Banks re-invent themselves to keep the customer onboard
By Guy Roosen (Member of the Executive Committee at Beobank)
Proximity and intelligent and secure digital experience are banks’ main weapons to secure customers’ altered expectations on banking
In the last decade, trends and behavior patterns of the FMCB* business have increasingly made inroads in the banking industry. From the “24 hours open” culture to the multi-channel diversity on product offering and the increased customer demand on customer service standards, customers have grown accustomed to an era where supply and demand interact in constantly changing perimeters.
While banks massively invested over the last 10 years in digital front ends (ATMs, home banking platforms, security gateways, etc…), customers have not necessarily been wowed and convinced on their banking journey. In the WRBR of Capgemimi and Efma (2015), polling shows that even for non-complex products, customers prefer the convenience of their branch. In the same report, the Customer Experience Index for Belgium (and Western Europe in general) has decreased 5 BPs (2015 versus 2013), showcasing customer’s lowered appreciation for medium and back offices.
At the same time, Regulatory initiatives have tightened their grip on the banking industry as a whole. In between Mifid regulation on enhanced customer protection, the Payment Service Directive (PSD2) on opening up the payment landscape to new entrants (in line with the SEPA promise), Basel II/III requirements on financial buffering and the Single Supervisory Mechanism (SSM) on the reinforcing of the Economic and Monetary Union, banks have been known to spend 80 to 90% of their yearly IT budget on Regulatory Affairs. Apart from the IT cost and the enlarged MIS requirements, there is also the undermining of traditional bank revenues.
With the walls between industries fading, a variety of new players have been attracted by the low hanging fruit in the financial department store. Offering financial products is not only considered as a new revenue stream, but more as a direct highway to customer’s DNA , as financial operations are often the missing link between the consumer and the purchase behavior. Retailers, web giants and service providers have embraced the financial space as a strategic direction to deploy.
How can banks going forward secure their existence and relevance in this challenging environment?
Firstly banks need to keep investing in their traditional branches network, in line with customer’s expectations on proximity and the desire to have a safe haven for advice and counseling. While financial products have often become a commodity, the expert counseling of a Financial Advisor has not. The differentiation in the marketplace will be on the merits of holistic advice, across the various product lines, towards a solution for customer needs. The shift from product management to solution management is more tangible than ever. To cope with these needs, banks will not erect more branches, but rather invest in more Financial Advisors in their existing network.
Secondly banks will need to continue to invest in intelligent digital channels. For generation Y customers the streamlining of processes and flows into manageable interaction platforms is a pre-requisite for doing business. For different customer segments technology is an indispensable part of the daily consumer journey, with varying expectations on delivery returns.
But compromises on efficiency and customer friendliness will not be tolerated by the demanding customer base. Productwise, the dematerialization of cash and plastics will continue to progress towards mobile carriers, ranging from mobile phones and wearables to digital wallets. Security protocols will be key here in customer adoption. Beobank is investing the NFC technology through launching contactless debit and credit cards in 2015 and is preparing a business case for a digital wallet in line with market trends. Contactwise customers are increasingly hungry to challenge traditional face-to-face encounters to virtual meetings, be with through videoconference, instant messaging or multiple social media. It goes beyond saying that bankers need to embrace every contact opportunity with their customers, but with the proper security lock on the virtual door.
Lastly banks will need to redesign their revenue model. With traditional revenues under attack, there is a clear shift between product fees and a “customer advisory fee model”, whereby new ways of tarification will need to be developed to cope with tomorrow’s reality. In an atmosphere of transparency, models need to be developed which value counseling and advice, in the same way as is customary for liberal professions for instance.
The face of banking in the next 5 years will witness an accelerated evolution of the traditional high street bank institutions of yore to flexible banking stores of the future. Both the brick-and-mortar and digital platforms will offer progressively more tailored advice to solution customer needs, based on the proximity relationship between a banker and its customer and the one shop shopping advantage. Customer touch points will need streamlining from front to back, to comply with high demands on 360° solution management throughout the customer life cycle. Security and convenience will need to find new balances to accommodate for customer’s ease of mind.
The old bank may be dead but bankers are more alive than ever….
*FMCB = Fast Moving Consumer Business