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Financial institutions can improve the customer experience by making themselves easier to do business with, being guided by the Voice of the Customer and by systematizing data collection and usage.

 

This article was originally published in BAI Banking Strategies on April 4, 2016. Mark Hendrix is an Advisor at Peak Performance Consulting Group.

 

BY MARK HENDRIXDart in dartboard

 

In today’s digital economy, banking, like other industries, faces “disruptive” expectations from customers. Both individuals and businesses expect access to and delivery of services virtually on demand. Winning companies are responding by creating innovative approaches to the customer experience. They have learned that re-calibrating their processes, bringing them into alignment with customer expectations, has resulted in new sources of revenue and productivity.

 

How can bankers accomplish this? By offering value in three areas:

 

Be easy to do business with. With nearly everyone instantly connected by smartphone, our expectations for ease of use have changed. However, let’s face it: many financial institutions are not easy to do business with.

 

Our industry operates with complex business rules across multiple organizational silos. Some are the result of regulatory requirements, but much of the problem is self-imposed. This has a negative impact on the customer experience because it leads to greater variability and inconsistency across touch points. It also has a negative impact on cost because it requires replicating specialized knowledge and the supporting infrastructure to maintain it.

 

How do we reverse this trend? By thinking like a customer. We must remember it’s never the consumer’s responsibility to figure out your organization. Does your bank make it easy to be a customer? Is the customer experience designed how you would want it?

 

Make all of your internal assets work together by aligning the way products work and are delivered – the product architecture, fulfillment and service rules – from the customer interaction to the back office support. For example, if you think of credit as one “service utility,” then unsecured loans, secured loans, leases and lines of credit can come together in one operating environment using common business rules. Similar functional steps, such as lien verification, are handled in the same way irrespective of the product type. When your internal processes are consistent, it is easier to simplify business rules and identify risk. There is significant improvement across the board, in new staff training, speed-to-market, expense reduction and productivity.

 

Be guided by the Voice of the Customer. Real upside exists by prioritizing initiatives based on the Voice of the Customer. What are customers telling you about the way they shop, buy and use your products? Are you allocating resources based on their preferences and the economic value they associate with specific features and functions?

 

At a time when executives are barraged by demands to invest in new technology, products and processes, how should they prioritize scarce human and financial resources for the greatest impact? Institutions need to be careful how they invest for value; not every new idea is a good one. Throughout our client work, we have noticed a lack of agreement on the drivers of success. Which interactions matter the most to which segment? Where does the greatest opportunity exist? How are we assessing risk? These “fault lines” can translate into misallocation of resources and lack of focus.

 

The customer experience involves both rational and emotional factors and priorities vary by individual needs and economic status. Emotional issues often present a greater challenge than rational ones. For example, if the customer loses a credit card and can’t receive an overnight replacement, it can destroy economic value because of high frustration and hassles, often leading to attrition with high net worth and mass affluent segments. Will fixing this service issue have a greater near-term impact than investment in new, and important, payment initiatives? Customer research and segment analytics can provide a plain “line of sight” into those touch points that are critical in driving engagement, advocacy and revenue.

 

These answers are within management’s grasp. Adopt decision methodologies that align your financial and human resources so that they solve the problems your customers want you to solve, and you’ll be richly rewarded.

 

Bring consistency to data collection and use it to organize how the customer experience is managed and delivered. We are in the service business, and the customer experience is both a promise and product. In short, it’s the brand, setting the stage for the emotional connection between customers and your business.

 

As channels, devices and data continue to expand at a rapid pace, it makes sense to re-think how this experience is built, managed and delivered. One place to start is by adopting the next generation of decision support tools that integrate client history, value, and channel preferences to provide a 360-degree view of customer behavior.

 

A critical enabler is the centralization and standardization of data. Without quality data, tools and routines can fall short of their potential. A lack of standardization in how customer information is being collected can result in failure to recognize opportunities, with the consequence of customer needs going unfulfilled. This puts retention and revenue at risk.

 

Enterprise data capture should have a unified line of sight. But we often find that product-oriented structures reinforce a limited view of the customer. This limits the upside cross-sell potential and results in a failure to capture natural opportunities, such as the synergy between commercial banking and wealth management.

 

Assess your current process by auditing customer, account and value data for completeness, accuracy and usability. Without this comprehensive understanding, it becomes more difficult to perform segmentation and modeling with the degree of precision needed to realize incremental profit. A commitment to the normalization and cleansing of data will create a better result – based on our experience, generating a two times return by improving data management routines.

 

Implement a standard, data-driven approach to decision making so that the highest value opportunities receive the greatest focus.

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To be successful, Bank-at-Work programs must deliver effectively on three elements: partnership, value proposition and sales execution.

 

 

This article was originally published in BAI Banking Strategies on March 11, 2016

business woman in warehouse

 

It goes without saying that retail banking has many moving parts and Bank-at-Work programs are no exception. From target strategy to sales protocols and from results tracking to offer fulfillment, successful program implementation requires that banks maintain a comprehensive structure around their Bank-at-Work initiatives.

 

But within that program structure, three things stand out because without them you’ll just be spinning your wheels. They are: partnerships, value proposition and sales execution. The formula goes like this: partnerships get you in front of company decision makers; value proposition gets you in front of employees; and sales execution gets you incremental revenue. Sounds pretty simple, but the reality is very few programs actually focus on these key essentials, which is the root cause of why many retail Bank-at-Work initiatives run aground and get shelved.

