Bank 2.0 - The big shift
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The document discusses transformational customer experience in financial services through technology by examining changes in customer behavior driven by self-actualization and technology adoption, outlining 3 phases of behavioral disruption and shifts in how customers access services through various channels like mobile banking and internet banking. It also provides recommendations for improving customer experience across channels like branches, ATMs, call centers, and digital platforms through initiatives focused on usability, analytics, sales capabilities, and organizational changes.
Bank 2.0 - The big shift
- 1. Transformational customer experience in the financial services sector through technology.
- 2. Changes in Customer Behavior Customer Behavior is rapidly changing due to two key factors: • The psychology of self-actualization. self- • Technology innovation and adoption – diffusion. Banks can either try to reinforce traditional mechanisms and behaviors, or they can anticipate changing behavior and build accordingly. The pace and rate of behavior change is speeding up, not slowing down. Thus institutions get less time to react and anticipate the impact of such changes on their business. The longer they wait, the wait bigger the gap between customer expectations and service capability becomes. There are 3 phases of these behavioral changes and we are at the second phase The third phase will occur within the next 5 years and phase. it will be a game changer changer. 2
- 3. Behavioral Shift • 97% own a computer • 94% own a mobile phone • 76% use Instant Messaging • 15% of IM users are logged on 24/7 • 34% use websites as their primary source of • news • 28% author a blog and 44% read blogs • 49% download music using peer-to-peer file sharing • 75% of college students have a Facebook account • 60% own some type of portable music and/or video • device such as an iPod Source: Heidi Przybyla "Obama's `Youth Mojo' Sparks Student Activism, Fueling Campaign", Bloomberg.com (May 7,2007) Source: Generation Y, Business Week, February 15 1999
- 4. Three Phases of Behavioral Disruption Phase 1 Phase 2 Phase 3 Mobile Wallet Internet & Smart Device & NFC dot.com & App Phone Payments Control and Anywhere, Cashless and Choice Anytime Ubiquitous 4
- 5. Changes Expected in the UK Retail Payments (2006 – 2015) “There will be a critical review in 2016 when the Payments Council will decide Paul Smee, Smee, Chief Executive of the whether sufficient change has occurred against agreed published criteria, to press UK Payments Council ahead to do away with the cheque in 2018. There are many more efficient ways of making payments than by paper in the 21st century, and the time is ripe for the economy as a whole to reap the benefits of its replacement”
- 6. Customer Empowerment Product 1980 2008 Credit Card 14 days Instant Approval Personal Loan 7-14 days Pre-approved, or 24 hours Home Mortgage 30 days + 24 - 28 hours John Steffens, Vice Chairman “The do-it-yourself model of investing, centered on Internet trading, should be do-it- Merril Lynch, September 1998 regarded as a serious threat to Americans’ financial lives.”
- 7. Measuring the Customer Experience Customer experience is the new Holy Grail of retail financial services, but the key is not so much about presence and service as they are about service, understanding the core needs of the customer. To build an optimal customer experience banks must be able to measure how customer behavior is adapting adapting, and be able to measure the rate of innovation or value creation within the whole organization. While many institutions have the capability to measure customer experience, it is considered inferior from a data-set perspective to revenue. But whereas revenue tells you what you achieved, behavioral analytics can tell you why, and more importantly, where you can do better.
- 8. Organization Structure Partial retail banking org chart relating to channel priorities CEO Head of Branch Head of Network Retail Transaction Customer IT Services Propositions Alternative Platform Marketing Call Centre Channels Mobile Internet ATM Banking Banking Branch revenue does not equal branch sales results. The decision to “apply” for a credit card is almost never made in the branch, unless it is a new account opening process. The branch practically has zero involvement in credit card sales, but we often require customers to come to the branch to actually submit the application. In this case the branch is a “step” in a compliance process.
- 9. Which Product works best on which channel? StanChart and Middle-East / North Africa Surveys: Preference for Retail Banking products online, by market. Middle-
- 10. Channel Improvement In the late 90s and early 2000, banks closed large swathes of branches in the name of cost cutting creating large-scale cutting, customer dissatisfaction. Recently branches have seen somewhat resurgence in popularity, but are branches working the way they need to work for both customers and banks in today’s changing landscape? How can banks make branches work much more effectively to create real value? It is about less high-counter transactional support and far high- support, more low-counter sales and service focus The objective is to low- focus. leave other less costly channels to handle no or low-margin transactions, and focus on where the value is – deep, profitable customer relationships.
