Can digital help re-invent banking?

We live in a world today where face-to-face interactions and digital interfaces frequently overlap, everywhere from retail shopping experiences to personal banking. Companies which create exceptional customer experiences can set themselves apart from their competitors, but this can be a challenge for financial services institutions, given the unprecedented amount of change occurring in the industry today. We have witnessed technological transformation in consumer banking in the past few years, including mobile-capable transactions which allow customers to skip a visit to a local bank branch. However, despite such innovations, the financial services industry is highly prone to digital disruption.

Traditional financial services companies are being challenged by established tech giants with access to large captive customer bases and low online acquisition costs. New players are entering the financial ecosystem, including Silicon Valley tech companies such as Apple, Facebook and Amazon. These “bigtech” giants are eroding boundaries among industries as they seek to be all things to all people. While payments and transaction services are often the first areas of disruption by bigtech, the end objective is the creation of an integrated financial ecosystem with a holistic customer engagement strategy. The new world may be one where financial services firms work closely with third parties, including tech companies and other non-banks. The future of finance is an increasingly converged ecosystem where consumer, small and medium enterprise (SME) financial demands are provided by banks and platform companies, with roots in e-commerce and social media.

With disruption being a critical focus area, how can financial services stay relevant and ahead of the competition? I spoke with Suresh Babu Uthaman, Vice President and Head of IT for the Americas at Volvo Financial Services, and a former IT Director at Citigroup with nearly two decades in the financial services industry, to gain his insight on how large financial institutions can:

1. Be customer focused, rather than product-focused (Customer Experience Levers)
2. Operate faster, smarter and more efficiently by leveraging the right set of platforms and tools (Transformation Levers)
3. Build a culture that organizes systems, process and people with agility in mind (Organizational Levers)

In this interview, we discussed the importance of customer experience and what it takes for any incumbent bank to digitally transform its business. The first important step is to move the customer interactions from touch points to journeys or episodes. In order to develop digital experiences that satisfy customers, one should pay attention to the four foundational elements of customer experience:

1. Know your customer

• Customer 360-degree view: Anticipate and understand the customer’s needs, in addition to their transactions. Customer 360-degree view is critical in order to know your customer, and companies need a real-time data platform, which connects customer data from the mainframe, online and other data sources. Several financial services companies are beginning to centralize their data assets and are leveraging hybrid cloud architectures to speed up the transition.
• Personalized experience: As companies and banks accumulate data on their customers, such as identity, preferences, spending patterns, payment info and purchase history, the customers’ expectations regarding the use of that information also rises. According to a study by McKinsey & Company, more than 70 percent of customers prefer to do business with brands which use their information to make experiences more efficient. Big data technology, in conjunction with customer data management platforms, should help banks deliver the personalized experiences which customers desire.
• Conversational engagement: Today, the majority of customers prefer using mobile and web application for routine banking transactions. As per the 2017 Customer Loyalty in Retail Banking Survey by Bain & Company, 45 percent of UK respondents feel that they can accomplish all of their banking needs on their primary bank’s website. In the USA, 27 percent of the population uses voice assistance software on their smartphone for their daily activities. However, when it comes to banking, this number drops to less than 5 percent because many banks do not use this software effectively. Integrating voice assistance solutions could allow customers to speak conversationally about their financial needs, and may help boost customer engagement.

2. Value your customer

• Save time: Make every customer interaction count and show them that their business matters to the organization. According to Forrester’s Top Trends for Customer Service in 2016, 73 percent of customers say that respecting their time is the most important thing a company can do to provide good service. Offering innovations such as Omni-channel banking and “connected car” technology to bring ATM services to the user, rather than the other way around, can save customers time.
• Convenience: Customers want an easy way to manage their financial portfolio in the form of a one-stop portal. Data or account aggregation is key to providing such a convenience. Incumbent banks and fintech companies have the ability to offer aggregator services to customers, even when the customers have banking relationships with various firms. For example, customers can utilize software to view multiple accounts across different institutions. To promote this data federation system, the European Union has created a new regulation called Payment Services Directive 2 (PSD2), which is intended to help standardize, integrate and improve payment efficiency in the EU.

3. Protect your customer

• Trust: Customers tend to place more trust in banks when it comes to financial products, compared to “fintech” or “bigtech.” In a 2017 Bain survey on customer loyalty in retail banking, customers ranked incumbent banks a 1.7 on a scale of 1 to 9, with 1 indicating high trust. The closest “bigtech” firms were PayPal and Amazon, with a ranking of 4.0 and 4.3 in trustworthiness. Customers listed protection offered by banks in case of fraud or stolen credit cards, security and privacy as reasons to trust their banks. Leveraging disruptive solutions like blockchain-based “smart contracts” will enhance customer trust.
• Transparency: Transparency in product features and protection of customer data can also enhance customer loyalty. According to EY’s 2016 Global Consumer Banking Survey, only 32 percent of global consumers have complete trust that their primary financial services provider is sharing full transparency about fees and charges, and nearly 60 percent of global consumers worry about the hacking of bank accounts or bank cards. A financial institution can provide its customers with convenience and security by maintaining open lines of communication with them, while establishing clear processes to minimize data breaches.

4. Wow your customer

• Empowerment: Banks can empower their customers by allowing them access to self-service digital technologies such as mobile and the Internet of Things. Financial services firms are also exploring the possibility of offering transactional and financial planning services to customers via artificial intelligence (AI), through chatbots, robotics, real-time analytics and cognitive computing. However, the success of AI implementation is largely dependent upon having complete customer data, which is not always easily accessible.

In order to deliver on these four critical elements of customer satisfaction and remain at the forefront of change, banks must continue to be innovative, transform their core systems and processes and build an organizational culture that focuses on agility and innovation. IT leaders in financial institutions need to be “change agents” with a laser focus on open, cloud-based and data intelligence-enabled technology stack, to help banks re-invent themselves for digital success.