A big theme of our current Internet age is personalizing your customer”s experience. The problem for banks is that it is both expensive and difficult to do. The idea that online (and offline) stores can tailor their presentation to customize its interactions is very appealing. Retail outfits like Amazon and Facebook personalize your shopping experience with recommendations, preferences, and anything else they can do to help to push you towards a buying decision. Plenty of banks are paying attention to this trend but they aren”t yet living up to the expectations their customers have been given by the retail and social media giants. As a result, banks are becoming vulnerable to more agile competitors (like the retailers themselves). The alarm is sounding and now banks must find a way to respond.
It”s hard to change the way in which transactional banking and specialist products like mortgages, loans and wealth managementproducts are delivered to consumers across contact channels. The technology that sits behind these channels is designed to deliver process flow and data processing, security and authentication, not to mention regulatory compliance and financial accounting. It”s not easy to layer sophisticated customer interaction models on top of this technology, which is often older, hard-coded, and bespoke.
Certainly, it looks like the rate of channel innovation isn”t about to slow down. From time to time, financial technology commentators write articles about the death of the branch, or the replacement of all other channels by mobile but none of the predictions really come true. Instead, businesses just keep adding new channels, modifying existing channels, adjusting the mix, and then try to find better ways to create a seamless experience wherever the customer chooses to interact with them. Some banks, like Metro, are seeking to transform the branch using a trendy coffee-chain retail model and some like KBC are even launching “pop-up” branches. Some previously pure-play digital retailers are even stepping on to the high street. Firms like eBay have launched pop up stores and even Amazon was at least rumoured to be considering investing in retail locations. Multi-channel is here to stay so the headache for banks is just going to keep getting bigger.
One useful measure is to implement purpose-built channel management solutions. Channel managers provide a way to manage all the channels consistently and provide a single integrated link between the bank”s back office and all it”s customer channel technologies. They also shield the core systems from expensive IT change in the race to keep up with channel innovation. The result is definitely more customer-centric but it doesn”t always address the presentation layer very effectively. Every channel has different requirements and mobile Internet technologies are changing so fast you need to be a specialist to keep up. Traditional banking IT just isn”t agile enough for the demands of a dynamic retail market.
So is the answer to call it quits? After all, following the economic downturn, everyone says, banks should just stick to the basics: focus on manufacturing product and keep deposits safe. Banks, rocked by the financial crisis, need to retrench. Many banks are considering outsourcing more of their non-core activities such as ATM management, card issuing, and merchant acquiring. So, instead, why not use specialist partners to manage the customer interaction layer? Specialists can respond in a faster and more agile way to market change.
An interesting example of this is SmartyPig, the online firm offers savings tools and prepaid card products. From the consumer”s perspective SmartyPig lets you do what you need to do. In this case, you can set savings targets and configure a savings plan to reach goals. It does this very well. Behind SmartyPig sits BBVA, the actual bank, hidden from view. BBVA is where the customer’s savings are actually deposited. In this relationship BBVA gets new deposits, which is the bank’s primary goal, and SmartyPigdelivers an experience that the consumer requires without the bank having to make changes to its core technology. Another example is Moven, which aims to provide a customer-centric banking experience on behalf of other banks. That”s not to say specialists need to be branded entities – they can just as easily be white-labelled – but the principle still applies.
Banks continue to invest in technology solutions to meet the interaction needs of the consumer because they believe they need to own and control the entire customer relationship. But relinquishing ownership doesn”t necessarily mean giving up control. And, in a changed financial services marketplace, perhaps banks should now be rethinking what they want to be and embracing innovation to help themselves to get back to basics.