- 11. Branch Setup Present Day Branch •High counter and barriers. •Transactional focus. •Fixed banking hours. Branch of the Future. •No counters or barriers. •Simplified branch visit. •Low-counter , sales and service focus. •Flexible banking hours.
- 12. Branch Improvements Today……(1) Project / Initiatives Desired Outcomes Cash / Cheque Reduce OTC (over-the-counter) transactions that are purely cost for the deposit machines branch. Meeters / Greeters Redirect non-optimal transactions to self-service automated capability. Customer Improved behavioral analytics on customers across all channels to understand Information Systems better which “tasks” customers prefer to do at the branch versus online etc. Sales Intelligence Real-time precognitive offer management for existing customers delivered in and automated offer the form of prompts, offers, or service messages. capability Branch customer Customer information dashboard that shows entire relationship footprint at a dashboard glance, along with current risk rating, credit approvals and suggested sales offers. Improved staff Focused service and sales training programs, along with better KPIs that focus mobilization on more than simply the number of applications per month, or total revenue BPR (Business Reduction of layering between sales and service departments, including the Process removal of duplicate “skills” within “competing” product units. Creation of Reengineering) on “customer dynamics” capability as owners of customers, rather than product select processes competing for revenue from the same.
- 13. Branch Improvements Today……(2) Project / Initiatives Desired Outcomes Straight-Through Enabling customers to get immediate fulfillment for an application rather than Processing (STP) and waiting the obligatory 24, 48 or 72 hours due to antiqued manual or human Credit Risk “processes” in the back office. Results in improved service perception and Management reduction of abandonment due to ongoing process demands (i.e. proof of systems income, faxing of 3 month’s bank statements, pay slips, e.t.c). Additional benefits include reduction of compliance errors through manual mishandling. Customer friendly Use of ethnography, usability research, audits, customer-focused observational language initiative field studies and focus groups to improve language and simplicity of application forms and communications with customers within branch (and beyond).
- 14. Contact Centers and IVRs Key Issues facing contact centers in the Bank 2.0 world. Please wait a Moment… Capitalizing on sales Consistency and quality Quick access to the Improving IVR utilization Opportunities: of communication. right information and effectiveness effectiveness. Why are we recommending Dealing with customer Respond quickly to the Through innovation like a particular product to queries across any channel most common inquiries speech recognition the customer? Making new Green Issues. Customer Advocacy. Finding the balance Staff turnover and technologies pay. Encourage customers Helpful, personable, in outsourcing. employee engagement. Text chat, video chat, skype to use e-statements friendly customer service. Offshore cost savings Staff satisfaction, vs Onshore quality career / skill progression 14
- 15. Proposed Roadmap for Channel Improvements Project / Initiatives Desired Outcomes Staff Retention Homesourcing as an option for retaining the best staff. Assigning new cadets to Programmes the call centre for at least 3 months within the first year of service. Full Integration of Integrate the technologies customers use into the contact centre; picking up email, VOIP and IM the phone is not a superior choice for customers. Develop a communication directly into the policy for all employees that covers the use of these tools, plus blogs, social contact center networking sites and virtual words. IVR Menu redesign Prioritize menu options based on traditional traffic analytics, thus reducing IVR navigation for frequently made calls. Incorporate voice recognition “emotive” IVR technologies to redirect upset customers to a specialist “customer advocate” and diffuse difficult situations. Single-screen Improve customer knowledge, process and workflow with a single-screen customer dashboard interface for CSRs, akin to the Internet banking centre for customers. Reduce the current workarounds with multiple disparate systems, separate logins, screens etc. Improved service Work to create a total service culture within the bank that gives contact culture. centre staff pride in their role within the customer equation, rather than feeling like they have been relegated to the call centre dungeon. Empowere staff to solve problems., rather than create a process to frustrates resolution through convoluted organization structures.
