Have you come across the term “proactive banking”?
The term seems to be on everyone’s lips in the digital banking industry – and with good reason.
In the rapidly evolving world of digital banking, the distinction between proactive and reactive banking has become increasingly significant. With digital transformation reshaping the industry and neobanks steadily becoming a genuine threat, established banks face mounting pressure to not only meet customer expectations, but to anticipate them. This transition goes beyond simply improving customer service – it is about redefining the entire banking experience. I
In this post, we will explore the fundamental differences between proactive and reactive banking, and why embracing a proactive approach is essential for staying competitive in today's fast-paced financial landscape.
Reactive banking: Solving problems as they occur
Reactive banking is the traditional approach to financial services and remains the method most used by established banks today.
In this model, banks primarily respond to customer needs only after they have been raised by the customer. Products and services are mostly one-size-fits-all, with very minimal personalisation. Any communication and insights from bank to customer is standard and based on static or historical information.
The bank often provides customer insights and notifications, but the communication is typically untimely, irrelevant, or not personalised to the specific customer. If the customer runs into a problem with their finances, the bank will notify them after the problem arises, such as:
- Warning customers about an unpaid expense when it is already overdue
- Warning customers about overdraft when the customer has already exceeded their means.
This leads to customer annoyance, diminished trust, and a need for customer support to figure out the next steps. Banks also need extensive (and expensive) customer support across multiple branches to be able to answer customer needs, which most often are basic questions about transactions or resolving minor problems.
While this approach was the golden standard 15 years ago, technology has changed and with it – customer expectations.
Gone are the days of manual budgeting
Proactive banking: Anticipating problems before they arise
In stark contrast to reactive banking, the proactive approach addresses customer needs before they arise.
A proactive bank warns their customer about an upcoming expense before the due date, helping them avoid fees. Ideally, the bank also provides the customer with cashflow forecasting, an overview of all upcoming expenses to give the customer an understanding of their liquidity as the month progresses. If the customer is at risk of going into overdraft, the bank would alert the customer in time to make arrangements.
To provide this level of proactive communication, the bank will have adopted the latest digital banking technology, including:
Advanced data enrichment – which transforms basic transaction data into a limitless source of value for both banks and customers. Enrichment technology adds valuable information to transactions, such as category, merchant details, geolocation, clear descriptions, and even carbon footprint calculations.
Hyper-personalisation – which makes use of advanced technologies such as AI, ML, and big data analytics to provide highly individualised and relevant financial services and experiences to each customer.
Personalised, omni-channel communication – which in our case, refers to AI-powered Insights that can be delivered to any customer-facing (or bank’s internal) channel. Marrying data enrichment and hyper-personalisation ensures effective, timely, and relevant communication can be sent out through push, in-app notifications, or Gen-AI chatbots, to name a few.
Proactive banking brings near endless benefits for both bank and customer. For banks, being proactive can reduce cost-to-serve due to reduced customer support needs, increase customer loyalty, reduce churn, and even create new revenue streams due to personalised product recommendations. Banks gain an understanding of each customer’s unique spending patterns and financial behaviour, enabling a more personalised and proactive banking experience.
For customers, they profit from a bank that acts as a trusted financial advisor, encouraging stability and keeping them in touch with their finances.
Meniga has helped leading banks around the world evolve into proactive banking, including Groupe BPCE, Unicredit, UOB, and Tangerine. Contact our team to find out how we can help you adopt the latest digital banking technologies in a safe and scalable way. Contact us!
