The ultimate aim of Experience-Driven Banking is to help banks build better, more collaborative relationships with their customers that drive engagement and loyalty. These relationships cannot be forced; they are earned and must be built on trust.
Once this trust is earned, banks then need to make the most of the data assets they have and ensure they use it to deliver the best possible services in order to retain it.
(Here follows an excerpt from our paper, 'A race banks must win', published in May)
Trust builds business
Trust is a key component of Experience-Driven Banking. To gain the most from Experience-Driven Banking, consumers will need to opt into many of the services. Being persuaded to do so will be a question of trust. Moreover, experience will drive trust, thus reinforcing the advantage. As such, returns on trust are potentially exponential with the possibility for a winner takes all situation.
As EY puts it, "Customers generally trust their primary providers, but the highest level of trust is a clear differentiator in creating advocacy, and customer experience is a key driver of that level of trust.
Consumers' trust in banks suffered after the financial crisis, but some research continues to show banks continue to enjoy an important, albeit narrowing, advantage. For example, a recent ING survey on mobile banking found respondents ranked their own banks first, way ahead of technology companies such as Google and Apple in terms of trust.
Data: it's personal
An arguably more important and likely more enduring competitive advantage banks have is access to customer transactional data. But, banks must mine and better deploy the data.
A good precedent from the retail industry is Amazon. It has been ground-breaking in its ability to take customer data to offer a highly personalised experience, tailoring recommendations for example, as well as providing a seamless and single point of access to multiple vendors in its ecosystem. The retail giant has also made gift certificates a form of money transfer; a pioneering move in what will be a sustained move towards making digital assets (such as air miles or mobile minutes) interchangeable and readily exchangeable as currency which banks will need to embrace.
The kind of experience-driven services that banks should be providing, and which many already are, include: tools to help customers to understand their spending better, applications to help them to achieve their financial goals such as saving targets, real-time offers based on their location and past spending, marketplaces for financial (and non-financial) services, social media integration, peer-to-peer advice and lending, frictionless payments (e.g transferring money to a friend by text without knowing their bank details) and wallets to help customers manage multiple types of digital assets and multiple financial relationships (e.g with all their banks, as well as say utilities). In addition, banks will need to do more to reward customer loyalty and we already observe many examples of banks setting up retailer-like loyalty schemes.
Here, there and everywhere
The Temenos/EIU retail banking survey showed that many established banks are already thinking this way. BNP Paribas Fortis, KBC, ING and Belfius have set up Belgian Mobile Wallet, operating as Sixdots. Wells Fargo and Standard Bank have created their own tech labs to test out new technology and apps.
Barclays has launched the hugely successful Pingit service, which allows customers to send and receive money from their mobile devices to or from anyone with a UK phone and bank account. Garanti Bank is possibly the advanced established bank in terms of experience-driven boasting a whole range of services around easier payments and spending and saving tools. But, perhaps the most innovative is a service that uses a combination of Foursquare, GPS and transaction history to give customer real-time location-based offers on their favourite brands and at their favourite stores.
Francisco González, Chairman and Chief Executive of the Spanish bank BBVA, has for some time predicted the industrialisation of core banking, separating order management and order taking. He told Euromoney: "[By the end of this year] BBVA will be perceived by the market as a new digital player, and as a result we should be able to capture quite different and ultimately higher valuations from investors."
Among the bank's digital steps is an open-platform initiative, collating real-time information on every financial transaction its customers make.