Telepresence holds great promise for retail banking, but most early-movers are missing the boat, says Celent. Rather than reinventing the teller experience, banks should pursue video banking as an omnichannel mechanism to improve customer engagement.
“There are several reasons for banks to explore video banking” says Bob Meara, senior analyst with Celent’s Banking Group and author of the report. “The most compelling reason is customer engagement, not cost savings. Banks have relied almost exclusively on the branch channel for customer engagement and embraced digital channels merely for low-cost transactions. That model no longer works.”
Real-time video (or telepresence) was once a novelty requiring expensive equipment and high bandwidth data connections. Now, a majority of young and middle aged adults use video chat on desktop, tablet, and mobile devices. Consumers’ increasing use of telepresence creates both challenge and opportunity for banks.
Key findings of the report:
- Customer engagement is the lifeblood of retail banking, but it comes at a cost. Historically, banks have relied upon the branch channel (and the call center to a significantly lesser extent) to engage customers and deliver much-needed sales results.
- Meanwhile, digital channels, although growing rapidly, were thought to be the domain of low-value, low-cost transactions and little else. This model no longer works for at least two reasons: (1) Branch foot traffic is declining. No matter how well banks delight branch goers, they are becoming the minority. Banks must learn how to engage customers digitally, while making the branch channel more efficient and effective. (2) Customer expectations are growing. The 8 a.m. to 5 p.m. branch model is inadequate. Banks willing to delight customers with extraordinary convenience and quality engagement will win customer loyalty.
- Addressing these challenges in today's patently lousy business climate is no easy task. Some banks are building the capability to engage customers in digital channels while enhancing engagement in the branch. Such banks are a small minority, but they're on the right track. Most are persistently devoted to legacy retail operating models that are increasingly challenged to deliver the concurrent imperatives of sales growth alongside cost reduction.
- There is no substitute to talking to customers when and where they need financial advice or assistance. Video banking offers banks the ability to expand the reach and convenience of customer engagement in a comparatively low-cost fashion.
In Celent's view, there are four reasons to embrace video banking in one or more of its forms:
- The imperative for branch redesign. In response to business conditions, declining branch foot traffic, and growth in digital channel usage, banks must increase both the efficiency and effectiveness of the branch channel. Video can play a role.
- Consumer acceptance. Once primarily a business application, mass market usage of video is burgeoning. Its appeal extends well beyond Gen Y.
- Customer engagement. As more customer interaction occurs in digital media, banks must devise ways of engaging customers digitally. Banks can no longer afford to view digital channels simply as a mechanism for low-cost transactions. Video and chat can play a role.
- Solution viability. Modern video alternatives are light years ahead of earlier solutions, improving efficacy at a much lower cost than before.
Celent offers several recommendations for banks considering video banking in one or more of its forms:
- Embrace video banking as a multichannel initiative.
- Connect consumers to who they need, when they need them.
- Expand opportunities for customer engagement.
- Offer video optionally.
- Develop a solid change management plan that creates ownership of the initiative throughout the enterprise.
In the report, “Lights, Camera, Transaction?” Celent looks at the emerging use of telepresence in retail banking and advocates a vision for how it can be used to enhance customer engagement while reducing cost to serve. It draws upon interviews among financial institutions and solution providers as well as a survey administered among 1,033 U.S. consumers in June 2013.