Although digital
technology is making bank transactions more efficient, it is
increasingly difficult for lenders to build close relationships
with consumers. Author and marketing consultant Brett King tells
Douglas Blakey the banking system is broken: not because of
regulation, but because banks no longer understand their
customers.

 

Bar chart showing the changes expected in UK retail payments from 2009-2015“The branch is
back. Cash is king. Cheques will bounce back. Yeah, OK. You just
keep telling yourself that and see how that works out for you,”
said Brett King, author of BANK 2.0 – How customer behaviour
and technology will change the future of financial
services
.

At the heart of King’s
argument is the contention that there has been a revolutionary
shift in consumer behaviour in the past decade – but a complete
failure by banks to recognise and respond to those
shifts.

He argued that banks of the
future need to offer personal online experiences, a mobile wallet,
social media, ‘branches of the future,’ touch-screen ATMs and
personalised digital marketing, among other things.

“But the majority of banks,
certainly in the UK, do not even allow staff to use social media
when at work. To have staff talking about their bank, in real time,
is terrifying from a risk perspective.”

How well do you really know your competitors?

Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.

Company Profile – free sample

Thank you!

Your download email will arrive shortly

Not ready to buy yet? Download a free sample

We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form

By GlobalData
Visit our Privacy Policy for more information about our services, how we may use, process and share your personal data, including information of your rights in respect of your personal data and how you can unsubscribe from future marketing communications. Our services are intended for corporate subscribers and you warrant that the email address submitted is your corporate email address.

He argued that First Direct
is about the only bank in the UK that has grasped that advocacy can
be built through social media. Although other lenders are
experimenting with it, the majority of them have a low level of
comfort for the medium.

According to King, banks need
to understand what it will take to adapt, not just for
profitability, but to protect their brand and revenue.

“No amount of brand
advertising or marketing will work if I am told by my friends in my
social networking group how bad their bank is… And we are
approaching a tipping point regarding consumers and marketing
messages.

“Traditional mechanisms are
breaking down and brand marketing will not in the future be
enough.”

 

Distribution
challenges

Bar chart showing the retail payments for 2015Increasingly,
customers will not visit a bank branch to enjoy the customer
service experience, unless the human interaction of the visit is an
essential element of the transaction.

While King conceded that
there is, and will continue to be, a role for the bank branch, he
stressed that the role of the physical network has to
change.

“We will end up seeing a very
different type of branch network. In the major cities, there will
be the big flagship branches. In the high street, the physical
footprint will become much smaller.

“A desk or a window in
another retail environment or a touch screen or a virtual branch;
for some bankers it will seem daunting.”

King is however scathing
about banks maintaining systems that reward the sales figures for
the branch network, over direct channels, because they are out of
step with customers.

So while 88% of mortgage
customers select a mortgage via the online channel, spending on
average of over 11 hours to choose a product, the sale is still
recorded against a ‘branch’ because that is where the customer
completes the last part of the compliance jigsaw.

Despite increased online
banking usage and a decline in actual branch sales, most banks
still consider the internet as an alternative to the branch or as a
cost-reduction strategy.

“There are bankers who say
‘things will get back to normal soon’. Bankers need to change their
instinct. They are infatuated with the art of banking and think
that is what makes them successful.

“The answer is to make
banking more pervasive. The car dealership – that is the time to
sell me a car loan. The house auction – sell me a mortgage. Take
banking to the customers and that is where geo-location and social
media offers lenders new opportunities.”

He argued that if banks
genuinely supported the internet as a sales channel, measured the
source of sales more accurately and used customer behaviour as an
indicator of where marketing budgets should be invested, the online
and mobile banking experience would improve as a direct
result.

“By 2020, when half of a
bank’s most valuable customers are Gen Y (18-34 year-olds) and have
never written a cheque, the bank will have to change how it
operates. Do you wait to 2020 or change now?”

King argued that failure to
respond to the changed climate will only benefit non-bank rivals,
such as Apple and Google.

“An NFC-enabled Apple iPhone
launched in association with Visa and MasterCard’s payment network
would give banks something to think about.

“If Apple used its iTunes
platform to provide stored value for a debit card mechanism, the
banks would not only have a new rival – they would have a new rival
with, arguably a stronger brand than many a lender.

“If you think, as a bank,
that you can prevent customers using this technology, you are on
drugs.

“Banks have thought they could stop behavioural change and
while a small segment of customers will still behave the same way
as now, to think that this change will not happen is
arrogant.”