Innovation for the Customer Experience

With the global financial crisis of 2008-2009 mostly in the rear view mirror, banks around the globe can focus more on the future, which means improving the customer experience through innovation, particularly in the delivery of mobile services.

That’s the view of a panel of bankers and financial services executives assembled to judge the 2013 BAI-Finacle Global Banking Innovation Awards, which will be presented at the upcoming BAI Retail Delivery 2013. “As more customers turn towards mobile and social channels in a bid to gain more control over their banking, banks have a unique opportunity to provide differentiated levels of service and functionality and connect with customers in a new way,” says Patrick Desmares, president and CEO of EFMA, the Paris-based European Financial Management Association.

Joining Desmares among the six of 10 judges responding to our questions regarding the state of innovation in today’s financial services industry were: Nick Astwick, chief operating officer, Kiwibank, Wellington, New Zealand; Sandeep Deobhakta, head of personal/business banking, Africa, for Standard Bank, Johannesburg, South Africa; Jan Hendrik Kraus, general manager, group strategy, Emirates NBD, Dubai; Steve Monaghan, chief innovation officer for DBS Bank, Singapore; and Benjami Puigdevall, head of electronic channels for la Caixa, Barcelona, Spain.

Q: By most measures, the global financial crisis appears to have eased this year. Has this improved the environment for innovation in retail banking in your country?

Puigdevall: Innovation is clearly a source of competitiveness and a way to keep growing. Post-crisis, the majority of banks have learned the lesson of the relevance of being closer to our clients and not only offering better products, but also developing a higher sensitivity to their needs. In our case, we launched a social community to obtain our clients’ opinions about what they expected from Caixabank. We obtained more than 900 new ideas in just a couple of months. This new approach to innovation will probably be the best legacy from this crisis.

Desmares: The evidence from EFMA’s annual global research is that bankers are increasing their investment in innovation and that they believe that their innovation performance is improving. Europe is no exception, although there are still countries in the region that are in recession and in those countries the banking system is under a lot of stress. I think we are still at the very early stages of recovery in Europe overall, so the environment is not as favourable as it is in other parts of the world.

We’ve definitely seen focus shift away from cost-optimization to innovation in customer-centricity and customer needs. Some interesting thoughts about innovation came about at our recent Banking on Innovation conference. A delegate pointed out that the real challenge is around the customer relationship – and the customer experience is just one side of that. It’s also about products and services and a convenient way to relate and it’s about processes and systems. There are now more platforms than ever for relating to and communicating with customers and creating engagement with them.

Monaghan: Innovation isn’t seasonal; it’s a critical element of our business mix at DBS. The best innovations are often born in adversity. In Singapore, adversity has framed how the country was forged and how it has grown to be one of the leading financial centers of the world. This frame is just as applicable to banking as it is in every industry. The challenge is to maintain that sense of urgency, focus and prudence when times are good and resources relatively abundant.

Deobhakta: The environment for innovation is certainly improving in Africa. It probably has less to do with the crisis and more with the growth opportunity in sub-Saharan Africa, with gross domestic product (GDP) growth projected at 5% or more. Key drivers of innovation are increased competition, the need to differentiate and provide a better customer experience and the growing penetration and evolution of mobile technology on the continent.

Astwick: While New Zealand was affected by the global financial crisis it wasn’t affected to the same scale as other parts of the world. The innovation agenda that we are seeing in financial services is less about product innovation as it is about service innovation and business model innovation. In our area, that’s the competitive battleground.

Kraus: Banks are investing more to deliver an enhanced customer experience and especially invest in new technologies, for example on the mobile banking side. It is clear that some banks have dedicated a significant budget to fund the transformation into the new era and are on-boarding the required expertise from more advanced markets.

Q: What are the most exciting innovations in retail banking that you’ve seen this year in your country or region of the world?

Monaghan: There are three fundamental drivers of technological innovation today: connectivity (Metcalf’s law), big data (Kryder’s law) and intelligence (Moore’s law). These are complemented by two rapidly maturing delivery channels, cloud and mobile, which are changing paradigms in scale and accessibility.

There are a few fundamental shifts evident in banks around the world as a result of this perfect storm of technology. First, a rapid shift towards customer-centric design, which is lowering the barrier to consumer adoption of products, services and channels. The second is the transformation of information into insight, which is enabling banks to deliver contextual services to customers. The third is value chain extension, where banks are moving beyond simple transactions to providing increasing consumer value. Each of these shifts is changing the revenue and cost dynamics of our industry and increasing the value proposition for customers.

