expensive 

Most organisations, regardless of sector, will be looking for similar skills in technology, engineering and data. There will be strong competition for talent and increased workforce costs.  

Banks that will thrive will have invested in upskilling their current teams and creating new innovative channels for talent (such as tech apprenticeships, internal talent marketplaces, or third-party partnering) .

What banks should do now 

• Increased remote working, accelerated by the pandemic, means banks can think more globally about where they source talent. 
• Ensure they are recruiting from the widest possible talent pool. As well as being diverse through race, gender, sexuality, neurodiversity and age. 
• Banks’ internal bureaucracy and the heavily regulated nature of their work can deter top tech talent away, especially as they compete with pure technology businesses or FinTechs. Banks need to ensure they can position themselves as an attractive and interesting place to be for technologists. 
• The most important future skill is the ability to re-skill There are unlikely to be enough skilled workers to go around. Banks that re-skill and re-train their people will have a natural advantage. 
• Bank leadership also needs to develop the right skills to manage this shift. They need to understand what technology provides them with, so they can drive the right decisions, with empathy. As organisations become more transformative, boards and leaders will have to manage constant change.  

Savvas Koufou, Partner, Ernst & Young LLP and Rachel Collins, Director Ernst & Young LLP have contributed to this chapter.

By 2030, financial regulation will have shifted to a primarily outcomes-based approach, moving on from rules or principle-led regulation, fuelled by the new Consumer Duty.

Regulation will not however be a barrier to innovation or growth as both banks and regulators seek the same thing – improved outcomes for their customers.  

Data and technology will continue to be at the heart of this transformation, with a rising expectation on banks to be able to translate their enhanced capabilities into a better and more dynamic understanding of customer needs. Big data and AI will be deployed at scale to enable the right decisions to be made, as well as to provide more bespoke products and ever-evolving solutions for vulnerable customers.  

Applying behavioural science, by piecing together the enormous data sets banks already hold, with new data from the open finance eco-system will be critical in ensuring banks deliver and evidence good outcomes – both now and on an ongoing basis – as well as avoid any unintended consequences from a purely data-driven approach. 

In addition, the increased dependency on data, means regulators are likely to further raise the bar around data storage, cyber-defences and all aspects of operational resilience. 

This is a significant shift in approach and successful banks in 2030 will have embedded this change across their systems, processes but also culture. It should make transformation easier from a regulatory perspective for those banks who have human-centred design and are investing in data and technology to personalise their services.  

The start of real-time regulation 

By developing real time data feeds, regulators can identify emerging problems faster. This would significantly reduce the regulatory burden on many firms, who could demonstrate compliance on an ongoing basis without scheduled discussions with regulators. It will also allow regulators and firms to understand emerging concerns and address problems before they cause significant harm.  

Sharing data in real-time with the regulator, banks and regulators can also have a more collaborative approach to innovation. A common fear amongst banks is being judged through 20/20 hindsight as they look to use new technology. A joint approach can further support innovation.  

Some of the world’s biggest consumer brands may be regulated as banks 

By 2023, we expect big tech firms to be more highly regulated – either because they choose to enter the mainstream banking sector or because of the critical dependency financial services has on their services, for example data storage. The recent HM Treasury consultation on critical third-party suppliers shows this intent.  

Fully entering financial services could have a significant impact on incumbents as big tech firms have the data, brand and budgets to compete and win in banking. While many tech firms have so far chosen to avoid the highly regulated finance sector, there may well become a time when the opportunities to provide a differentiated offering outweigh the risks. 

What banks should do now  

• Culture: Banks have been given a real insight into the demands of tomorrow through the FCA’s Consumer Duty. They should look to embed these changes, and ensure they develop a culture that places customer needs first and foremost. 
• Data strategy: Banks have spoken about monetising and fully utilising their data for some time. They need to act now, leveraging cloud, AI and automation to gather, analyse and use insights to truly understand customers. 
• Purpose: Banks need to embrace ESG and sustainability to establish their purpose. This will allow them to truly understand how to best meet the customers ultimate aim and align offerings, products or services. 
• Closer working: The door is wide open from the regulator to help banks innovate. Banks should try and bring the regulator along with them on their transformative journey, so they understand their thinking. It is not sensible to develop a new product or service in private before presenting it as a fait accompli to a regulator. 

