Banks have been working to become omni-channel businesses in an attempt to provide a better customer experience.
Options for differentiation have shifted over time and customer experience is one of the few business areas that can separate a bank from its rivals.
The challenge, according to Ed Thompson, vice-president of customer experience at Gartner, is that 90% of customer relationship management (CRM) projects offer no benefit to the customer.
Many companies say customer experience is important, but do nothing about it, he says.
According to Gartner’s research on customer experience, 97% of the people surveyed are multi-channel users.
Looking across all industry verticals, it found that 52% of customers have switched providers in the past year and 81% are prepared to pay more for a better customer experience.
Move current accounts
A bank’s customers can now easily move their current accounts to another financial provider, thanks to Current Account Switching Service (Cast) legislation. There is also a very real risk that they will buy other competitive services from another bank, which may be able to offer a better deal.
But as Gartner’s study shows, people are prepared to pay more for a better customer experience. Switching providers may mean: the customer has to deal with more than one bank; the integration a single provider can offer across its various products is lost; people may end up with multiple payment or credit cards and have to deal with multiple bank call centres; and they will need to use apps from different providers on their smartphone. All of this reduces customer satisfaction.
But if a bank can keep its customers happy, there is a very real chance that they will appreciate the benefit of good customer service, and the integrated multi-channel offering that their existing provider can deliver.
When asked, business leaders will often say they admire the customer experience offered by the likes of Amazon and Apple. But for Thompson, these pioneering firms do not represent a realistic goal. “If you have a couple of billion, you can be like Amazon or Apple,” he says.
In its report Use customer journeys to guide your digital banking strategy, Forrester highlights legacy systems as one of the major challenges faced by traditional banks. “Current technology stacks, like vintage core banking systems, often limit what you can do to fix broken experiences,” it says. “Journey maps can help make the case for technology investments. Digital banking and customer experience executives must collaborate closely with technology management colleagues – business analysts, systems architects, consultants and process analysts – to define the technical requirements, resources, processes and costs to implement each project.”
Alessandro Colafranceschi, former head of digital banking at Standard Bank, South Africa, who is quoted in the report, says: “Within the process of redesigning customer journeys, you hit a lot of ‘system conditions’ – business rules or constraints that were designed 10 or 15 years ago. These rules constitute huge obstacles for the redesign process.”
But although it may make sense to rework legacy systems and processes to fit in with more customer experience-led programmes, Gartner research vice-president Alistair Newton warns: “It can be career limiting for a CIO to try to replace the core legacy system.” However, Newton says many financial institutions now recognise the need to be much more fit and agile to compete digitally. He says replacing core banking systems is akin to open heart surgery and CIOs need absolute commitment from senior management.
Putting legacy replacement aside, for HSBC, going digital is about focusing on the customer journey and optimising a key business process to make this journey as smooth as possible.
In a presentation at a recent Adobe customer event in London, Craig Johnson, HSBC’s head of multi-channel, described the bank’s digital journey and how it has tried to provide a better customer experience by simplifying the way people transact with it.
How open banking can open up opportunities to improve customer services
Gavin Scruby, CTO of direct debit provider SmartDebit, says that while many banks are putting open banking APIs in place, these are purely there to comply with banking regulations. “It is being seen as a burden rather than an opportunity, because the banks are worried about disintermediation,” he says.
Scruby believes the Competition and Markets Authority is trying to make retail banking more like the energy and telcom sectors by forcing the banks to open up the area between themselves and the customer. This provides an opportunity for companies such as SmartDebit to capitalise on open banking to improve its services.
“We are a direct debit payment provider,” he says. “For us, open banking enables quick and easy payment, which is easier than credit cards. If we already have the customer’s banking details, then we should be able to use open APIs to offer more flexible payment options.”
“Customers are used to interacting with us in particular ways,” says Johnson. The bank is running a $1.7bn transformation programme, which began three years ago across employees and customers, and for Johnson, this transformation is not wholly focused on the convenience of self-service banking. “The reality is not self- service,” he says. “Customers need advice. A 25-year-old may be a digital native, but you need advice if you are about to invest your life savings in buying a home. “Johnson says the main focus of HSBC’s digital journey is getting people in the right channel. For him, a multi-channel customer experience is about how to get the customer from an online channel to another channel. Customers must be able to interact with the bank using the channel that best meets their needs, he says.
Remote engagement is one of the latest initiatives HSBC has rolled out, enabling customers to have a video chat with their bank manager. “You don’t want to take half a day out to talk to someone in branch for a new mortgage,” he says. “We offer video.”
But although it may be great to have a video call, customers would prefer not to have to wait two weeks for bank paperwork to arrive. “The challenge is to make it seamless for customers,” says Johnson. “There is an awful lot you can do quickly. But when you look at the final mile, what about the 500 pieces of paper? Paper is a comfort blanket. It will get through legal and compliance. But it isn’t simple to deal with paper. It can be illegible.”
Johnson says HSBC looked holistically at where it forced customers to use paper, and then replaced areas where a customer’s signature was required with Adobe Sign, a digital signature.
Explaining the paperless process, Johnson says: “Agents send an encrypted document link to the customer. We use the Adobe API [application programming interface] to remove a few steps for the customer by prepopulating forms.”
Johnson says the electronic document and signature signing saves the bank time for processing, because it avoids errors of misreading handwritten names and addresses. It also provides an end-to-end chain of auditability and accountability.
Adobe Sign has provided HSBC with a relatively fast speed to market, says Johnson. “You can reduce turnaround time from weeks to minutes,” he says. “An interaction with a customer on the phone can be completed within 15 minutes. It is not a massive digital transformation, but electronic signatures fit a lot of scenarios where paper is used. It also provides a digital experience for clients and customers and delivers better staff experience, because they are not chasing paperwork.”
As HSBC has shown, going paperless certainly improves the customer experience and internal processes. Johnson regards it as a quick win to showcase the bank’s digital strategy, and has a rapid payback.
Digitise the entire lifecycle
As Forrester analyst Aurélie L’Hostis says in the report Use customer journeys to guide your digital banking strategy: “Digital banking teams are keen to digitise the entire customer lifecycle. They want to cut costs and offer convenience by enabling customers to research, buy and manage loans, bank accounts, savings and investments through digital touchpoints.”
Banks will need to focus on digitising the whole customer journey, not just to differentiate their services against the existing competition, but also against challenger banks and new entrants, some of which already have a significant footprint in the retail sector.
In a recent discussion at Computer Weekly’s UKtech50 2017, Claire Calmejane, risk transformation director at Lloyds Banking Group, described the threat to banks posed by Amazon: “If Amazon were to get into the lending business in a big way, combined with the way you pay on Prime, it would disrupt all the lines of credit and would cause major disruption to the banking sector.”
It is no longer a question of whether this will happen, but when. Gavin Scruby, CTO at direct debit provider SmartDebit, thinks that third-party payment providers, challenger banks and companies such as Amazon could take advantage of regulations such as the Second Payment Services Directive (PSD2) and open banking APIs in the UK.
“I see Amazon opening up their own open banking group,” he says. “If they can increase revenue by 2% through the use of open banking APIs to cut transaction fees, they will become a challenger bank.”
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