By Harry McDermott, CEO, Hudson & Yorke
In today’s economic environment, as the UK government seeks to promote competition, high street banks are being forced to compete for custom. Low interest rates are one end of the spectrum but nothing less than exceptional customer service is necessary when dealing with Joe Public’s cash. But amongst the apparent challenges are opportunities for banks to approach a new pool of customers with an enhanced service.
Typical high street banking ICT systems are particularly complex and many banks have spent the past 10 to 15 years patching legacy ICT systems, implementing shared infrastructure across group subsidiaries, and adding new technology and infrastructure on top of existing solutions. However, when used properly, technology can be a strategic asset which can help improve service to customers as well as cut costs.
Over the last decade, we’ve seen a shift in communications, encompassing more than just computers but information and knowledge. We have stumbled into an all–encompassing generation and banks need to keep up in order to take advantage of new revenue streams. Customers are constantly evolving in their banking needs and expect to be able to conduct their banking to fit in with their lifestyle; whether that be 24/7 banking; mobile banking on the go; or the traditional in-branch banking. All three have different ICT requirements in order to satisfy the range of customer needs.
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As a result, banks should adjust their approach to deal with changing consumer behaviour. According to a survey from Accenture1 looking at the way that 4000 customers interact with their bank, , daily and weekly branch visits fell from 19% of all interactions with the bank in 2010 to 15% in 2012 while interactions via mobile banking showed positive growth increasing from 10% in 2010 to 22% in 2012, almost doubling in popularity.
Self-reported customer satisfaction and willingness to recommend banks remained level, but loyalty fell, with the percentage of overall banking customers that had switched to another bank increasing from 11% in 2010 to 15% in 2012. In September, the UK government introduces seven-day account switching, which will allow consumers to be able to switch to a new bank more easily. Technology that can support customer experience and personalised services could be a clear path to customer retention.
A bank that can upgrade to a more connected system providing overall visibility of a customer’s interactions will take the lead in customer service and win customers from the competition when the new account switching rules come into force. Those banks that have a single view of the customer have opportunities to cross-sell and up-sell products and services that the customer may be more amenable to buying – a coup during a time when banks are under increasing pressure to maximise revenues.
Many of our banking clients come to us to aid them with updating their legacy ICT infrastructure. It is not banks’ lack of desire to innovate that is holding them back from spending on new systems but the sheer scale of maintaining a complex network of infrastructure in tandem with the growing burden of regulatory compliance. They recognise the need to future-proof their systems and provide an integrated, multi-channel approach that will aid customer service and retention.
The key to solving these challenges lies with a change in mindset. Banks have become caught in a cycle of ICT budget cuts as well as budgets being taken over with fire-fighting existing issues. The only way to escape is to develop a longer term strategy which fosters a culture of innovation.
Change will not be achieved overnight, and an effective change management strategy should reach many years into the future. Banks need to recruit senior ICT professionals with the right mindset, skills and stomach for the fight who can drive innovation. ICT is well placed to take the lead but it requires the right people to lead the charge and without these key figures on board the ICT department is often reduced to playing a facilitating role.
With the UK government currently focused on cost cutting measures and improving banking services it’s certainly not an ideal time for banks to be battling with archaic legacy ICT systems. Banks will find that reinventing communication systems will go a long way to servicing the ever-evolving expectant customer and managing customer insights and performance.
Additionally, if UK banks are to maintain the large majority of the UK market in the face of an open European banking system, a more sophisticated level of ICT technology will be fundamental. It is through this technology that they will gain a competitive advantage, offering incomparable customer service.
About Harry McDermott
Harry, chief executive and co-founder of Hudson & Yorke, has 25 years experience in the technology sector, 20 of which have been as a consultant and trusted advisor to senior IT decision-makers in large multinationals. Prior to launching Hudson & Yorke, Harry was a Director at Deloitte Consulting and a Director of Mason Group (now Analysys-Mason). He is a graduate of Trinity College Dublin holding a postgraduate MBA and undergraduate degrees in Electronic Engineering and Mathematics. Harry has successfully negotiated and/or advised on some of Europe’s biggest telecoms/network contracts and has supported clients in the design/implementation of their transition and transformation programmes. He has also been engaged as an independent consultant/arbitrator in benchmarking, valuation and dispute resolution.