- 16. Proposed Roadmap for Channel Improvements Project / Initiatives Desired Outcomes Customer Analytics Use customer analytics to better understand the reasons for the call and work to anticipate customers’ needs both collectively and individually. If a customer regularly calls with the same request, utilize analytics to serve up and IVR menu that prioritizes those requests by CLID function. Customer Advocacy Build a customer advocacy team that can act as a gateway between customers Program and the institution. Help this team to be champions for the customers and have them involved in any decision in respect of the changes to customer processes, new product launches, etc that impact the frontline. Dynamic offer Create a customer dynamics team (incorporating product specialists, management marketing staff, customer advocates, etc) to craft offers for segments that emerge from the customer analytics. Create tons of sales scripts and offers for unique tailored cross-sell and up-sell opportunities that feel like better service for the customers rather than just sales pitch. Reform Legal and Give the legal and compliance department KPIs for enabling customer compliance solutions and improvements, so they are working for the customer and not just departments mitigating risk for the brand.
- 17. Web Mechanisms affecting online revenue generation Mix & Journey Cross-sell to Existing Findability Customers Value Exchange & Content Usability Scoring
- 18. Web How do we ensure it works once implemented? CSR: Welcome to XYZ Bank. How can I help you today? Customer: I’m having trouble transferring my funds to my overseas account in London using the Internet Banking facility. Can you help me? CSR: Certainly, sir. Can you explain what the problem is? Customer: When I go into internet banking and choose transfers, the list of banks does not show my bank in London. Can I add it to the list? CSR: You should be able to type in the name of the bank and the SWIFT code directly onto the page, sir. What menu option are you choosing? Customer: Third Party Transfers… CSR: Aah…that’s the problem. You need to be selecting telegraphic transfers. That is the option for overseas transfers. Third party transfers are the option for transfers within Kenya. Case of a call centre interaction with a customer over money transfer via internet banking. To the customer third-party third- transfer means you can transfer outside of the bank to a third party. What if the bank simply changed the menu options to read “Transfers within Kenya” and “Transfers Overseas”?
- 19. Web The Value Exchange: Drivers for effective web presence Improve my life Buy more •Fit my unique needs. •Acquire new customers. •Address more of my •Increase share of wallet. requirements •Get longer lasting relationships Respect my time •Be more convenient Value Cost Less Value •Be faster and simpler from the •Sell and service more from efficiently. customers bank •Smarter marketing. Save me money •Be cheaper to own •Give me a better deal.
- 20. Internet Channel Improvement Roadmap Project / Initiatives Desired Outcomes Usability tests for all Assess any issues with current website language, layout, design and process. sites Customer Improved behavioral analytics on customers across all channels to understand information systems better which “tasks” customers prefer to do in-branch, versus online. Content The old dot.com favorite is back, but this time enabled across the organization management systems so we can “publish” new content continuously. The best analogy is to imagine that your bank is publishing a product catalogue and investor information magazine, based on your product, to customers daily. Sales intelligence Real time and precognitive offer management for existing customers delivered and automated offer in the form of prompts, offers, or service messages, especially within the capability internet banking portal. BPR (Business Reduction of layering between sales and service departments, including the Process Re- removal of “duplicate” skills within competing product units. Creation of engineering) on customer dynamics capability as owners of customers, rather than product select processes competing for revenue from the same.
- 21. Internet Channel Improvement Roadmap Project / Initiatives Desired Outcomes Straight-Through Enabling customers to get immediate fulfillment for an application rather than Processing (STP) and waiting the obligatory 24, 48 or 72 hours due to antiqued manual or human Credit Risk “processes” in the back office. Results in improved service perception and Management systems reduction of abandonment due to ongoing process demands (i.e. proof of income, faxing of 3 month’s bank statements, pay slips, e.t.c). Additional benefits include reduction of compliance errors through manual mishandling. Customer friendly Use of ethnography, usability research, audits, customer-focused observational language initiative field studies and focus groups to improve language and simplicity of application forms and communications with customers within branch (and beyond). Search engine Organic search engine optimization requires rethinking what content should be optimization put on the site which is driven by what customers are looking for.
- 22. Mobile Key areas to consider in mobile banking development OS or Device Needs and Bank Software Interface Revenue Hardware Solutions Integration Stacks
- 23. Mobile Revenue opportunities for mobile banking services Transactional Transactional Acquisition Revenue Subscription-Led Revenue Subscription- Cost Savings Revenue Mobile payments New product Monthly fee for daily feed Reduction in branch, ATM acquisition and call centre load. Mobile remittance Drive to the web, Royalty and card usage Decrease in cost of branch lead-gen offers acquisition Virtual NFC Up-sell, upgrades Location-based usage offers Decrease in net customer debit/credit card cost.
