Channel management is arguably one of the most important functions in today’s banking industry as institutions are caught between the eroding viability of traditional branches and the need to accommodate emerging channels such as mobile. How do banks plan for future changes in customer channel preference while still meeting the needs of today’s customers?
We posed that question to James (“Jim”) Di Ciaula, vice president and director, customer experience and channel integration, at Chicago-based Harris Bank. With 25 years of experience in the banking industry, Di Ciaula remembers when channel management mostly consisted of trying to maintain optimal performance at each customer touchpoint, such as the branch, ATM and call center. Today, the focus has shifted to “channel optimization,” an analytics-rich science of maximizing the usage of those customer touchpoints within an overall channel management strategy that tries to anticipate future customer behavior.
“It starts by having the management information around customer trends and how they are changing; by constantly monitoring customer behavior, you’re able to take action at the right time,” Di Ciaula says.
Q: Banking is notorious for never getting rid of a delivery channel, of simply layering on new ones. What sort of challenge does that pose for someone such as yourself, who is tasked with managing channels?
Di Ciaula: When you look at customer behavior, customer demand is really around “anytime, anywhere” banking. So, when you look at integrated channel management or how you respond to customer needs, you really need to think about what the customer wants. They’re at the center of the decision-making process and we respond to their preferences.
In the early days of integrated channel management, we focused on trying to ensure that the features we offered and our employee skill sets met those customer needs across channels. Now, we need to dive deeper, and continue to gain a better understanding of specific customer segments and their behaviors. Based on those behaviors, we can develop strategies that will actually transition customers to channels that will meet their needs and deliver a desired customer experience.
I call this “channel optimization”—how do you “optimize,” or most effectively utilize the capabilities across all of your distribution channels? All the channels play a valuable role in a truly integrated customer experience, but invariably, over time, certain channels will become more prominent. Branch banking is the perfect example. If you think about where branches were a decade ago in terms of service-level transactions, those transactions have significantly transitioned to online and other distribution channels.
To answer your question more directly, the challenge is in determining the best approach for optimizing the channels based on customer behavior and developing the analytics to collect customer insights and monitor those behaviors.
Q: How do you try to anticipate future demand without hurting current performance? Branches, for example, may be declining in importance but are still needed to attract new customers. How do you manage that transition?
Di Ciaula: It’s not that branches are losing their importance so much as we need to redefine what the purpose of the branch is in today’s environment and fully utilize its capabilities according to customer preferences.
And it starts with the customer and their expectations. Given demographics and projections of their behavior, you can forecast trends and start looking at your interim and long-term transition plans for the different channels. There is a perspective in the industry that electronic channels are going to take on a much greater role for both sales and service. With this change in behavior, you begin to look at transitioning customers over time. This could lead to deployment of a branch optimization model that takes into consideration the future market opportunity.
Changes in customer behavior, the evolution of virtual channels and the centralization of many corporate functions have resulted in a decreased need for branches to be as large as they are today. The overall physical footprint of the branch, the flow of traffic and what transactions occur can – and need to – change. You start looking at branch designs that are more flexible and affordable. You also look at your distribution network – do branches need to be in close proximity or can a robust ATM or other self-service options serve as an alternative?
It’s an art more than a science, but I think it starts by having the management information around customer trends and how they are changing; by constantly monitoring customer behavior, you’re able to take action at the right time.
Q: Just based on your experience in this business, and what you’ve been reading, what is your gut feeling for how bank channels will be configured in a typical bank ten years from now? What would you likely see then that you don’t see today?
Di Ciaula: I think online, mobile and other technologies on the horizon that we can’t even anticipate yet are probably going to account for 60% to 70% of service transaction volume – not necessarily sales, but definitely the service side of things. I can foresee where you’ll actually be sitting in your living room, bringing something up online, having a virtual conversation with a banker and getting your mortgage closed with the click of a button.
The total number and proximity of branches may be different, but the branch will continue to be very important. It’s key to your brand, to creating a visible presence in the communities in which you serve. I think it’s integral to building customer relationships and loyalty and for offering customers more complex financial advice and products.
I can’t stress enough, in terms of integrated channel management, the discipline around understanding customer behaviors, building the supporting reporting and establishing an analytical infrastructure. You need to look at your business by channel: how many people utilize it, what’s the frequency of that utilization, what’s the cost of serving in that channel and how much revenue would you attribute to that channel? If you don’t have the mechanisms to monitor that over time, you’re not going to know the right time to deploy another strategy.
Q: I noticed on the Harris Bank website a button that you can “push to talk” to a live banker. How does that fit into your concept of channel management?
Di Ciaula: We are among the early adopters of the “Push to Talk” functionality. It’s a kind of insurance policy. Customers may not use it, but they know it’s there, and that gives a lot of comfort to some customers.
With all the movement towards virtual channels, customers still have questions, and some are only willing to go so far before they want to speak to an individual. That’s just part of making it easier for customers to do business with us – offering them the flexibility and choice to do business with us when, where and how they want to be served.
Channel integration revolves around the customer experience: how do you create consistency either in the features or information that is available within the different distribution channels? If you call a branch about a new promotion, can that same information be accessed in the online space? Was that same information communicated and coached in the call center?
Q: How do you accomplish that from a managerial perspective, given the siloed nature of most banking organizations?
Di Ciaula: You need to have the channels centralized under one line of business, where you have a holistic view across those different distribution points. Then, you build a process – as we’ve done within our integrated channel management office – in which any new products, initiatives or messages funnel through a centralized point and you have that cross-discipline representation, whether you call it a committee, a team, or whatever.
The goal is to understand the customer experience that is going to be generated at those different distribution points and build it into the plan. It’s a very deliberate process.
I’m the director of the Integrated Channel Management Office at Harris. Along with my team, I explore strategy, planning and performance management across the distribution channels as well as the related customer experience. We also influence the strategic investments and channel adoption strategies we want to deploy across our customer segments.
Q: Speaking of strategic investments, what’s your view on mobile? How important a channel will that be?
Di Ciaula: I believe mobile will be a very important channel moving forward, especially when you look at the number of households and individuals who actually own smartphones . We just don’t know the adoption rates and the types of transactions mobile will specifically be used for. As a starting point, however, we have reached out to our customers to ask what features and functionality are important to them. That customer feedback is directly influencing the development of our mobile platform.
Mr. Cline is managing editor of BAI Banking Strategies. He can be reached at [email protected].
The report includes insights from our recent BAI Banking Outlook: 2023 Trends survey that identified the top challenges ahead: gaining new customers, providing a more compelling digital banking experience and acquiring and retaining talent....
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