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Flaws for thought

Written by Scott Thompson
13/06/2013

Scott Thompson goes beyond the hype and asks: are the UK’s banks anywhere close to delivering a seamless customer experience across multiple channels?

The way consumers engage with banks is undergoing a massive shift driven by innovations in technology. With competition in the retail banking sector increasing, at the time of writing the Post Office was set to become the latest new entrant, the High Street’s big hitters need to up their games if they are to maintain their market share and rebuild trust amongst customers. Multi-channel offers up many benefits in this respect but also a series of obstacles and issues which, if not addressed correctly, could result in damage to the brand and lost business. So, how are banks doing in terms of multi-channel strategies and delivering the consistent service needed to engage and retain increasingly savvy customers?

Not particularly well, it would seem. Disgruntled customers still abound and financial institutions must improve the experience they offer or continue to risk losing business. Ten per cent of customers say they are likely to jump ship in the next six months, while an additional 41 per cent are unsure if they will stay or go. That’s according to Capgemini and Efma’s 2013 World Banking Report, which surveyed over 18,000 people across 35 markets. The report also finds that banks can become more customer-centric by leveraging vast amounts of customer data and further developing mobile capabilities to create more personal interactions.

Somewhat predictably, mobile banking received the highest increase in importance, relative to all channels, by customers globally in 2013. Its importance increased by 10 per cent in Central Europe between 2012 and 2013, nine per cent in Asia Pacific, and six per cent in Western Europe. It’s a trend that’s set to continue with the general public (particularly the young) turning away from branches and ATMs over the next four years and moving to mobile. While branch usage in North America is set to fall 3.5 per cent by 2017, mobile banking will see a 7.7 per cent rise. Patrick Desmarès, secretary general, Efma, says: “The future of retail banking is mobile banking. By the end of 2013, there will be more mobile devices than people with a predicted 10 billion mobile connected devices amounting to a global average of 1.4 mobile devices per capita. Banks need to go where the opportunity is and that is mobile.”

It might well be an opportunity, but it’s also something of a timebomb if handled incorrectly. According to a recent Forrester mobile banking survey, the UK’s banks (which were slow both to take mobile banking seriously and to launch services for smartphones) have not yet caught up following their late start. The mobile banking services from the UK’s banks are notably less advanced than those offered by their counterparts in North America and elsewhere in Europe, according to Forrester. NatWest are at the head of the pack, but even they only scored slightly above the average for the 15 banks surveyed overall.

An obsession with mobile can also take organisations away from the bigger picture. Simon Barrows, director of financial services, Glue Reply, comments: “We are seeing banks fall over themselves to deliver new mobile offerings – apps for this and apps for that – but the broader challenge of ensuring a seamless customer experience across all touchpoints, not just the new-fangled digital channels, is much, much harder. Omnichannel seems to be in vogue now as a term over multi-channel but even this misses the key point, that being it is not really about the channels or indeed the devices that customers use to access those channels, but instead it is about the customer conversation and end-to-end experience in the context of what they are trying to achieve.”

Ian Byrne, director of banking UK&I, Wincor Nixdorf, observes: “A majority of banks’ current focus is on enhancing existing infrastructure in ways that will enable cross channel transactions, effectively providing a veneer of multi-channel that sits in front of existing systems to boost customer service. Much of this relies on the integration of mobile services; since smartphones are the one true multi-channel banking tool, they will enable banks to deliver a more targeted and personalised service by providing solutions that are more integrated and enhance existing services. Many of today’s existing technical solutions are orientated into silos designed only to meet the needs of the channel that it is developed for. Connecting these silos into a multi-channel banking system will allow banks to provide a more seamless customer experience but doing so creates challenges from both a cost and technical perspective that some banks are struggling with.”

Integration, integration, integration
The case for multi-channel banking has been oft stated. This is, after all, an area that whips up a lot of hype, usually courtesy of analysts with a report to plug or vendors with a cool new solution to sell. Those retail banks who provide a seamless customer experience across various channels (branch, mobile, online, contact centre) will be the winners in the long run while the losers will be yesterday’s men. In 2013, the customer is king. You get the drift...The Digitally Native banks (Moven, Simple et al) have been winning rave reviews in this space, earning plaudits for their social media, online and mobile strategies. But it could be argued it’s easier for them than it is for their mainstream counterparts. They have streamlined business models and very low fixed costs. They are not lumbered with legacy IT systems, have few employees and no physical branches.

Creaking legacy systems are particularly relevant here. Last year, they were attracting negative headlines and aggravating customers at the likes of RBS, NatWest, Ulster Bank and Lloyds Banking Group (in the case of the latter, a computer systems crash left New Year revellers unable to withdraw cash. Customers took to Twitter to vent spleen at being unable to make cash machine withdrawals and use their debit cards. Some also claimed that credit in their accounts had been wiped out...about as far from the multi-channel ideal as you could possibly wish to get).

