Five ways banks develop customer centricity while improving operating efficiencies By Tom Peace, Business Development Leader, Collinson

As we clatter into the new decade, has anything changed? A little, perhaps. With the emergence of challenger banks and FinTechs, existing banking institutions are recognising that there’s a greater need to become more agile and adapt to the evolving needs of the customer. However, recognising you need to make a change and actually doing so are two significantly different things. Global banking institutions in their nature, are overrun with legacy systems and long-standing processes, to the point where any small change can be exceedingly costly and time consuming.

Yet, within this new era of digital transformation their hands are being forced by new, exciting and innovative disruptors, and the balance is now shifting towards a new paradigm of both customer-centricity and streamlined operations. This shift is not just nice-to-have; it’s vital to survival.

As we well know, the financial services industry is heavily influenced by constantly evolving regulations. Despite seemingly adding another layer of complexity for large financial institutions and an inhibitor of innovation, these regulations play an important role in building consumer trust and creating a consistent customer experience. In fact, the areas in which traditional banks should be looking to innovate, surround their legacy systems and lengthy processes. How should banks adapt to be customer centric and get closer to the customers? How can they improve efficiencies?

AUTOMATION

McKinsey estimates that 75 to 80 percent of transactional operations (for example, general accounting operations, payments processing) and up to 40 percent of more strategic activities (for example, financial controlling and reporting, financial planning and analysis, treasury) can be automated. By capturing the potential in AI, automation and the evolution of Blockchain, financial institutions are able to vastly improve and streamline their banking processes. This is already an important part of consumer banking, but it will penetrate operations much more deeply in coming years. The impact will be felt not just in delivering benefits to the banks cost structure, but also to the customer.

Combining digital transformation with knowledge of their systems and processes, banks will have to first develop customised products before leveraging the technology to manage and deliver them. This could extend to automated document signing or state of the art facial recognition software that would speed up the process, while giving customers the flexibility and freedom to access, view and sign their documents online or with their mobile app. The time efficiencies around this automation alone would impact both the customer and banks by days.

BETTER USE OF DATA

According to a recent EY study, consumers want three things from a bank: better rates/fees (24%), better online experience (21%) and access to different products and services (21%). All of these and efficiencies are deliverable through the better use of data.

However, in most cases, ‘big banks’ legacy systems do not have the capacity to collect and manage all the data required to identify the needs of individual customers and, then, to personalise the offers for the individual, in real-time. The use of APIs and uniting data silos enables this analysis without overhauling the banks entire core IT system. The efficiencies gained through this alone can be significant.

Smart data analytics and data management goes a long way to developing relationships with valued customers, and this is where banks can truly gain their competitive advantage. In their nature, financial institutions hold an enormous amount of data. However, only those who can capture, analyse and create insights that inform their future consumer-focused strategy, will succeed in creating unrivalled customer experiences.

PROACTIVE CUSTOMER CENTRICITY

Utilising this colossal amount of data to inform a customer-focused strategy, will help banks to proactively serve their customers. Whether through the anticipation of outcomes based on account behaviours or identifying problems before the customer has raised any issues to customer services. While communicating the pre-emptive outreach will dramatically boost customer satisfaction, proactively identifying potential customer issues to ultimately create a more positive day-to-day banking experience, will also limit customer disruption as well as prove to be a long-term saving on resolution execution.

Predictive analytics can also create greater efficiencies and customer satisfaction in the management of operations and the deployment of resources. Using their customer data, banks can build detailed profiles from a multitude of data sets, including online interactions, geographic information from mobile device usage and aggregated payments behaviour. They can then apply analytics to predict the needs and desires of their customers as well as adjust products or services to better serve them.

ONE CUSTOMER, ONE HOLISTIC OPERATION

 Traditionally, retail banks have operated within an organisational trinity of front office (branches), middle office (call centres) and back office (operations). According to McKinsey, this trinity will evolve dramatically in the 2020’s.

Customer centricity, along with evolving technological solutions, has advanced the development of the bank’s insfrastructure. Putting the customer at the centre of everything means bringing them closer to the variety of touchpoints the bank offers. It also helps to create differentiation in what is an already crowded industry, facing a vast technological revolution. No longer will there be a trinity of operations in a bank: there will just be ‘one’ bank.

As we’ve already noted, back offices will slim down. Call centres will all but disappear due to AI bots and automation, and branches will be scaled down in number and transformed in function. As more customer transactions move to digital channels, front-line branch employees will operate as skilled personal advisors, helping customers responding to queries that cannot be addressed digitally and generally serving as a one-stop-shop for customers. This is a new paradigm in which customers will receive personalised advice, based on enhanced data management, smart analysis and relying on a simpler organisation.

SYNCHRONISED FUNCTIONS

Improving customer centricity whilst creating greater efficiency can be found when the banks work through the customer journey. Managing the incoming demands and asking if the process is required or if the level of task demands can be reduced will go some way to achieving that. Redesigning and streamlining that process and looking to deliver operational simplification will be key drivers in delivering it too.

We’ve already touched upon the reduction of manual work, using automated processes, smarter workflows and input digitisation. Equally, we have raised the use of advanced descriptive, predictive and prescriptive analytics as well as artificial intelligence to leverage better use of data. However, there is also a need to maximise manual productivity too. Optimising the workforce through centralisation, offshoring or outsourcing not only bring greater efficiency, but also better customer experiences.

With one integrated system, working symbiotically and in neat synchronisation, they can offer the customer a standard of experience and engagement that they’ve come to expect from other retail sectors. Not only will these efficiencies make an impact to the customer, but the employees will be emancipated from innovation-limiting tasks and be able to develop new products and processes.

AND IF THEY DON’T...

Bradley Leimer, Head of Innovation at Santander, has said, “If banks can’t offer something more valuable than Amazon Prime, then we’re probably in the wrong business”. The industry, thanks to the reinvigoration of the sector by disruptors, understands what it needs to deliver to customer and recognises that it is possible. Improving customer centricity while improving efficiencies is the perfect outcome, but how many banks will achieve it?