Mapping a ‘bionic’ future for banks
Image Credit: José Luis Barros/©Gulf News

Banks are remodelling the in-branch experience by bridging their digital and human delivery channels to enhance customer centricity and service delivery to stay relevant to their audience.

For most retail and wealth customers, the conventional bank branch experience and day-to-day banking activities have been shifting to online platforms for the past 15 years. Disruption to the banking industry comes from fintech companies, powerful telecom networks, and online retail behemoths forcing the financial services industry to view their traditional and digital channels as connected entities, rather than isolated business formats.

To optimise performance, meet consumer demand and remain profitable, branches need to become more productive and less costly and to retain staff that will adhere to a new wave of customer-centric service orientation. To achieve this, banks need to go back a step to move forwards, that is by fusing their digital functionality with human interaction to extend the personal touch of wealth management advisory for new account customers, whilst retaining the loyalty of a higher tier of customers.

Big Data is supporting banks’ goals by bringing clicks-and-bricks into greater alignment, with virtual and video banking bringing customers closer to their banks. Call centre agents have even greater access to customer information, allowing a richer level of interaction to troubleshoot a gamut of concerns from run-of-the-mill card and ATM access and payment issues, to understanding the workings of their accounts and knowledge of wealth products.

In many ways, branch innovation is drawing inspiration from the five-star hospitality industry. By reframing all aspects of the branch model — beginning with the use of engaging language, i.e., calling customers “clients” and offering to “serve” — enhancing user experience means melding branch aesthetics with ergonomically well-embedded, easy-to-use technology and coupling this with human assistance at every touch point, to match the in-branch experience with its online proposition.

Future branch transformations will rely on Human Centred Design (HCD) or ‘Design thinking’. While not an entirely new idea for tech firms, who tend to focus first on consumer experience, HCD’s five tenets are encouraging changes within banking. These tenets empathise (develop a deep understanding of the challenge), define (articulate the problem), ideate (brainstorm and develop solutions), prototype (attempt a variety of solutions), and test (continuous short-cycle innovation to test your preferred solution), As digitisation opens the financial services ecosystem to new and niche players, a Boston Consulting Group’s (BCG) report expects to see fewer full-stack banks. Instead, banks will likely pursue a mix of strategies, such as becoming platform leaders, being specialist providers, and promoting infrastructure-as-a-service offerings.

The cost basis will also change. Banks will need to be leaner and more efficient if they are to compete effectively against digitally mature peers and fintechs, many of which have much lower cost run rates.

Across all retail businesses — including banks — customers now expect interactions to be simple, intuitive, and seamlessly connected across physical and digital touchpoints.

Banks must do more than react to shifts in consumer preferences — they need to set aspirational targets for sales and service across channels. Some customers will self-select into digital channels, but banks can do more to encourage less motivated customers to make the shift. According to McKinsey & Company, banks in markets like the Nordics and UK have reduced the number of customers using branches by up to 60 per cent by focusing on how to serve the heaviest branch users effectively through other channels.

Banks in North America and southern Europe are reducing branches and growing digital sales at a more gradual rate. In many Asian, African, and Latin American countries, branch reduction is not so apparent — only because retail banks in these markets leapfrogged branch distribution to go directly to digital sales.

The rate of branch reduction is often tied to customer willingness to purchase banking products online or on mobile devices. Eighty to 90 per cent of banking customers in the Nordics, for example, are open to digital product purchases for most financial products, compared to 50-60 per cent in North America and southern Europe.

Boston Consulting Group’s (BCG) report demonstrates that in emerging markets, with rising discretionary incomes, robust GDP growth, and a larger population of banking customers, retail banks will continue to experience strong growth and accounting for 75 per cent of the industry’s CAGR (compounded annual growth rate) over several years.

The surveys also show that customers want choice in how to engage with their bank and that they expect service to be consistent, streamlined, and engaging no matter what channel they use. While 43 per cent of respondents indicated a preference for digital-only experiences, the same percentage said they want a mix of physical and virtual interactions — a hybrid banking experience, in which digital tools and capabilities combine with human input and advice at the moments that matter.

Over 50 per cent of customers surveyed via BCG’s “Rebex” benchmarking and its latest Retail Banking Customer Survey in China, Colombia, Italy, Russia, Spain, the UAE, and the US, said they prefer this type of hybrid banking relationship. BCG analysts posit that to enable this hybrid model, banks must go “bionic”, and that by accelerating bionic transformation, retail banks can generate a 30 per cent increase in net profit by 2020.

A bionic transformation consists of blending digital and personal interactions to create a more responsive and cost-effective distribution model. It combines human judgement with data power and mapping a customer journey with end-to-end processes supported with robotics and machine learning.

BCG advises that, at the branch level, banks must create multiple branch formats, embedded within a well-rounded multichannel experience. The research forecasts that banks that move to a bionic network can see revenue gains of 5-15 per cent, network cost reductions of 15-35 per cent, and increases in customer satisfaction of 10-15 per cent.

These new drivers of the future hybrid branch can ensure that customers are well equipped to reach their desired financial goals. By learning and documenting customers’ experiences and issues and then responding to this feedback by creating solutions, banks capture customers’ emotions. So that to on-board and retain clients, institutions can assure customers that their problems will be solved, their time will be well used, and they will feel valued.

It’s clear that it will be another exciting “couple of years” for the banking and financial sector. Digitisation in banking is gathering momentum. With fintechs coming to the fore and incumbents looking ready to join hands with tech providers, we are expecting to continue seeing a major transformation in the banking landscape.

Sonny Zulu is Managing Director and Head of Retail Banking, Standard Chartered, UAE.