Which begs the question: how can you be truly multi-channel (customer centric, agile and forward thinking) when you’re stuck with decades old systems and processes? For Glue Reply’s Barrows, it’s all about, “integration, integration, integration...Banks’ systems and organisational structures are still predominantly built around how banks have decided to organise themselves for what they believe is maximum efficiency and to segment business lines. Bank channels have evolved in this vein but to really produce a rich and seamless experience for customers, banks need to knock down these business and IT walls and deliver solutions that stretch across channels and integrate front-to-back. Given the inherent complexity of bank systems and the prevalence of legacy architectures this is no mean feat and in many cases is acting as a driving force behind banks’ SOA (Service Oriented Architecture) roadmaps.”

And there are plenty of other challenges and obstacles along the road to multi-channel glory, social media being among them, although it does appear that banks are doing pretty well here. Sixty three per cent of the UK’s High Street banks are responding to customers within an hour of receiving complaints and queries on Twitter, according to a study by Virgin Media Business. NatWest had the fastest response times with an average of just four minutes to initially respond to a customer on the site. HSBC comes a distant second with an average time of 14 minutes. When it comes to number of followers, Co-operative Bank takes the lead with over 11,500 compared to RBS’ 1,500.

“Social media helpdesks are becoming common in industries where businesses interact daily with customers. They’re becoming like virtual stores. It’s really encouraging to see the banking industry is taking a lead on this with every major High Street bank using Twitter to engage with customers,” says Phil Stewart, director of customer services, Virgin Media Business. He also notes, however, that, “On Facebook, banks have slightly more work to do. Our research found that just half of banks use their Facebook pages to speak to customers about personal issues.”

Elsewhere, The Customer Framework’s Stone cites: “Slow economic growth, increasingly tough regulation, problems for the banks getting their own house in order in terms of restraining themselves in using the increasing number of channels as ways to stuff a customer with (sometimes wrong) products, rather than providing more cost-effective and better service.”

Indeed, when the planned sale of 631 UK bank branches by Lloyds Banking Group to the Co-op group fell though in April, the Co-op blamed a grim economic outlook and the tough regulatory environment imposed on banks. There was even speculation that it might pull out of banking altogether. Shortly after the deal collapsed, in a double whammy of bad news ratings agency Moody’s downgraded Co-op Bank’s debt rating to ‘junk’ status, citing fears that it was vulnerable to potential losses. Against this backdrop, multi-channel, with the significant investment that comes with it, suddenly loses some of its shine.

The future
So, plenty of work to be done and lots of problems to be tackled, but where is all this heading? By its very nature, multi-channel won’t stand still for long and social media and mobile have created increasingly demanding and switched on customers. Stone notes: “There will be steady and definitely not rapid progress in mobile and tablet access for all purposes, defensive moves against new entrants (keeping payments costs down, while focusing on speed and security), working closely with the biggest generators of payments in the economy to ensure that high service levels are maintained (retailers, online businesses etc).”

Barrows: “We’ll see more and more apps and other above-the-line developments which test and develop the customer market and demonstrate banks are striving to innovate and meet customer demands. Many of these will be tactical in nature and the immediate focus will continue to be on things we’ve seen already, like payments and making mobile facilities customers have in more established channels. We’ve started to see use of location in offerings, e.g. for house hunting, but as yet most of the “bank of the future” ideas involving proximity have failed to materialise. The technology certainly exists but do the benefits? And banks have a lot of work to do behind the scenes on integration and real-time (big) data analytics to make it all work. With other things to worry about, like layer upon layer of regulation, we’ll see things edge forward in the channel space but more baby steps than giant leaps. Other players, e.g. usual suspects such as Google or Apple, could shake all that up though. As a bank customer, I secretly hope they do!”

Wincor Nixdorf’s Byrne believes that in time channels are going to merge, with mobile being the key driver for the customer to take more control over how and when they interact. “Banks will have to react to this by delivering services in a way that fits more conveniently with the customer’s needs. This can be delivered by enabling key cross channel transactions through evolving banking systems rather than through wholesale change. Near-field communication (NFC) is touted as the next major disruptive innovation to take the banking/payments world by storm. Currently, it’s on a very slow burn because banks, mobile operators and card schemes are still establishing how it can be incorporated into the customer journey in a way that delivers real benefits. The slow pace of NFC adoption is just one example of how other sectors are struggling to come to terms with new technology and how industries that are not traditional bed fellows, like mobile operators and banks/card schemes, are going to work together to address customer needs and deliver tailored solutions.”

Some UK banks are making genuine multi-channel progress, most notably RBS (legacy issues aside, it has been investing heavily in its branch network and online and mobile offerings) and Barclays (also splashing out on mobile, e.g. Pingit, its system for the mobile transfer of money in the UK and held up as an example of a branch innovator in a recent report from RBR entitled Branch Banking II: Case studies for the next generation). But, in truth, no one is quite there yet when it comes to delivering the consistent service needed to engage and retain increasingly savvy customers. Some are excelling in certain areas (e.g. first direct with social media and Nationwide with mobile), but no one has found a winning formula across all channels Ultimately, the mantra is: great customer service on any platform should be the rule, not the exception. And as such, the multi-channel puzzle remains incomplete.



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