BFS - Online Banking Meeting Customers Where They Are
The digital disruption we are witnessing today has changed the business landscape for industries across the board. The world is moving online, and banks are no exception. According to Forrester Research, mobile banking is the biggest industry innovation in a century. This rapid growth is not limited to just mobile banking. It spans all forms of virtual banking and has gone beyond the traditional modes of personal and phone interaction. Banks are building a digital ecosystem to serve customers better and ensure a premium banking experience.
Uncovering the Digital Opportunity
When was the last time you visited your bank? Chances are, you don’t remember! Banks are changing the way they do business as more and more customers prefer to do business online. In 2015, Pew Research found that 57% of adults in the US bank online to some degree. An earlier report revealed that a majority of those who banked online comprised baby boomers and millennials. This represents a milestone in the online banking industry: the same people who once only trusted handshakes and “walk-in-the-door” style bank branches now trust their computers just as much.
Another study by Gartner throws light on the explosive growth of e- and m-banking. It indicated that the evolution of the Internet has raised questions about the continued viability of brick-and-mortar establishments in retailing and financial services. For many financial institutions, the future is proving to be extremely difficult and challenging, as traditional models no longer apply to many of their customers or markets.
What once was the hallmark of the banking industry— the concept of a community bank with a home-grown bank president who participated in local charity golf tournaments and clinched customers over a glass of bourbon and a handshake—is giving way to a new concept of banking in which automation and customer preferences call the shots. According to Dan Boone, head of Banking and Financial Services for Coforge in North America, some 79% of smart phone users will use their phones to help with shopping. This has given rise to a price-savvy customer in every industry, from groceries and gasoline to banking itself.
This rings in good news for customers. Automation means increased convenience, mobility, and lower prices and fees. For banks, on the other hand, it means a 21st century challenge: maintaining organic growth and customer loyalty when the new customers on the market are more interested in a bank’s online reputation or customer service modules. Needless to say, your customer experience will go a long way in deciding if you are on top of your game.
Great customer experiences are planned, designed and actively managed. Companies that consistently deliver, and improve upon, positive experiences have three things in common: customer insight, a customer culture, and a “designed” customer experience. This paper advocates how organizations must deliver a rich, personalized cross-channel experience with seamless integration across all touch points.
Internet Leads the Way for Organic Growth
Any expansion or growth that happens as a result of daily business is organic in nature. For instance, parents opening a savings account for their child at the local community bank is an example of organic growth. This traditional form or organic growth in the banking industry may become less prevalent as the parents become grandparents and the millennials—the first generation raised in the Internet era—take their place.
How are banks going to encourage organic growth in a world where customers shop around for low fees, added convenience, and place less value on their enduring loyalty to one specific chain? The answer lies in making a superior customer experience the key differentiator. It means expanding the concept of “community” that was once isolated to a bank customer’s hometown. “People tend to want to trust the crowd. It is the herd mentality,” reminds Boone. “If everybody is talking about something— including a bank—they will tend to flock to it.”
The online generation relies heavily on word-of-mouth recommendations, and social media presence has changed the concept of a community bank by changing the very concept of community. For millennials, the community has become global.
Online banking is not just more convenient and available 24×7, it is also extremely low on cost when compared with an actual visit to the branch. Experience in the Scandinavian region, considered to be the most advanced e-banking area in the world, confirms that online banking is having a profound effect on the global financial services industry. The future, clearly, is in a combination of ‘clicks and-mortar’ banking—delivering full service banking via a number of channels including online.
Growth Driver: The Bigger, Better Deal
Millennials—people born between 1982 and 1994— have become the nation’s young adults. Although millennials still live and work in the shadow of the baby boomers, the latter began turning 65 years old in 2011.
This means that in the coming decades, baby boomers will retire and begin to transition their wealth to the coming generations.
According to Boone, millennials represent the next generation of growing families—those that will need mortgage loans and car loans as well as long term savings and investments. Many of this generation are in their early thirties, are witnessing a surge in their salaries and are starting families. This brings them to a critical point where establishing a relationship with a bank will be a financial necessity. If these banks expect any of the steadfast loyalty offered by the baby boomers, this is the right time to begin building relationships with millennials.
