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Great digital customer experience key to success

Top observers say future depends on tech innovation

Bank tech trends can make your head spin. So regularly longtime Tech Exchange Editor John Ginovsky does his best to “make sense of it all.” Bank tech trends can make your head spin. So regularly longtime Tech Exchange Editor John Ginovsky does his best to “make sense of it all.”

What has always seemed intuitive—if a customer always has a positive experience with you, you’ll continue to have their business—now has become an accepted business precept, especially in the banking industry.

This is a huge switch from generations of previous business theory which held that new and superior products and services, however they were offered, were key to business success. That theory succeeded due to the assumption that banks, and only banks, could offer those products and services.

For a long time, that theory worked well. But it also resulted in “bankers’ hours” and imposing stone and iron-bar edifices.

In this age of ever-accelerating tech innovation and the continuing emergence of fintech competitors—and increasing customer expectations—it’s no wonder that “bankers’ hours” now are 24/7. That, and the fact that many of those imposing stone and iron-bar edifices aren’t banks anymore. They’ve become chic restaurants or hip apartment buildings. (At least, that’s my experience living in downtown Baltimore.)

Recently some very high-powered analysts and industry observers have weighed in very clearly on this new reality—that of the need for digitalization and the ratcheting-up of customer experience as business priorities.

Here’s a rundown of these, all coming out in January.

Innovation’s the driver

In its Global Banking Outlook 2018, EY says 85% of banks cite implementation of a digital transformation program as a business priority for 2018. The survey of 221 institutions across Europe, North America, emerging markets, and Asia-Pacific shows that banks are seeking to become digitally mature, completing the transition from regulatory-driven transformation to innovation-led change in order to insulate themselves from future downturns.

Says Jan Bellens, EY Global Banking and Capital Markets deputy sector leader: “In order for banks to weather the performance challenges that lie ahead, they must prepare for a future led by innovation and technology. The pace of innovation continues to accelerate, and banks must have a strategy in place to ensure their implementation of new technology is effective.”

In its state of the financial services industry 2018 report, Oliver Wyman says traditional financial services firms will need to accelerate customer value creation or risk conceding an increasing share of customer attention and wallet to other firms, primarily to what it calls “big tech.”

“The lessons from big tech in the last decade are not just about gaining and growing customer mindshare; they also reveal the nature of future competition they will pose,” says Rick Chavez, partner at Oliver Wyman. “The basis for competition has shifted from products to active solutions, from product selling to problem solving for customers with systematic improvement in the overall value delivered to customers.”

Bankers get the shift

In its annual banking priorities executive report, Computer Services Inc.— notes that the clear emphasis on customer experience and omnichannel initiatives this year is undeniable.

CSI surveyed 230 U.S. bankers to find out what they perceive will most affect the financial industry in the year ahead. Some results:

• 48% said customer experience initiatives, which trailed cybersecurity risk (59%) and information technology (64%).

• 53% rated customer relationship management as the most important omnichannel strategy.

• 38% will improve the customer experience with digital enhancements, including branch transformation (39%), mobile banking adoption (35%), and mobile wallet/tokenization (24%).

“Today, the main differentiator between financial institutions is the customer experience” says Steve Powless, CSI chairman and CEO. “Banks must focus their attention not only on gaining new customers, but also on building loyalty among their existing ones. We’re seeing bankers tackle this by focusing on ominichannel strategies that streamline and connect the customer’s bank experience across all channels, from in-person interactions to mobile apps and online. Banks utilizing these strategies will likely see the most growth throughout 2018.”

In Frost and Sullivan’s survey of IT professionals a third of respondents said that reducing operational costs, improving customer experience, and improving digital presence will be top drivers for IT investment over the next two years.

“Banking, insurance, finance, and retail industries are the bigger investors in technologies that improve customer experience,” says Alpa Shah, vice-president, Digital Transformation, at Frost and Sullivan.

International Data Corp., in its IDC MaturityScape Benchmark: Digital Transformation in Banking Worldwide, 2018, gives a cautionary observation: “While all banks worldwide acknowledge the importance and complexity of transforming their businesses to compete in this new digital economy, nearly 40% have not yet executed on a sustainable digital transformation strategy.”

“Banks no longer have a choice but to transform if they want to become more responsive to today’s and tomorrow’s markets,” says Jerry Silva, director, Global Retail Banking at IDC Financial Insights. “Those banks that have committed to digital transformation at the board and C-suite level are already creating disruptions that are taking the industry to business models beyond banking.”

But what to do first?

So there is room for improvement and advancement—but how? Charles Keenan, writing in a blog sponsored by TSYS, says it’s necessary first to truly understand what the customer wants in a digital environment.

In a wide-ranging essay, he cites Liraz Marglit, a web psychologist and head of behavioral research at Clicktale, who helps perform retail analytics.

“One of the basic human needs is to feel in control,” says Margalit. “If I’m sending you a message, you don’t have to reply right away … Once we get used to this type of control, we cannot go back.”

Her main point, Keenan says, is that success in the digital world is defined by more than convenience.

Some banks have demonstrated mastery at achieving digitalization. Everest Group studied 30 leading North American retail banks and identified 11 that are leading the way with new “experience first” business models. These latter, says Everest, deliver business results through the effective use of digital technologies.

Collectively, the study shows them outperforming their peers by delivering:

• 22% higher adoption of online banking platforms.

• 13% higher adoption of mobile banking platforms.

• 20% higher mobile banking application rankings.

• 3% higher growth in deposits.

• 9% lower efficiency ratio.

How to be a “Super-Bank”

But the big question is how did they do all this? Likely, specifics are different for each individual banking organization. Generally, though, Everest offers this “SUPER” formula:

Secure—Consumers demand transparency in fees, products, and personal financials, and expect high levels of security without significant friction in the customer experience.

Ubiquitous—Consumers demand access to banking services anytime, anywhere, and from any device. They expect high digital channel availability from their banks.

Personal—Consumers demand that their banks not only understand their current needs but also detect potential needs and offer relevant, customized solutions.

Easy—Consumers demand a seamless user experience across channels and types of transactions. They expect integrated financial solutions with their activities.

Responsive—Consumers expect quick responses to their queries across the channels of their choosing. They expect context-aware responses in real time.

“Digital technologies are at the heart of this transformation,” says Jimit Arora, partner at Everest Group. “By weaving together digital technologies, experience-first strategies, and new alliances across industries, banks ultimately will become the underlying, connective fabric that unites the global ecosystem.”

John Ginovsky

John Ginovsky is a contributing editor of Banking Exchange and editor of the publication’s Tech Exchange e-newsletter. For more than two decades he’s written about the commercial banking industry, specializing in its technological side and how it relates to the actual business of banking. In addition to his weekly blogs—"Making Sense of It All"—he contributes fresh, original stories to each Tech Exchange issue based on personal interviews or exclusive contributed pieces. He previously was senior editor for Community Banker magazine (which merged into ABA Banking Journal) and for ABA Banking Journal and was managing editor and staff reporter for ABA’s Bankers News. Email him at [email protected].

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