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Banks need to eliminate complexity by simplifying processes and customer interactions, with the payoff being lower expense, higher customer loyalty and reduced risk. This article was originally published in BAI Banking Strategies on January 5, 2016

 

Consumers are increasingly self-reliant and see time as a resource that is just as valuable as money. Moving forward, delivering a timely customer experience will be an important factor in winning in the market.

 

Banks, however, have a hard time delivering on this customer demand for timeliness due to their innate complexity, with business models that reflect the uneven integration of multiple lines of business such as retail, business banking and investment banking. Over time, these organizational processes have often been “spaghetti wired” from legacy systems that are not fully integrated. Recent regulation further complicated matters, adding additional infrastructure that increased operational layers and cost.

 

Bankers are increasingly aware that this unplanned complexity has gotten out of hand and harms the ability to deliver for customers. In our recent survey of financial services executives, 68% of respondents indicated they have initiatives in place to simplify their business models. How should an organization tackle this task?

 

Start with a change campaign. With so much at stake, you can start anywhere – beginning, middle or the end – but take the first step. Start by mapping process steps and identifying activities that are duplicative, or do not contribute to efficiency.

 

Once a root cause has been identified, develop the management routines to determine the legacy drivers in Information Technology (IT), operations, service, channel and organizational structure. Several remedies that can yield immediate productivity are:

 

  • Eliminate hand offs;
  • Remove paper processes;
  • Standardize data capture and governance;
  • Implement voice of customer research on how customers shop, buy and use your products and services.

 

Embedding these changes is not a function of technology but rather of change management and organizational leadership. Enterprise Resource Planning can provide reports and metrics to identify opportunities. But improvements are a function of leadership attention to the experience drivers that create real value.

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Jim Marous, who’s work I respect, asked for our insight and input to his annual Top 10 Retail Banking Predictions. Here are 4 predictions for 2016. What do you think?.

  1. Universal Bankers will become “universal”, and will be the standard staffing model in most bank branches. And this will not just be cross-trained tellers but a true merging of the teller and personal banker role.
  2. The shift to digital will accelerate. Up to now it has primarily impacted routine monetary and service transactions. But we are at an inflection point where account openings and advisory services will be delivered remotely. This will represent a fundamental shift, where the physical branch will support the digital channels, rather than the reverse.
  3. With more touchpoints, mapping the customer journey becomes critical. Understanding where they start, how they use channels in tandem, and where they stop along the way will be essential to managing relationships in the future. This will require adoption of new data management tools and skills.
  4. The call center is back! It will no longer be a support function to the branch network, but rather the hub of the customer experience. With customers using more channels than ever before, they expect consistency across all touchpoints. These new “customer experience hubs” are well positioned to bridge both physical and digital channels.
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A modified version of this article was originally published in BAI Banking Strategies on November 13, 2015.

 

As the Millennial generation increases its economic clout, banks need to adapt strategies that enable them to profitably attract, serve and grow with these new customers.

 

It’s a simple fact: Millennials are your future customers. Already the largest group in the workforce, the leading edge is now in their 30’s and reaching an age when they have stable jobs, are forming families and buying homes. By 2020 they will have greater savings and investments than Baby Boomers. They are not just a customer category, but a massive segment that is driving change rapidly.

 

And Millennials are critical to your bank’s growth strategy. Approximately 10% of households switch banks annually – a rate that has been relatively stable for the past decade. But this propensity to switch varies widely by age group. Older customers are more likely to have long-established banking relationships and their average switching rate is only between 3% and 4%, usually as the result of a service or moving issue. On the other hand, younger customers switch at a rate of between 15% and 20% annually. They are most likely to be attracted to financial institutions that offer the technology and online services they prefer.

 

Banks need to take action or risk losing this segment to new entrants in the payment, consumer banking and business banking space. And there is cause for concern: we counted 38 different non-traditional competitors in the payments space alone, of which 10 were new in the last year.

 

Up to now, these competitors have been mostly nibbling around the edges, but the introduction of Apple Pay significantly heightened awareness of the threat. In our recent industry survey, one bank CEO told us: “The fear is that Apple Pay and Google Pay reduce, if not eliminate, the need for banks to provide the payment stream. How do we compete with that? …. Not sure what the solution is at this point. Once the consumer leaves or never comes in to the system, will they ever join again? Jury is out but I am not optimistic.”

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This article was originally published in BAI Banking Strategies on October 23, 2015

 

To avoid the revenue growth squeeze, community banks need to embrace neighborhood marketing, improve sales effectiveness, expand customer relationships, utilize data analytics for product design and diversify their offerings.

 

Banks are hungry for growth: hungry for new customers, for deeper and more profitable relationships with existing clients and for better alignment of expense against revenue opportunities. But achieving that growth is a difficult challenge.

 

Low interest rates continue to put pressure on margins. According to the most recent FDIC Quarterly Banking Profile, “revenue growth has been modest and net interest margins continued to decline.” Although interest rates will inevitably start to rise when the Federal Reserve raises rates and this will help loan yields, it will also trigger competitive pressure on deposit rates, limiting improvement in the margin.

 

Furthermore, the “no fee zone” is expanding. Financial institutions are simply unable to charge for services that were once common sources of profit. Overdraft (OD) fees have been severely constrained, and the situation will only worsen as new regulations from the Consumer Financial Protection Bureau further limit this important source of revenue. Early analysis suggests potential reductions in OD revenue in the range of 25% to 50%, with the impact beginning in late 2016.

 

Finding topline revenue growth is the core issue facing the industry, and this begs for new pathways for success. As one C-level banker stated in response to our recent industry survey, “What we’re doing now isn’t working anymore; we have to take a different approach.”

 

Here are five suggestions for such a different approach:

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