As the banking industry faces tighter margins and increasing competition for customers, many financial executives find themselves looking to cost reductions and department downsizing to better their bottom lines.
Yet, those who take a balanced approach and identify the right operational efficiency initiatives may find that what’s good for profit margins may also improve the customer experience. Automation, self-service capabilities and reduction in human touchpoints can be a win-win for both banks and account holders.
Good for the bottom line and CX
Customer experience is now a top driver at many financial institutions. Banks that lead in customer experience typically have higher customer satisfaction, greater customer longevity and a greater share of deposits, according to a report by Kantar.
As most banks show a reluctance to compete on price, many now compete instead on speed and convenience by automating manual processes and decreasing cycle time, says Vincent Hui, managing director at Cornerstone Advisors. Reducing paperwork and cumbersome processes, increasing automation and enabling associates to help customers with more services can all benefit a customer’s perception of the brand, Hui says.
“There are many processes in which efficiency and improved customer experience go hand-in-hand. You get a double benefit for the bank and the customer,” Hui says. “Little things can often greatly improve the customer experience.”
Anything that can support self-service often frees up staff for more value-added activities and appeals to consumers’ need for instant gratification, Hui says.
Lending holds particular promise for operational efficiency to boost customer satisfaction, says Timothy Reimink, managing director of financial institutions performance improvement at Crowe. For example, apps and websites that enable consumers to upload documents can significantly speed up closing time and reduce many touchpoints on the back end.
“Increasing efficiency in the system enables [institutions] to not only close more loans and improve employee morale, but also improve customer service. …It all speeds up the process and the customer sees the benefit,” Reimink says.
While many big banks have led the charge in technology, smaller banks have also used efficiency-boosting technologies to grow. For example, MainStreet Bank’s early adoption of remote deposit capture in 2004 added real value and attracted new customers without requiring any additional infrastructure, says Lisa Kilgour, SVP and CIO at MainStreet Bank. The ability to offer features such as online banking and cash management options at a time when other competing banks didn’t led to an increase in market share and efficiency ratio.
“We were really able to help customers with minimal branch staff. We have a team that is dedicated to supporting the electronic side for any customer calls that come in,” Kilgour says.
Increasing simplification and speed on the back end can also improve the experience in the front of the house. For example, implementing a more robust and data-driven CRM (customer relationship management) system can offer all associates a comprehensive history of data and interactions with customers. This not only saves time, but also avoids the hassle of associates asking the same questions across channels when customers are trying to resolve problems.
At MainStreet Bank, improved back end processes in loan origination saved paperwork and human capital for the bank while also streamlining the experience for customers. Anything that offers more options ultimately benefits the customer experience, Kilgour says. “Consumers want to do what they want, when they want and how they want. But at the same time, if they need help, they want different ways of getting it,” Kilgour says. “When we reach a pain point, we look for technology instead of trying to throw people at the process.”
Banks that want to implement operational efficiency initiatives with customers in mind should start by identifying meaningful and attainable targets for improvement, Reimink says. General strategic areas include business realignment, channel optimization, process costs, staff productivity and technology and automation.
“The most successful efficiency initiatives follow a more analytic approach that reflects the specific challenges and opportunities facing each line of business and support function,” Reimink says.
Many banks have also discovered that the shift towards personalization can increase the efficiency of customer acquisition and retention. More than half of new account holders say personalization originally drew them to their bank, while nearly 70 percent of existing account holders say personalization has deepened their relationship with their bank, according to the Global Retail Banking Report by Boston Consulting Group. BCG estimates personalization can generate a 40 percent sales lift, reduce customer churn by 30 percent and triple customer engagement scores.
Implementing an automated onboarding process can also reduce staff workload while offering benefits for the customer, says Stacey Zengel, vice president at Jack Henry & Associates. When combined with the right data and solutions, AI also empowers banks to uncover more-efficient processes that can better serve customers. For example, one bank designed a workflow that scanned obituary information to quickly identify deceased account holders and start the account-closing process. AI can also help automate some customer service functions that can increase convenience while reducing back-end labor.
“There’s a sense of immediate gratification, and customers want problems solved immediately,” Zengel.
Despite the opportunities, banks must ensure efficiency initiatives don’t impede the customer experience. Even though customer satisfaction and convenience are high, many customers’ perceptions of trust are lower than they were before 2009, according to the J.D. Power 2019 U.S. Retail Banking Satisfaction Study. J.D. Power noted that one trade-off for the industry has been a “decline in easy interaction, providing advice and strengthening customer relationships.”
Banks should also avoid the temptation to immediately look at staff reductions or cost-cutting to boost efficiency, Reimink says. While these actions may offer short-term results, they don’t address the underlying costs of how processes get done, and these kinds of cuts can ultimately result in a negative customer experience.
“We’ve seen organizations with that mindset fall behind in terms of technology for customers and in terms of quality of service because they avoid spending money,” Reimink says.
Craig Guillot is a business writer who specializes in retail and finance. His work has appeared in such publications as the Wall Street Journal, CNBC, Bankrate and Better Investing.
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