While many banks are jumping on the bandwagon of adopting digital channels – fuelled by the fear of customers attrition, combined with the attraction of cutting cost:income ratios – a digital banking strategy alone will not provide the panacea these banks seek. Alex Bray, retail channel director at Misys, considers the need of an ‘omni-channel’ banking strategy, which puts the customer interaction at the heart of the strategy.
The retail banking market is evolving fast – particularly in the field of digital banking. Coping with this change has proved daunting for banks. Mobile devices have proliferated. With each jazzy new launch have come new features and new functionalities. At the same time, the likes of Apple, Google and Amazon have driven the bar for user interface design higher and higher. The expectations of today’s customers are being set beyond the financial services industry.
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So why does this matter to banks?
Today’s customers are more demanding and more savvy. They are increasingly looking for their banking services to become more convenient – and for all the dots to be joined up. As lifestyles change and lives become busier, we see clear trends of customers migrating in increasing numbers from branches into digital channels. This has been re-affirmed by recent studies, such as Bains’ ‘Customer Loyalty in Retail Banking‘. As a result of this ongoing shift, the most frequent touch point that a customer now has with the bank is often through their computer, tablet or mobile phone.
The business benefits of migrating customers to digital channels exceed cost:income ratio
As per most banks’ activity migration strategies, customers should be encouraged to use low cost, high convenience digital channels. According to TowerGroup, the cost of processing a transaction via an online channel can be as much as 5 times lower than via an ATM and as much as 25 times lower than in-branch. And the figures for mobile banking are even more impressive, with TowerGroup estimating that the cost of processing a transaction via a mobile phone can be as much as 10 times lower than via an ATM and as much as 50 times lower than in-branch.
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By GlobalDataReducing cost:income ratio is high on the agenda for the majority – if not all – banks. But while digital channels are a means to achieving this efficiency, the benefits they can provide in customer loyalty and increased sales are independent business drivers, powerful enough to warrant a digital channel strategy.
Banks must create a differentiated proposition via digital channels
Consumers’ migration away from the branch makes it critical that banks are able to create a differentiated proposition via these new digital touch points. If they fail to do so, then their brand proposition and the overall stickiness of the customer relationship will start to fade.
At the same time, many banks used to make the most of their sales by generating leads from customer transactions in-branch. However, if customers no longer go into branches, it becomes imperative for banks to be able to make valuable sales to customers through their digital channel touches. According to EFMA, by 2015, current accounts sold via digital channels (online and mobile) will increase from 9% of sales to 43% of sales, while 59% of savings accounts will be sold via digital channels.
Without a salesperson on hand to encourage cross- or up-selling, digital channels sales processes need to be refined and developed up to the point where they offer an effective (potentially superior) alternative to face-to-face salespeople.
However, to look at this solely through the lens of digital channels is to miss the bigger picture. At the same time that we see customer behaviours change, the entire concept of the channel itself is becoming dated – even irrelevant. Where does social media fit? What is the difference between online banking, mobile banking or tablet banking? What channel are you using if you video chat with an advisor via a tablet banking app?
A few years ago, we looked towards a multi-channel future. Today, the new buzz phrase is ‘omni-channel strategy’. We are moving from a world where customer journeys are enabled in many parallel, yet discrete, channel silos, to an environment where consumers can experience an integrated and seamless customer journey across all distribution channels. In this new, omni-channel world, social media, person-to-person and person-to-machine interactions seamlessly merge into one customer experience. To deliver such an experience, we need to start to think about how we manage and deliver customer interactions instead of structuring banking teams around specific channels.
Delivering a customer interaction
For low value customer interactions, such as balance checking or statement viewing, the best customer experience is often driven by providing a device-optimised process – or even a bespoke app – with the minimum number of steps, clicks or swipes needed to reach the goal. Alternatively, this can be achieved by adding more digital options to a branch. This is a strategy which has been adopted by many big banks – and the Apple store-style redesign of the new Citibank branches illustrates this. Citibank reengineered over 100 branch-level processes to reinvent the branch experience for customers. It has incorporated 24/7 access to customer service via video assist terminals, a ‘Minority Report’ style digital service browser where customers can preview Citi’s products and services, as well as other highly interactive features.
However, retaining person-to-person interactions for complex or value adding transactions or sales makes sense. A good example of this is a mortgage sale. A customer will most likely want to start their purchase by undertaking some anonymous research – so they feel informed before they speak to someone. They will scout sites like MoneySupermarket.com and read financial advice sites to get a feel for today’s pricing and offers. Then they will want to take some advice – perhaps from a broker or a personal banker. They may then wish to start an online application. But halfway through, they may want to ask more questions. At this point, omni-channel strategy kicks in. Can the user talk to an adviser within the channel they are already using – or do they need to pick up the phone? Can the advisor see the customer’s partially completed application? Once the advice has been given, can the customer continue with their online application – or are they forced down another channel?
Banks have lagged at building these kinds of customer experiences. And while banks have been focusing on the repercussions of the financial crisis, new competitors have emerged and started to create tailored omni-channel processes that can meet the needs of high-value customer segments. In effect, new challengers are nibbling at the best edges of banks’ customer bases. However, there have been some bright spots. For example, ASB in New Zealand have deployed a video chat service within their Facebook page which enables the bank to provide customers with a more seamless service experience.
As the world becomes more digital, the challenge to banks is to develop an omni-channel strategy which enables person-to-person interactions at specific points where value to the customer and the bank can be optimised. Make person-to-person interactions too readily available and a bank adds cost for little benefit. Make them too hard to access and a bank can lose sales opportunities.