The Challenge: While traditionally, a higher premium was placed on the brick-and-mortar presence of traditional community banks, younger customers have different priorities. Convenience, mobile accessibility, and customer service, often based online, are the deciding factors in winning their business.
To serve this growing generation of ‘new’ customers, banks must adapt to shifting customer expectations and cultivate customer loyalty without the personal touch of traditional banking. Today’s digitally-equipped customers do not shy away from shifting loyalties for the bigger, better deal. They prefer self-service through quick navigation and easy access to information with minimum complexity. A survey by Fast Company reveals that almost 70% of customers prefer the self-service option for their queries—and they want it now.
The Solution: Innovation through technology is the way to go. This means cultivating banking tools that appeal to the online sensibilities of younger customers. These tools include online banking wizards, or guides that help new bank customers apply for loans, check their account, or execute money transfers through self-serve, without the need for a bank visit. These processes have the innate advantage of affordability, as automation tends to be less expensive than a brick-and-mortar presence. Declining costs for banks also means incentives to lower rates and fees. For the price-sensitive millennial, every cent counts.
What Can You Bank On?
In banking, it may not be as difficult as you think to predict future trends. Consulting US census data allows for a broad overview of the future of banking: Baby boomers will begin to retire en masse, leaving purchasing power and wealth to a rising generation with different priorities as banking customers.
According to Boone, if banks are going to rise to the new market demands, there are three likely models of banks you can expect to see this century:
Intelligent, Multi-channel Banking: This is highly automated model, featuring online compatibility and a contact center. Such banks are able to bring out your files at a moment’s notice, tailoring their services to suit your preferences and your history as a customer. It makes for fast banking transactions and requires little personal customer presence, though the in-person branch will continue to serve for those who prefer it.
Socially Engaging Banking: These are the banks that will utilize social media to find customers. They will thrive on their online reputation and engage actively with customers and potential customers alike, attempting to build the word-of-mouth reputation so highly prized by millennials.
‘Digital Ecosystem’ Banking: This is the bank for a customer who says, “I don’t need a regular bank.” Borrowing money, paying bills—everything moves online. Between the many payments made through a mobile electronic wallet, customers of a digital ecosystem may one day do away with cash and credit cards. These banks will look to cultivate alliances and partnerships with other businesses in order to offer discounts and deals as part of their customer incentives.
Though traditional brick-and-mortar banking branches will still have a place in the future, they are likely to survive by interacting with customers on multiple channels. Other banks, including socially engaging banks and digital ecosystem banks, understand that in order to create organic growth, they will need to appeal to new generation customer demands, including a positive reputation on social media and customer incentives.
Catering to Customer 3.0
Cultivating organic growth in an evolving industry means defining what is important to a new wave of consumers. What is important to the next crop of digital banking consumers? They crave community approval, which means a powerful social media presence. They shop by price, which means that automation will be key for keeping fees and rates low. They look for interactive features—if a bank is not able to respond to a concern quickly, they begin to feel undervalued as customers. In a smaller, faster world, banks have to keep up with technology that makes customers feel appreciated— even if the customers are not seen face-to-face.
More and more, banks are becoming allies with other businesses, as well. Targeting ads and specific promotions are more commonplace, as is matching customers with special offers. Banks that adopt the extended ecosystem model understand what a “Customer 3.0” might look like—they initiate their banking from their desks, from their couch, in their car, relying on opinions of friends and family, and online reviews. They want to be able to go to a bank with any number of concerns and come out with all of the answers they need. Banks can be more than a place to hold money; they can become providers of advice and shops unto themselves, offering exclusive deals provided through their partnerships.
Most significantly, Customer 3.0 needs to feel that their business is worthwhile to their bank. According to Boone, one of his friends in the classic car business—a bank customer who had once placed a high premium on customer loyalty and an enduring relationship with his bank—went to his bank and found that they had trouble remembering him. Going to the building, waiting in line, and eventually finding that the bank clerks didn’t really know him was the last straw. Slowly he switched to a smaller bank that understood and catered to his financial needs. As the demographics of the nation shift, so will its wealth: all thanks to Customer 3.0.