- 24. ATM and Self-Service Banking – Convergence and Self- Control The ATM turned 40 recently, and it doesn’t look like its diminishing in popularity any time soon. As banks seek to leverage their extensive ATM network, what are the key drivers for use by customers? • Where should ATMs be located? • When do people use them? • What could prevent using a specific ATM? • Is the ATM a cost or profit centre? • Originally designed to reduce branch load, is it doing its job? The key to self-service is ease and speed use. Don’t make it too complicated and when it comes to decisions on what to deploy, strip the process or task down to its simplest form.
- 25. Channel Silos to Channel Management Retail Contact Call Centre Centre - IVR - Phone Banking •IP (www, i-Bank, Retail mobile) Internet •ATM Comm. - www •Kiosk Internet •Voice / Data - Internet banking •Voice Recognition •Other Alternative Content Channel Management Management Channels Self-Service Customer Banking Analytics Cards Call - ATM Center - In-Bank Systems Comm. Call SOA Center
- 26. The Bank 2.0 Roadmap Analytics Offer Mgt segmentation Customer Data Mart Core Banking Straight –Through Systems Processing Credit Risk Management XML Web 2.0 Tools Content Management Avatars Voice Recognition Contact Centre Contact Management
- 27. From Bank 1.0 Channel Architecture to Bank 2.0 Channel Architecture Retail Retail Kiosk Brokerage Kiosk Mobile Brokerage Mobile Trading Trading www Settlements www Settlements Treasury Call Centre Treasury Call Centre Mortgages Mortgages IVR Trade IVR Finance Trade POS Finance POS ATM Card Services ATM Card Services Branch Branch
- 28. The Road Ahead – Beyond Channel Technology appears to have reached a point where exponential improvements are nothing new. Adoption rates for new technologies are sky rocketing and prices are coming down so more people have access to these technologies. Technology is not exceptional, nor is it an alternative choice for consumers – it is the way of banking in the bank 2.0 world. • What will the future bring? • How does this impact service providers? • How can they prepare for it?
- 29. Innovation An innovation approach will challenge the rules of the game. Traditional Approach Innovation Approach A different Same Analysis Point of view about the future Sustained Differentiati Price Competition on Same Strategy Using new Commoditization lenses Differentiation Perceived Simple Value by Same comparison Customers Products & for Unique Services customers Value Propositions Companies pursue similar strategies often Innovative thinking will challenge resulting in thecommoditization of their commoditization by creating sustainable value propositions growth strategies through differentiation
- 30. Innovation Business Model Innovation. By questioning different dimensions of the business model, we can create new business concepts to deliver more customer value, within and beyond our core business I. Who? IV. How to create a competitive I Who are our customers? advantage? In which way are we different from our Which market segments are we competition? serving? How is this difference valued by the Which new needs are we serving? consumers? II. What? V I What products and services are we I Is this differentiation sustainable? selling? ? V. How do we make money? What benefits and solutions are we What do we charge our customers? delivering? What are the major cost variables of III. How? our value proposition? Which distribution channels are we using? How do we extract value? What is the configuration of the value chain? What is our pricing model? I II Who are our allies? Innovation Within the core V I Scope Expanding the core In which way are our allies helping us Beyond the core delivering value? Customer Value Analysis Value Created 2 ways to create more Customer Value: Customers seek out Value CapturedValue Delivered 1. Reduce the Price optimizing the Cost or ‘the best deal’. Then, cutting on the Margins, and/or companies need to Customer Cost Margin 2. Increase the Benefits adding more create more Value functionalities to the P&S and/or customer value than Cost Price Benefit expanding the Customer Experience competitors. (Willingness To Pay)
- 31. Innovation Innovation Principles. A set of principles enables the development of transformation and renewal programs within our client organizations I. Mobilize and engage II. Use different lenses III. Build a point of view the entire workforce for new answers about the future IV. It is only innovation when it V. Develop and manage a VI. Embed a system of is delivered to customers pipeline of opportunities for strategic innovation not just each challenge a process Source: Strategos
- 32. Innovation Innovation Blueprint. Allows the structuring and embedding of innovation throughout the organization, enabling a systematic production of results Innovation Factories Breakthrough Innovation Incremental Innovation Building Blocks Organizational Structures Processes & Methodologies Technologic Platforms Metrics & Evaluation Strategy & Objectives Corporate Training Brand & Communication Innovation Network
