A new intimacy has been born in retail banking but success will require a unified digital command centre.
This article was originally published by Retail Banker International here
Today's customers are more likely to interact with their banks online or via their mobile than face to face in a branch. They demand real-time communications and transactions, and will shop around for the best service or price.
Banks are responding with different strategies. Some have patched their legacy systems; others have added digital services to deliver a multi-channel approach; a third group has embraced digital-only models, abandoning branches altogether. But whatever the strategy, all agree that to survive in the digital age they must provide seamless services at the lowest price to retain loyalty and win new business. It's about providing experience-rich banking - a new intimacy.
Key to this is having a unified digital command centre that focuses on the customer's demands and needs rather than on the transaction-driven core model of old. Those that embrace this customer-centric, unified approach will be able to compete with the digital disrupters and thrive.
Our recent study Retail Banking: In Tech We Trust, published with the Economist Intelligence Unit, found that half of retail banks worldwide believe that fintech will bring an end to branch-based banking and the majority predict that retail banking will become fully automated within five years.
Meanwhile, Gartner research has found that response rates to relevant communications that land while customers are already interacting with their bank are almost 15 times higher than response rates for non-targeted campaigns.
But many banks are not in a position to fully participate in this digital revolution because their IT architecture is not sophisticated enough. To succeed, their core strategy must go beyond omni-channel to be omni-present. They need to accompany the customer constantly - be that on websites, via mobile apps, social media or in chat rooms - to drive and facilitate cross selling and upselling. This demands a unified command centre, or "SingleBrain".
The "SingleBrain" command centre delivers a snapshot of all of a customer's activity, monitoring events via analytics and insight gathering engines. The data is analysed in real time and communications channels then respond with an offer within the parameters of credit and business constraints.
The offer could be the best possible rate on a credit card, or be based on geo-location tagging and involve local retailers. This type of intimacy demands that banks adopt a strategy based on what we have identified as the four Ds - detect, decide, deliver and discover.
First they must detect and trap real-time events and respond. This could be something relatively mundane such as a salary payment landing, a credit limit being approached or a customer logging into the site. It could even come from an external link, for example news of a large movement in the stock market or a change in base rates. The system logs the event, ready for the next step.
The system then decides what to do based on analytics. The use of intricate personal financial management tools in particular can play a role, replacing a service that was once provided on a face-to-face basis.
Delivery comes next through the most effective channel. That could be via mobile, internet, text, social media messaging, telephone or a letter. Maybe the communication would be more effective if it is put on hold and arrives later.
Finally, discover what works. Record all communications and responses to assess what has been successful and log best practice. Relate these findings to data amassed elsewhere.
The most advanced banks are already connecting all their data and channels to the back end in a "SingleBrain" and seeing significant bottom line improvements. The Spanish bank BBVA, for example, reported a 10.9 per cent rise in gross income to €23.68bn for 2015, attributing the rise to its digital programme. It said 19.2 per cent of consumer loans in Spain last year were made purely through digital channels, double the previous year.
In the UK, Lloyds Banking Group, which has created a digital hub, recently revealed that every 60 seconds 12,900 people visit its website, 400 bills worth £150,000 are paid, with 32,000 page views, 1,500 mobile app logins and 3,000 internet banking logins. That equals £4.6m in digital commercial transactions in one minute, much of which would have gone to rivals if not for its new hub.
Customer expectations are rising and technological advances - in software and devices - also allow smaller institutions to take on new roles in their customers' lives, such as that of a personal financial advisor, available day and night.
Many banks will find their legacy core systems are not up to the task. Instead, they need a modern responsive core and to shun the vulnerabilities of stop-gap fixes and patches. Running these new functions on a dated core would be akin to entering the Tour de France on a clunky mountain bike. You can try, but sooner or later, you'll fall by the wayside.