Both retaining and gaining customers are constant concerns for banks across the UK. With the Seven Day Switching Service in full effect, losing a customer is more likely than ever before. How can a bank differentiate itself in such a crowded market? Customer service seems to be the answer. Patrick Brusnahan investigates
Customer acquisition has always been a tricky task for banks. Previously, an easy way to differentiate yourself from your competition was on price. In the British market now, this is a harder task. The interest rates and service charges for current accounts are within small margins of each other.
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Shashi Nirale, senior vice president and GM EMEA for Servion, tells RBI: “The sector is very commoditised at the moment. Everyone is offering the same interest rates, everybody is offering the same loan products, and there are no differences between banks.”
As a result, the real differentiator becomes customer service.
What are customers looking for from their services?
The story behind what customers want has, in general, always been the same. They want convenient and secure services, but in the new digital age, this can mean many things. According to customer experience management company Servion, customer complaints in the UK alone are costing $37bn to the banking industry.
“Banks are not offering a true omnichannel customer services to their clients and it affects loyalty,” Nirale says. “If I’m not retaining my customers, it’s going to be a big problem. In this industry, if you’re not offering an enhanced customer experience, you’re losing customers and you don’t want to do that right now.”
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By GlobalDataWith new mobile and digital services available, more than ever before, banks need to acknowledge the desire for these options. However, the physical strands of service, such as branches and ATMs, are still in play and must not be ignored. Choice is crucial when keeping a customer happy.
As James Bridge, assistant director of The Association of British Insurers, puts it: “How do you accommodate a huge range of customer journeys?”
Speaking to RBI, Eugene Danilkis, CEO of Mambu, says: “There’s a new wave of people. Some enjoy the experience of a branch and don’t find it cumbersome. The new generation has been raised on mobile technology and they would rather be able to do anything transactional at any time anywhere and not have to deal with the hassle of lining up.
“It’s a generational gap perhaps which is the tipping point right now, especially in the Western world. It’s different in emerging markets where it is more about opportunity of access where travelling to a bank branch involved long distances and there may not be any ATMs. In those markets, it’s more about access than convenience.”
While much has been said across the sector on how millennial consumers love technology, it can be overstated.
Dr Nicola Millard, head of customer insights and futures at BT, says: “The millennial thing is a big overblown. A lot is universal, regardless of your age.”
Nirale also highlighted the many different types of customers a bank can have, all with different preferences.
He says: “Different size banks have different customers. Different regions have different customers. They all vary in nature.”
The mobile channel
Mobile banking has seen a large uptake in usage. According to the British Bankers’ Association, there were 11 million banking app logins a day during 2015, a 50% rise from the previous year. In addition, the number of payments made using banking apps in 2015 was 347 million, an increase of 54% from 2014.
Bridge says: “Customers have been transacting online for a reasonable time now.”
“The majority of day-to-day transactions are probably on the smartphone,” Millard adds.
Danilkis says: “The mobile side is one that has been embraced by even established organisations. The difference is the one taking a digital-first approach and rethinking the entire customer journey. The older organisations are adding it as a new way to interact, but the newer players are thinking about how much of the entire customer journey they can put into mobile as the primary factor; the mobile-first customer experience.
“That is the part that is new to a lot of people. It’s a completely different design and process than what you would get from a traditional bank.”
One aspect that has drawn consumers to the mobile experience is how easy the whole experience is. Marieke Flament, managing director of Europe at Circle (a social payments mobile application), says: “The main feedback we get is the easiness of the app. That is consistent. Setting up an account with Circle probably takes less than a minute. It’s seamless. Nowadays, it needs to be super easy and super fast. That’s what we think makes it easy to adopt.”
Pendar Ostovar, executive director of strategy and research at the BBA, says: “People like convenience. The initial phase of digital involved moving core paper-based client propositions onto the web browser interface. Come smart phones and tablets, the internet became user-friendly and accessible through apps. People started to think what interactions could easily be migrated onto such devices. This was the second phase of digital development. The next phase is designing and manufacturing propositions primarily for apps, while making maximum use of data analytics to create tailored and relevant customer journeys.”
“The approaches that work better are the ones that use mobile to rethink the customer journey. If you design a mobile-based customer journey, you can really rethink the product and its interaction with the customer,” adds Danilkis.
“From a customer point-of-view, you can even think differently on what an account is supposed to be. If you design it from a mobile-first perspective, you could have multiple pools of accounts that merge into an account more relevant for the customer. If you rethink the products, you have a better way of designing this mobile-first experience rather than simply exposing products to mobile channels. Those methods will be less than those that really think.”
Artificial intelligence
One of the ways institutions are hoping to improve customer service is through the implementation of artificial intelligence (AI).
Rather than speak to a person, while trying to remember multiple passwords, AI can streamline this entire process through utilising data.
Nirale says: “Based on data analytics and AI and the tools available, they are not harnessing the power of the data they already have about their customers. All of that can be done.
“I’ll give you an example. If I am on a loan page on a bank’s website, nobody is offering a chat or additional advice. Nobody knows that I’m on that loan page. If I have an omnichannel platform working in the background to give the context of me as a customer, then an agent or advisor should be able to offer me a deal or a discount based on my history. Intuitive services of this nature are not there.
“If you have something there, the customer is delighted. It’s a relief for the customer, as it does not feel like an upsell, which can have a negative connotation.”
AI can also be used to improve security Flament explains. She says: “From the bottom up, we have a lot of AI that is probably better than having someone asking you 20 questions. I would argue that the level of security we have is even better than some banks. We have touch ID, a PIN code, and you can set your own limits. We’ve put a lot of things in place.”
Bridge purports that AI in the form of chatbots could be helpful for the customer experience by ‘creating an experience where customers feel they’re dealing with you, even when they’re not’.
“Various banks are in various stages of implementing this,” Nirale adds. “It’s not just going in and adopting it. They key part is ‘What are you going to do? What are you going to solve?’ There has to be a specific use case.
“Data is a fundamental fabric that will change the customer services industry. The bank has to use the tools that are available today.”
Ostovar says: “Today, customers’ expectations are being shaped through their experiences of solutions offered by different industries such as retail tech providers. One area ripe for transformation is robo-advice, which can make maximum use of customer data, propensities and risk appetite to bridge the advice gap.”
What’s holding banks back?
Why don’t banks already offer this level of customer service? It goes back to a very common answer: legacy systems.
“Banks have enormous amounts of legacy code which constrains system development and roll out of enhanced customer solutions,” Ostovar syas. “Making maximum use of fintechs to some extent circumvents the legacy system issues and allows firms to deliver customer functionality quickly, without adding to the legacy code problem. Some big banks invest in such firms to facilitate their take up within their organisation.”
Nirale adds: “Big banks have invested in technology that is old monolithic legacy. For them to free up capital and invest in new technology, it is difficult and slow.
“In a smaller bank, it is easier for them to make a move. All the processes are easier and the customer base is smaller and the systems are relatively newer and move quicker. That’s the key difference.”
He concludes: “Post-2008, there were so many regulations added to banks. 80% of their budget was allocated towards regulations and fines. They didn’t have the money to spend on these new things, but the costs will go down and then, it will become an interesting playing field.”