Puigdevall: The most exciting development, without a doubt, is the incredible growth of mobile services as a real revolution, deeper than the Internet revolution 15 years ago. The adoption of this new channel is so strong that mobile activity has reached the same transactional volumes as our 10,000 ATMs. In fact, there is a new category of “pure mobile” clients who use exclusively mobile access to our remote services. We’re really convinced that the combination of mobile services, payments and social networks will provide us the opportunity to create new and disruptive services in the coming years.

Kraus: From my point of view, the most exiting innovations in the Middle East are on the channel side, especially in mobile banking, which offers a whole range of new opportunities to do banking anywhere/anytime with a high level of convenience.

Astwick: The most exciting innovations in retail banking from my perspective have come largely in the areas of service innovation and business model innovation. The usability and capability of mobile banking has presented the greatest opportunity for innovation in both service and business innovation, from small, easy-to-use visual applications such as Westpac’s Cash Tank to personal financial management. This technology can enable quantum shifts in the way financial services are provided to deliver customer cost and compliance outcomes but it does require challenging your mind set to execute successfully.

Deobhakta: The improvement in financial access through mobile technology is the most exciting development in Africa. Banking penetration overall is still very low on the continent but we have seen huge progress as mobile banking and mobile payments provide access to a much larger number of customers. Speaking generally, the use of smart devices, apps, mobile and Internet capability to enhance the customer experience in terms of service and usability is really changing the customer experience.

Desmares: Mobile and online are still the areas getting the most focus and we have seen the first digital-only bank launched in Belgium and Germany by BNP Paribas, called Hello bank! This bank is designed specifically for the mobile phone rather than just being an adaptation of an existing online bank.

Biometrics is also a big area of focus and Finnish start-up Uniqul, for example, has announced that it has developed a biometric authentication system based on face recognition. Meanwhile, British start-up Voicekey has developed a biometric iPhone app that uses voice recognition software. The user’s voice print is recorded and stored in a database or on the user’s phone. When users want to identify themselves, all they have to do is say a few words, which the app will compare with the user’s previously recorded voice print. Possible uses of Voicekey include using it as a PIN replacement to validate mobile payments. Another example is from UniCredit, which is testing a new biometric recognition system for making payments at the point-of-sale.

Q: Do you believe that such innovations can help restore customers’ trust in their retail banks, which was damaged during the financial crisis?

Deobhakta: Absolutely. Innovations that are relevant help enhance the customer experience and that does help improve trust.

Monaghan: Technology is an enabler of transparency and transparency creates trust. As banks continue to embrace and enable consumer technology, the nature and quality of consumer engagement and information exchange continues to increase. This creates value for both the customer and the bank, the perfect ingredients for sustainable, trusted relationships.

Kraus: While the lack of trust in banks overall is a challenge for the sector and not easy to overcome, every bank can individually strive to increase trust in their own customer base. This is primarily driven by ethical behavior, i.e. transparency, perceived value for money, etc. If banks deploy and apply new technologies in the right manner, they will provide convenience and features to their customers which will definitely add a lot of value to the relationship. Therefore, innovations won’t be the source of but can be a means to increase trust levels by increasing customer satisfaction with the delivery of banking services.

Desmares: While re-building trust will take far more than the innovations themselves, they can certainly help. For example, as more customers turn towards mobile and social channels in a bid to gain more control over their banking, banks have a unique opportunity to provide differentiated levels of service and functionality and connect with customers in a new way. Innovations in security measures such as biometrics can also help.

Banks can also be innovative in the way they support customers in difficulty, and this is an important factor in enhancing the customer value proposition and establishing real trust.

Puigdevall: Working on innovation will improve the quality of customer relationships. Nevertheless, we think the best way to improve customer trust is through social innovation, which implies a huge emotional impact on our clients. Somehow, we have to demonstrate that it’s not just a matter of customer benefits – that our activities include a social commitment to society.

Astwick: In our jurisdiction, there wasn’t the same damage to customer trust as seen in other parts of the globe. In New Zealand, the greatest impact of the financial crisis was the constriction of credit. But now, the credit supply has been restored to previous levels and banks are heavily investing in innovations to dramatically improve their customer experiences in line with their brand propositions. 

Mr. Cline is managing editor of BAI Banking Strategies. He can be reached at [email protected].