For the longest time, the branch was the undisputed center of the banking universe and everything revolved around it. In the last 20 years, banking transactions have moved from 50% in-branch to 95% digital self-service channels with customer experience at its center.
Now that the customer-centricity has taken a whole new meaning, the banking processes and systems merits some much-needed realignment. To be more specific, the customer-centric banking paradigm is open, transparent, real-time, intelligent, tailored, secure, seamless, and deeply integrated into customers’ lives.
In truth, customer-centric banking is no longer optional. Today, customers are both demanding and impatient. And also, notoriously fickle: when a well-known advisory firm surveyed 15,000 consumers around the globe a few years ago, it found that a third would stop using a “loved” brand after just one bad experience. Another report by PWC states that 75% of banking consumers have stated that a positive customer experience is the key driver for their purchase decision. With big tech and fintech companies entering the banking space with innovative propositions and customer-centric experiences, traditional banks must rush to meet or exceed the same standards, else lose customers and revenues.
Customer-centric banking is not a new idea. But it isn’t exact science either. To begin with, customer-centric banking in the digital age implies being equally accessible on a wide range of channels such as mobile, internet, voice-enabled chatbots, and smart home automation devices to create a seamless omnichannel offering. The next step is to embed financial services (such as payments, loans and insurance) into customers’ lifestyle habits. As per a Lightyear report and in an article published by Forbes, embedded finance is stated to grow to nearly $230 billion (in revenue) by 2025, up from $22.5 billion in 2020. For example, DBS runs successful marketplaces for used cars, property, travel and utilities enhancing customer experience and generating new streams of revenue. Another example is PayTm that seamlessly weaves its services into customers’ primary journeys, be it shopping, paying bills, buying movie or event tickets, making investments, and a lot more.
On their part, banks should grow beyond their transactional and service role into becoming trusted advisors who can guide their customers to pay, borrow, save, invest and insure better. More than ever, it is about putting the customer in control of what data may be shared and with whom, and what data must be deleted.
Several pieces such as people, processes and technology must come together to craft customer-centric banking. Following is a roadmap that banks could consider to reach there:
Reimagining the business model: The traditional banking model is that of the “universal bank”, where the bank manufactures and distributes its own products through its own channels. Traditionally, banks looked to differentiate themselves through the product, pricing, quality of service, and later, through their customer experience. Today, many forward-looking banks are reinventing themselves as a ‘platform business’ by aggregating relevant components form a wider ecosystem. In general, a platform business can choose to focus on something it excels in such as:
· Serving a particular customer segment. Australian Military Bank is a great example. The bank which primarily provides banking services to the Australian Defence Force, replaced its legacy systems with a SaaS-based digital banking solution stack. The objective was to enable the bank to keep pace with new technology developments and allow a speedy response to market demands.
· Being a manufacturing bank that makes best in class products that can be co-branded or white-labeled – for example, Marcus by Goldman Sachs with its joint offering with players like Apple, Amazon and JetLite.
· Being a value aggregator curating best-in-class products to fulfill more than just banking needs such as Starling bank from the UK that offer a marketplace providing services from finest partners in the area of accounting software, wealth management services, pension accounts etc.
· Being a pure distributor, focused only on acquiring and servicing customers, without middle and back office burdens like several neo banks, such as Moven, N26 in the U.S. and BankOpen in India
Provisioning the right technology
A new business model will call for changes in systems and technology. An ideal tech stack is modular and composable on demand, highly extensible, and sufficiently open so APIs may be used to collaborate with fintech firms and other partners. The tech stack will have three decoupled layers – digital business engine, systems of engagement and systems of experiences. The first layer has the digital core banking system, with robust, scalable business engines for deposits, loans, payments, treasury, trade finance, wealth management etc. The second layer provides engagement and omnichannel capabilities; it is responsible for ensuring consistency and continuity across channels, for management of users, their preferences and entitlements, and it also houses a vast API catalog. The experience layer enables user journey management, user interface, mobile apps, and channel extensions such as smartwatch and WhatsApp banking. In the example of AMB mentioned above, the bank leveraged APIs to streamline the identity verification process with real-time checks enabling account opening in less than 2 minutes. It could thus introduce digital onboarding to allow members of the Defence Community, who may be stationed across the country, to join and commence banking from anywhere and anytime.
Personalizing at scale
Used to personalized experiences from the likes of Amazon, Netflix and Google, consumers expect the same from their banks. Studies show that personalization can reduce customer acquisition costs, increase revenue and increase the efficiency of marketing spends. On the flip side, lack of personalization can induce rapid attrition2. So the roadmap to customer-centricity must include leveraging big data to anticipate customer behavior and requirements, and using these insights and other data, such as location and payment preferences, to push contextual, personalized offers at scale.
Building agile teams
The secret sauce of success in devising customer centric banking, is the bank’s personnel. Internal teams should be realigned and reskilled for agility. Employees need to be digital-first themselves before they can evangelize the new user journeys. Enabled with the right technology tools, data and insight, bank staff can engage with their customers better.
The last word
Customer-centricity is imperative for banks to thrive in the new normal. Banks lagging in this area must waste no time in embracing customer-centric banking in entirety.