Banking efficiency for a customer-centric world

In my previous blog, I showed how banks that can offer seamless, hyper-personalized customer journeys will have a clear sales and marketing advantage. But there’s another advantage: by digitizing customer experience, banks can simultaneously improve their operations and generate important cost savings.

Sales and marketing in the banking industry were already experiencing an explosion: new services, new competitors, new demands. Now the pandemic has poured further fuel on the fire. It’s a thrilling time to be part of the sector—but it’s not for the faint hearted. To thrive, banks will need to reset their thinking and find new ways to bring service and efficiency together.

If you work for a bank, you’ll have experienced many years’ worth of change in just a few months. A 30% surge in mobile banking, and a sudden demand for digital channels, are hard to miss. In my previous blog, I outlined how the relationship between customer and bank is changing —and why we need to think about a seamless, hyper-personalized customer journey.

But there’s more. Rethinking customer experience can also help banks “square the circle”: reducing costs while increasing revenues.

Twin imperatives: transforming the customer journey and finding operational efficiencies

Many banking leaders feel caught in a tug of war, expected to deliver cost savings while customer demands continue to increase. Cost-income ratio is regularly among the top 3 KPIs any bank CEO needs to deliver.

To meet these objectives, banks traditionally focused on procurement, organizational restructuring, and process and IT improvements. But these are isolated pockets, and the benefits rarely move the needle on the overall cost of operations.

But five years from now, things will look starkly different. Banks will operate more like tech companies, with fewer people doing jobs no customer sees, like processing transactions or compiling data. Instead, the workforce will focus on advising clients about the best financial options, solving problems creatively, and developing new products and services.

To get there, banks have to make bold moves now. Boards need to reimagine their business models around new customer needs.

But what does that mean in the real world? I believe there are five defining principles for tomorrow’s bank:

1.??????Shift towards data centric

First, you need a holistic, 360-degree view of the customer’s situation—in real time, or as close as you can get. This will let sales and marketing leaders understand precisely what customers want and when, so they can make better strategic decisions, find insights, and respond creatively to changing needs.

It’s easier said than done. As my colleague Luigi Scappin puts it , traditional code-centric logic silos data in different applications. This prevents a holistic view of the customer and it’s difficult to dismantle. Data warehouses and data lakes are only partly successful in overcoming these limitations, as loading and transforming data needs further ad-hoc code.

Instead, banks need a new, data-centric paradigm—rethinking data as a primary, permanent asset while applications come and go. This enables better product design, and it’s also inherently efficient, avoiding the cost of maintaining duplicated or quasi-duplicated data, while preventing costly errors.

2.??????Empower the customer

A fully fledged data-centric architecture will also become the foundation for automation and artificial intelligence, delivering benefits to customers while reducing costs for the bank.

For example, digitizing the customer journey for a loan product could allow the approval process to be automated. A decision that once took weeks could be returned in hours—or even instantly— increasing customer satisfaction and freeing up the bank’s back-office operations.

It will improve loan fulfilment and closing, too. Giving customers the freedom to view and sign documents online, or a via mobile app, improves the experience while saving on costly branch personnel.

Same for call center operations; instant automated customer service can make representatives more efficient and effective. In some cases, customers might interact with AI-powered bots, avoiding a maze of menus and forms while letting human agents focus their skills on helping customers with more complex or sensitive issues.

3.??????Let advanced analytics rock!

A data-centric architecture, including both structured data (like bank transactions) and unstructured data (for example, from social media), will also dramatically improve the quality of decision making, lowering costs through better predictions and improved processes.

For instance, you might combine hundreds of variables like online interactions, geographical data, and financial behaviour into customer segment profiles, and use them to forecast demand for products and services. This would let you optimize your onboarding and reduce cost to serve.

Or you could set more complex, granular KPIs—even monitoring at an individual customer level. You could query time spent with call center reps by micro-segment, and find cases that need corrective action (perhaps a different process or new product features). The result? Happier customers, and better call center productivity.

With better analytics, you can also personalize products and services. For example, sending relevant insights and notifications (such as credit card payment reminders, changes in monthly subscriptions, or savings tips) can improve customer engagement.

Finally, advanced analytics directly improves fraud detection and credit risk scoring algorithms, reducing the cost of risk.

4.??????Enhance distribution channels

The pandemic has given banks an extra reason to offer customers better and more cost-effective online processes. Many customers are now reluctant to engage physically—or want to limit these interactions to very specific cases, while completing most banking transactions safely from home.

Digital features like biometric authentication, and simplified transfers and balance checks, are now mainstream. So top players need to go a step further to differentiate themselves, for example by enabling remote check deposits through their app.

Enhanced data, automation and AI can all improve call center interactions. Chatbots can reduce inbound call volumes, voice-to-text transcripts enable call analysis, and IVR can become more conversational, dynamic, and contextually aware.

Customer relationship management (CRM) systems are evolving too—making sense of customer journeys across channels, touchpoints, and products, to develop a coherent, joined-up service. This also unlocks powerful new roles like Universal Bankers, who can own a customer’s relationship across various services, while coaching them on digital channels.

5.??????Eliminate organizational silos

Finally, eliminating data silos between data also helps to eliminate organizational barriers, and rebalances the split between branches, contact centers, and back office functions.

AI optimization can help branches to be scaled back slightly while improving customer experience. But importantly, the shift to online transactions can transform their function, with branch personnel becoming skilled personal advisors across customers’ entire journeys. Call centers will serve an enhanced role—empowered by automation and AI—while back offices will become the last resort for complex needs and operations.

Paradoxically, this new paradigm means customers will benefit from a simpler organization, while accessing more flexible and effective products and services.

(Of course, using technology is just one way you can concentrate on core activities that make the biggest difference to your customers. It’s a much broader topic, and there’s a strong case for working with partners who can help you keep your attention on the things you do best. I’ll talk about that in more detail in my next blog.)

Join the conversation: can efficiency and service co-exist?

So, what do you think—do efficiency gains always come at the expense of the customer’s experience, or can digital transformation boost both at the same time? And have I missed any key trends that you think will make a difference in banking in the next few years?

I’m eager to hear your view; please join the conversation in the comments below.