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.
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?.
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.
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.
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.
- 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.
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.”
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:
Peak Performance Consulting Group recently conducted a survey of financial services executives to gain their perspective about the challenges ahead for the banking industry. Respondents highlighted the difficulties facing community and regional banks, including pressure on margins and fee income, the high cost of regulatory compliance, increased competition from nonbanks and changing customer preferences that are making branches less efficient.
SNL recently interviewed us about threats, opportunities and challenges. free-link. You can find the original survey at http://ppcgroup.com/resources/insights-and-downloads.html
This article was originally published in BAI Banking Strategies on September 15, 2015
As customers migrate to digital channels, bankers need to aggressively re-configure their branch networks in terms of the number and mix of facilities, the staffing provided and the role of the contact center.
Perhaps the single most important threat facing the banking industry is the fundamental change in the way consumers and small businesses use branches. Routine service transactions are being displaced by online and mobile, causing branch transaction activity to decline at a 4% to 5% rate per year on average, with some banks such as SunTrust, experiencing declines of 8.5%. And sales productivity is low: our client benchmark data indicates the average branch opens 20 to 30 new accounts per month, and that translates to only 1 to 1.5 accounts per business day.
The steady change in channel behavior has left many bankers uncertain about how aggressively to respond. In our recent survey of industry leaders, one senior banker said, “There is still a lot of disagreement within the industry and our bank as to how quickly the shift from physical to digital is taking place. That is leading to a hesitation about committing resource investments, which could be a huge stumbling block for the prosperity of the industry longer term.”
Here are some suggestions for revamping your distribution model to evolve with the changing customer trends: