Even as overall customer satisfaction with banks continues to rise, banking today is faced with a number of serious challenges; including the rise of non-bank competitors and the commoditization of core services in a digital age, both fueled by rapid advances in technology-enabled platforms. Rising customer satisfaction levels indicate better retention, but the larger risks for the future are about maintaining banking’s position at the front end of the customer experience. That’s where transactions originate, even as fulfilment avenues tend to become commoditized or disrupted.
To respond to these challenges in 2016, banks should consider these initiatives:
Orient the mobile channel towards sales and engagement. So far, mobile banking has been focused on convenience and self-service. This has served bankers well given the changing demographics and operational effectiveness; more than a third of bank customers regularly use mobile banking. This has improved customer retention as well.
In 2016, however, the focus must start shifting to personalized marketing and affinity. According to a JD Power 2015 survey, more than 68% of virtual customers have not been contacted by the bank in over a year. It’s time for mobile banking to transform itself into a sales and consulting engine. This can be done in two ways. First, create a consultative sales model with the goal of helping customers achieve their financial security needs – issues such as retirement, education, refinancing and tax planning. Using customer analytics, journey mapping, education and personalized recommendations, banks need to get customers to use mobile as their first stop for exploration, needs analysis and fulfilment. Journeys will likely not end on mobile and customers can be directed to a branch for further guidance.
Second, banks need to be more oriented towards commerce by inserting themselves into the digital marketing efforts of other businesses, such as retailers. Telecom companies are doing this through location-based offers without requiring consumers to install mobile apps of their favorite brands. Consumers must opt-in, and brands should agree to piggyback on this infrastructure. A few years ago, Visa launched a similar location-based promotions model, although customers first had to install Visa’s mobile app. Banks can move forward much more comprehensively, and arguably with lesser friction, given their existing high trust relationships with customers. In addition, tools such as budget planning, wish lists, savings targets and payments can seamlessly be included on mobile apps by banks, arguably better than other businesses can. These supplementary features will be essential success factors of these mobile initiatives.
Both these areas above will require revisiting the technology landscape. For example, how should banks enable theme-based account balances, where parts of the overall balance can be tagged to certain themes such as holiday or travel? Not all banks have this capability today, although it is available. Similarly, creating a nurturing relationship with the customer needs a more responsive email and online engagement capability. The first step should be to map the current technology landscape to these desired business capabilities, and then set off as soon as possible with a planned, quantifiable roadmap.
Blend outbound and inbound channels. The benefits of broad relationships are well known; customers who have multiple products or use multiple channels are known to drive higher retention rates. However, for too long, banks have been operating their channels and products in silos. Cross selling between product lines has been challenging and isolated at best. At the same time, 55% of customers say that being recommended products and services that will better meet their financial needs would strongly increase their loyalty to the bank.
2016 will be the year when banks need to move from outbound, top-of-the-funnel marketing to more engaged conversations. Contact center, web, mobile and branch channels should be integrated to not only create internal customer 360-degree views, but also to address the customer’s educational needs across channels.
For example, the online secure banking areas are largely untapped from the perspective of providing personalized recommendations or offers to initiate a dialog. Drawing customers in through interactive engagement tools and encouraging them to build up more comprehensive profiles with the bank could be two short-term goals. Another opportunity could be to leverage the physical branch presence by sending out email and other marketing promotions on behalf of a local relationship banker rather than from a corporate digital identity. This will help create more personalized relationships.
A third important area is to continue customer conversations across channels through regular customer education and outreach. The simplest example of such a use case is when a checking account customer browses the bank’s website for information on home mortgages. These opportunities are lost as banks fail to identify and capture this conversation for follow up. Technological advancements in better integrating digital marketing, analytics, customer relationship management and campaign management will be some key functions to consider.
Innovate business models. Technology is enabling new non-banking disruptors to gain market share in areas such as person-to-person (P2P) lending. According to the Millennial Disruption Index, 53% of customers don’t think their bank offers anything different than other banks. More troubling is the fact that 73% of them would be more excited about a banking offering from a technology firm such as Google, Apple or Square.
In 2016, banks need to take on these emerging challenges and start making headway. Bringing people together and being a facilitator is the way of the future as we’ve seen in other industries (Uber in transportation, Lending Club in financial services and Airbnb in hospitality, to name a few). Banks need to review their business models and determine the most appropriate roadmap to start being relevant again. In the case of P2P lending, perhaps simplified credit scoring, updated risk management models and expansion of lending avenues through external partnerships can be a start, or maybe even launching a new brand using widely available digital technology. Maintaining front end customer engagement will be the most important factor in the immediate term in order to tap into emerging revenue models and avoid being relegated to a fulfilment services provider.
Improve payments capabilities. The consumer market has evolved to be much more demanding when it comes to the range and speed of transactions. P2P money transfers and small business payments are two typical areas where disruption is already occurring. Even though most transactions ultimately end up at a traditional bank, there is nothing to prevent disruptors from evolving their models into prepaid deposits and cards. Banks must create a roadmap for improving user adoption and ensuring that customers stay on their own networks.
More importantly, as with P2P lending, the transaction itself is not the measure of the full potential. Simple payment transactions can easily evolve into new business models, such as small business loyalty programs. Banks need to look beyond the payment transactions to the long-term revenue models these will generate, similar to the way in which Facebook, Google and Amazon created robust revenue streams from social networking and retail transaction-focused business models.
Rethink the branch network to be the sales generator, not the sales enabler. While branches are still useful for closing sales transactions, customers typically do not use them to originate those transactions in today’s digital environment. They most likely began with self-driven research on the Web. So, it’s time to equip the branch with those same research capabilities to provide a local and personalized feel to the relationship.
The branch should be leveraged for what it is. In an age when more than 75% of customers believe that their banking relationship is transaction- rather than advice-driven, the branch needs to start being the hub where customer goals are discussed. One way to accomplish that is to transform the branch into a community hub, where people discover and analyze their financial needs. This can be done by inviting third parties into the branch to educate customers on financial matters. Similarly, non-financial activities such as environmental campaigns, sporting marathons and other community service activities are all ultimately linked to fund raising and financial management. By becoming a community nerve center, banks can regain their position as a community anchor.
Mr. Grover can be reached at firstname.lastname@example.org.