Banking has come a long way from the famously
inconvenient “bankers’ hours” of years past; i.e. 10 a.m. to 3 p.m. weekdays.
Increasingly, consumers are doing their banking whenever and wherever they want.
It started with phone banking, ATMs and now, as we know it’s via phones,
tablets and PCs through SMS, websites, and mobile apps. Citibank
reported in October last year that 95 percent of all transactions for Citi
in Asia now occur outside a branch. The branch network as we know it is
changing dramatically and all banks are seeing this trend.
Due to competitive pressure and the increasing
demand of the customer, most banks have not had the chance to step back and reconsider
their architecture before rushing to add these new channels. This has lead to
silo channels and an inconsistent view of the customer across products and
lines of business.
Customers are demanding increased access,
simplicity and transparency. They want to use whichever channel happens to be
the most convenient at the moment, and a seamless experience between them all—whether
it’s access to products, information, or transactions. More and more, customers
prefer using digital channels over making the trip to a bank branch and waiting
in line to talk to someone face-to-face. It’s not hard to understand why. I
myself have probably been into a bank branch less than a handful of times over
the last two years, and even that was painful.
Also, digital channels help people compare
products and services among banks quickly and easily—as is the case across all
industries. As consumer trust and faith in banks has declined, loyalty to one’s
banker just isn’t what it used to be. Forrester
Research’s report Customer Advocacy 2012 revealed last year that financial institutions
scored at the bottom of the ranking. The
Ernst & Young Global Consumer Banking Survey 2012 stated there was a 40
percent decrease in customer confidence in the banking industry globally, with
Italy and Spain decreasing 72 and 76 percent respectively (not surprisingly!).
For banks, having a clear multi-channel story is the
key component of the future financial services industry and customer-centricity.
Digital channels have enabled consumers to interact and communicate with banks
on their terms, when they want, through the channel they choose. The power of
the relationship has shifted from bank to consumer. They offer a different
proposition for customers, and one that will revolutionise operating models.
Banks must move from a focus on products to a focus on customers in order to minimise
churn, reduce costs, and increase up-sell in assisted and unassisted channels.
And while we’re talking about costs, its important
to note that the migration of customers to lower-cost channels will drive a
more efficient business. A multi-channel approach reduces the cost-to-income
ratio for each customer. It also allows banks to leverage economies of scale by
sharing technologies and their costs across countries. This is true for both
emerging markets and developed markets.
From a technology standpoint, many legacy
platforms are at the end of their useful lives, having grown complex,
inflexible, and unwieldy. As these old systems collect more and more customer
data, the lack of multi-channel banking architecture has left all that valuable
information stored in silo-ed channels, unavailable for analytics. Not to
mention regulators in many countries are demanding higher availability and
transparency for consumers—and urging banks to get involved in burgeoning
mobile payment platforms.
Largely, it’s technology advancements—and consumer
adoption and use of that technology—that’s forcing a change in the banking
industry. Evolve or get left behind. It’s time for true multi-channel