John Saxton, Partner, Ernst & Young LLP and Alex Roy, Director, Regulatory Insights, Ernst & Young LLP have contributed to this chapter.

The next decade will see a continuation of new technologies, platforms and disruption, all at a time when banks are still grappling with their existing world. This will test banks. They will need to understand how they engage and innovate with these new worlds. They also need to consider how they redefine their role with the customer and in these new environments.  

One clear example of this current dilemma is the metaverse.  

Metaverse – the emerging market that cannot be ignored 

For its supporters, the metaverse today carries the same significance and potential as the early days of internet banking. The metaverse is part of Web 3.0, where information is tailored through AI and accessed three dimensionally. The threat for banks is that the metaverse offers a decentralised creator economy, that removes the need for traditional intermediaries to create and store value. 

The power of the metaverse is not in the technology behind it, but the social revolution it is creating. It's empowering people at all levels of the organisation, to create content, shared content, transact and monetise and create an economy. 

This presents some fundamental challenges and opportunities for banks. Their customers are going to have some sort of experience in these communities. And banks need to ask themselves, do we understand the metaverse and its impact on our customers? Do we know how they create value? Do we know how they are going to live in these virtual worlds? What are going to be the life events in this virtual world? 

There is a real risk that if banks don`t engage they become disintermediated. As we saw in chapter four, attracting talent with digital skills will be vital in the future, so a credible and visible metaverse presence will also be important for recruitment. 

Banks will need to fight for the right to finance within the metaverse  

The risk to banking being side-lined in the metaverse is very real. Decentralised finance, using blockchain, removes the need for intermediaries such as banks. There will be more collaborative peer-to-peer lending, and commerce through blockchain and cryptocurrency.

Banks who develop solutions that serve the metaverse, working with government regulations and a secure system, can be front and centre financing the needs of this new world.  

Innovation in customer engagement – instant virtual engagement will recapture intimacy and trust

Banks in 2030 will use augmented reality or virtual reality to reimagine how they connect with customers. It will restore trust and intimacy back in banking, after the mainly transactional nature of digital and mobile banking. The metaverse can place humanity back in ways that are not possible in app alerts or text messages.  

Digital and mobile banking have removed the opportunity for banks to build positive personal relationships with their customers. Chatbots or overworked call centres can sometimes be a frustrating channel for customers when they want to speak to their bank. 

The metaverse could allow small businesses to show their relationship manager their new product or machinery, to help fast track a loan application or asset financing request. But banks will still need other channels (such as call centres) for those who are slower to adapt. 

For the next generation of bank customers, who have grown up with gaming, the metaverse will be a natural habitat to engage with their banks. But it can also help banks to increase financial literacy. This can be scaled up and made much more interactive and accessible. 

Banks can be a beacon of safety in a sea of uncertainty

One common fear about the metaverse is how to manage fraud prevention or financial crime. The risks will be very different to the real world, given people can trade in unregulated forms.  

Banks can be part of the answer. They can help with validation, fraud prevention, financial crimes – creating a trust layer between consumers and this brand-new world. Instead of trying to build controls to fix problems (as in the real world), banks who engage early can build the controls up front, as the metaverse develops.  

Banks will also need new credit and risk models to deal with emergence of new metaverse native businesses that are run automatically using computer code, smart contracts and blockchain.  

What should banks do now

Stay close to any new disruptors - that are impacting their customers. Banks will need to understand all the different channels or environments that their customers may care about. Banks will have to rethink how they engage with these new environments, including: 

• Workforce: whether it's talent development, onboarding, or recruiting, employee experience. 
• Product development: understand and build propositions relevant to customer’s lifestyle. 
• Customer experience: leverage the potential offered by developers to redefine the customer journey, customer experience, and even how they're going to engage with new customer segments.  
• The metaverse: should be seen as an emerging market for banks. To be credible to gamers and current users of the metaverse, banks will need to develop a strong brand within the virtual world. This will differ from the real world, and could prove a competitive advantage for those banks that are seen to be credible in the metaverse. 
• Wealth and private banking teams: should be looking at the opportunities to gain customers, with many high-net-worth cryptocurrency individuals likely to be fully immersed in the metaverse. 

Jeeva Moni, Partner, Ernst & Young LLP and Ebony Smallman, Senior Manager, Ernst & Young LLP have contributed to this chapter.

Special thanks go to Nina Driscoll, Director, Ernst & Young S.A., for her contribution to this report.