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Changing expectations

By Dharmesh Mistry 14 Jun 2016

The customer base in retail banking in mutating. The following is an excerpt from our detailed report: Racing from digital engagement to customer intimacy

It's well known that many Millennials reject traditional marketing approaches and want new ways of interacting with banks. A survey for the 2015 World Retail Banking Report from CapGemini and Efma showed a significant rise in customers willing to change banks near term, with a 4-12 percentage point increase from the previous survey, depending on region. The propensity to shift was more marked among the young, notably Generation Y. But in banking, it is not just Millennials driving demand for new engagement. Elderly customers are increasingly using handheld devices for services. And the ease of mobile banking means previously unbanked or under-banked demographics are new targets. This presents challenges – and opportunities – for existing providers.

A 2014 Bain study showed that more than 50 per cent of banking interactions were through digital channels in 18 of 22 countries. That figure is only rising. Accenture found last year that 20 per cent of bank customers were digital-only users. The CapGemini study found that customers were also less likely to refer others to their banks and buy additional services in-house, underscoring the ubiquity of alternatives including retailers with large databases, high traffic, strong brands and cross-selling opportunities. The logistics of switching are also becoming simpler. And the concept of "liquid expectations" is taking root, whereby the just-in-time interaction that customers receive in sectors such as retail (Amazon) or transport (Uber) fuels demand for a similar quality of service from their other providers, like banks. Marketing and IT leaders are increasingly working together to achieve digital transformation across traditional boundaries, creating opportunities for trusted brands to enter new sectors, according to a recent survey from Accenture.

In March, Temenos released "Retail Banking: In Tech We Trust" its third annual study of the sector in association with the Economist Intelligence Unit. Among other things it found that almost half of retail banks worldwide believe that the fintech revolution will bring an end to branch-based banking, and a majority predicted that retail banking will become fully automated within five years.

Evidence for the efficacy of what has been dubbed the "multichannel inbound/outbound approach" comes from Gartner, which found that the ability to extend a relevant, planned offer during a spontaneous customer interaction has response rates approaching 15 times those of non-targeted outbound campaigns. Many banks are still unable to leverage the vast majority of their exchanges to sell their products or create happy clients because their architecture is not sophisticated enough even though the applications and channels are available. To succeed, their core strategy must go beyond omni-channel, encompassing omni-presence, or accompany the much-vaunted customer "journey" wherever that may lead online – for example on websites, via mobile apps, social media or in chat rooms – driving and facilitating transactional preferences at all times.

To seize these opportunities, banks must fulfil burgeoning expectations and create new growth areas through customer intimacy and engagement; being able to use every interaction – online or off – as an opportunity to offer, advise, reward, build loyalty, retain clients and create advocates.

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