A 2016 CapGemini study found that customers believe that their banking experience has improved. They are, in general, happy about the experience they receive at their retail banks – a credit to the investment and energy that has been put into transforming front-end processes and services. Despite those gains, however, there were two worrying signs. Namely, the younger generations – millennials – still scored low on customer experience, and gains in customer experience didn’t translate into increased profit.
So what does that mean for retail banks in 2017? There’s still work be done, and 2017 might just be the year to do it. Here’s our take on the three things that retail banks should double down on in the year ahead.
Target the (still) elusive millenials
The fastest growing consumer base on the planet, millennials are disrupting just about every industry, but banking is the most vulnerable. The Millennial Disruption Index (MDI) found that 53% of millennials don’t see a difference between their bank and others, and one in three people would consider changing banks. Worst of all, 71% would rather go to the dentist, yes, the dentist, than listen to what banks are saying.
Beginning to mend – or in many cases build – relationships with this generation will require banks to not only digitize their offerings (that’s a must for this tech-first generation) but also tailor them to create a “bank of one” experience. This means making customer data actionable and using it to understand what the customer wants, at any given time, based on the context clues they’ve provided.
Here’s an example of what that looks like: Jane is starting the process of buying a home. She’s spent time on the bank’s website looking at mortgage rates, and her savings has increased dramatically to prepare for the down payment. Rather than sending her updates on the newest overdraft protection services, Jane should receive prompts to make sure she’s hitting her savings goal and articles on the home-buying process, perhaps even have a mortgage consultant reach out to explain the application process.
Finding ways to make these one-to-one connections is crucial in the year ahead; it will not only build the customer relationship but also potentially lead to revenue growth in new areas.
Introduce new technology-driven offerings
Technology-driven services are the “must have” for banks today, but all too often they aren’t moving fast enough. Because they’re taking too long to develop a product, they’re losing market share to the likes of Apple, Google, PayPal/Venmo, and more. This is especially true in the payments space, as use of peer-to-peer (P2P) payment services that allow people to split a check or pay someone back in real time have skyrocketed in the last year. Companies like Venmo processed $17.6 billion in transactions 2016, a 135% increase over 2015.
For retail banks, peer-to-peer payments have always been possible, just clunky. Doing so required sensitive account information and, if you were transferring money between two banks, could take days. Recognizing that they weren’t going to fix the problem alone, 19 banks, including Bank of America, Citigroup, JP Morgan, and Wells Fargo, have teamed up to start Zelle to take on payment apps such as Venmo. It will allow users to transfer money via the Zelle app/website or their online banking site. Integration between the native banking environment and a third-party app is no small feat and is indicative of a new, collaborative way of thinking for retail banks.
The technology requirements for a service of this kind are vast – especially given the complexity that each individual bank has on the back end. But luckily, there are new technologies on the market that can help banks transform their back-end operations to improve the front-end experience. For example, blockchain and the underlying distributed ledger technology can become critical to speed up payment transfers. Similarly, digital banking tools like SAP Omnichannel Banking allow banks to adopt a modular architecture and planned application programming interface (API) integration to create a seamless experience and boost development productivity.
Adopt a (strategic) collaboration approach
The CapGemini study found that nearly two-thirds of customers across the globe are using products or services from a fintech firm. Surprised? Don’t be. Fintechs are largely digital-first organizations that focus on doing one or two things really, really well. They offer the intuitive, personalized customer experience that people crave. There’s a lot that banks can – and should – learn from them about customer experience and building brand loyalty. And, there’s also a lot that banks can teach these young upstarts. That’s why partnerships and, in some cases, acquisitions between these two parties will be most beneficial.
The appetite for both is notable; an IDC survey commissioned by SAP found that six out of 10 global banks were open to partnering with fintechs, and one in four would consider an acquisition. When considering a partnership with a fintech, banks should think strategically and ask themselves: What is the customer need that can’t be addressed with current resources? Where is the greatest area for disruption? Will this company help reach a new or different audience? Choosing the right partner will allow banks to become more agile in their product and service development, perhaps opening up new revenue opportunities or chances to engage with new audiences.
What do these three things have in common? Success in any – and all – of these areas will have a direct, positive impact not only on the customer experience, but also on the sales pipeline. And it’s this one-two punch of experience and sales that will keep large retail banks profitable and relevant today and tomorrow.
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