- 33. Innovation Breakthrough Innovation Create a continuous flow of experiments and pilots of business model innovation and growth platforms that address business challenges Discovery Ideation Elaboration Development Experiments Business Plans Implementation New Insights New Ideas New Concepts New Businesses Process Using different Leveraging on the Building value Design and implementation of lenses to build a new perspectives for propositions using experiments (low-cost and short term) new point of view creating new ideas, the ideas generated. to evaluate some assumptions of the on the challenge which arise at the Focusing the value proposed business models (Core competencies, intersection of propositions in the Development of business plans and Orthodoxies, different prisms core area implementation of the concepts Customer insights, Discontinuities) Thousands of ideas Many value Validation of the assumptions of Results A differentiated and generated propositions and quick selected opportunities proprietary view Participation of wins, representing (experimentation plans) about the future hundreds of people potential innovations Guidelines for the Business Plans Participation of to implement on the implementation hundreds of people business units (Venture Plans)
- 34. Innovation Incremental Innovation Incremental Innovation is mandatory for every organization: the pursuit of small innovations that can delivery efficiency and develop a better customer experience. Incremental innovation efforts can be leveraged through technology platforms Generation Collection Evaluation Implementation Action Plans Execution Incremental Ideas Selection Initiatives Operational improvements Process Focus on innovation Organizational process Marketplace of ideas Decision to Implement or to transfer challenge for collecting ideas (negotiation with ideas) and to the relevant business unit Spontaneous ideas Idea Forum (ranking of ideas) Integration with the Candidates chosen for pipeline generated on the implementation through the breakthrough Innovation participation of all the initiatives organization Results Thousands of new ideas Facilitation and Identification of the ideas, Initiatives launch through the involvement of presentation of ideas in a according to the criteria the entire organization structured format that defined so that the facilitates consultation selected ideas can be and analysis implemented
- 36. Timeline of Disruptive Changes…..(1) 2007 2011 2014 2016 The launch of app phone, App phone sales dominate Marketing spend on digital EU and UK governments announce 3G and WiFi represents the mobile landscape, most media in financial services support for physical credit cards the second disruptive are RFID/NFC enabled exceeds traditional media to be phased out due to fraud technology for banks for the first time issues 1995 The Internet phenomenon becomes the first disruptive technology to impact banks 2003 2010 2012 2015 Internet banking Internet banking revenues Contact less credit cards NFC contact less phone transactions exceed branch exceed branch-led revenues become the dominant payments exceed debit / transactions in most in the US and UK markets for POS/Card combination credit card payments developed economies for the the first time first time
- 37. Timeline of Disruptive Changes…..(2) 2018 2020 The UK, Australia and Physical cash makes up less others stop using cheques; than 2.5% of retail payments the US follows two years later 2017 Value of P2P payments via 2019 mobile exceeds ATM cash Use of ATM Machines is withdrawals globally in terminal decline in the West
- 38. Book Reviewed By: Bank 2.0 Author: Brett King is a bestselling author and the founder Peter Muya, Managing Partner at Pearl Touch International Limited, is a trusted of a breakout new retail banking concept, technology advisor in the ICT industry, driven by the passion to transform the Movenbank. Voted as American Banker's Top enterprise through the delivery of tools and insights that create a synergy Innovator of the Year in 2012, King initially between business needs, business information, IT systems, data, technology achieved recognition for his bestselling book delivery, organization, costs and standards . BANK 2.0, which received widespread industry acclaim and topped category lists in the UK, USA, Having a wealth of 10+ years experience in the key dimensions of the ICT value Germany, Japan, Canada, France Russia and Asia. chain including IT strategy and governance, Enterprise Architecture, IT Operations He is widely considered the foremost global Management, Business Applications - SOA, BI, ERP, CRM, ECM, software expert on retail banking innovation today. development, business analysis, project management, pre-sales / business development and service management all in a diversity of sectors – IT consulting, telecommunications and financial services industry. Email: peter.muya@pearltouchint.com Web: www.pearltouchint.com/consulting Questions?