Putting aside the financial turmoil of recent years, the passage of time has been generally kind to many of us in terms of banking service and convenience. When I was a boy, we had to go to the bank to withdraw money; cash we’d have to use to pay for almost everything, cash for dad’s wallet and cash to slot into many payment books. These days it might appear many of us hardly use branches: we get cash from ATMs, make payments and arrangements through direct debits and internet banking, and we can compare hundreds of insurance offers in moments. And yet, banks seem to be failing to realise the potential power of the branch.
Recently, the world’s local bank – of which I’ve been a customer for close to 20 years – eventually persuaded me to come in for a financial health check. I was asked to ensure I had all documentation with me so we could have a productive meeting. Interested in moving my mortgage and open to other ideas, I took the morning off work to go into the city centre branch. Five minutes later I was walking out having had my direct debits read out to me to make sure they were still valid. I walked back in to tell a supervisor I was confused and disappointed and they assured me they’d ‘look into it’ – they didn’t.
We all have our own preferences for how we do things. Some may be open to switching mortgages online; some may be averse to getting a house insurance quotation. But if the branch is for anything, surely it’s to provide the personal touch, the fabled ‘corner shop’ experience, where all the insight, all of the data is right there, unfettered by email exchanges, display ads, poor telephone connections etc. Surely, whether a small, perhaps rural branch or a large city centre branch, their role is to be the flagship experience, retention magnet and cross-sell kernel of their customer experience marketing.
The branch needs to be an integrated part of that customer experience and journey. Banks and insurers have moved with the times in some marketing areas but what of the branches? In the summer, a study revealed that 40 per cent of UK bank and building society branches have closed since 1989. The findings from academics at Nottingham University cited 7,500 shutdowns in that period; just recently Barclays announced the closure of branches and the loss of 1,700 jobs. Banks seem to think it makes great business sense, and some research including our own would tend to agree with their findings, but the situation is more complex.
Such is the pace of change in the brave new world of contact centres and digital marketing that it’s perhaps understandable banks continually review their branch portfolio in the context of their overall customer touchpoints. Perhaps time-poor consumers would agree that face-to-face banking is less relevant in the digital age. However, scratch the surface of customer contact preferences, and a very different picture emerges.
To understand how people want to communicate with their bank, we analysed extensive data collected on behalf of our clients in the financial services industry (as well as to enhance our own database of UK consumers). This amounted to around 130,000 responses. The headline finding may well be a surprise: more than three-quarters of people (77 per cent) say it’s still very important to have a local branch.
Meanwhile, we can see which demographics prefer to bank in-branch. For example, four in 10 under-30s say a local outlet is of little or no importance, but just one in 10 over-65s feels the same. That should come as no surprise given the greater likelihood for younger demographics to embrace digital banking.
Meanwhile, London-based customers place the least importance on local branch availability, with a quarter saying it is of little or no importance. Out of this group of people, 75 per cent prefer to do their banking online and the remaining 25 per cent interact over the phone. In terms of regions most reliant on branches, respondents based in Wales showed the highest propensity to regard face-to-face communication as important.
Further examination reveals a disparity between different income bands and the need for local branches. Those in the highest earning category (annual salary of more than £150,000) are six times more likely to say having nearby access is not important than those on incomes of £20,000 or less. Perhaps the cross-sell opportunity in branches isn’t so high after all? It’s even possible to split out channel preference – and also interest in branch banking – by occupation. Some 81 per cent of manual workers describe branches as their favourite method, with 15 per cent citing online and just 4 per cent phone banking. In contrast, branches were viewed as the most important by 55 per cent of senior managers, while 38 per cent rated online highest and 7 per cent phone banking. Even so, among all age groups and occupation types branches were ranked as top choice for banking, and by some distance.
So what does all of this information mean for banks? Put simply, regardless of differing preferences by demographics, three out of four customers still clamour for the personal touch; there is enormous interest in having access to a local branch network. But the learnings from the statistics go beyond that headline. People who enter high-street banks do so in the main for help with their current account or mortgage. Yet the opportunities to cross- and upsell other products to them shouldn’t be ignored, particularly when they are face-to-face with a customer adviser.
Banks must see their branch as a fully integrated part of the marketing mix and need to integrate customer data across this and all touchpoints to avoid a schizophrenic brand experience. Armed and informed with the right insight, created themselves and through third-parties, bank staff can have a much more personalised conversation which is far more likely to be helpful for the customer, but will also make selling wider services easier; it will feel less ‘bolted on’.
Understanding the customer, and where they are on their journey, whether you’re dealing with them through a contact centre, online or face-to-face, is crucial; especially if they are to avoid the negative experience I encountered, despite being a long-standing customer.
Recently, the UK government introduced new rules that force banks to allow any customer who want to switch provider to do so in just seven days. Now that moving finances really is as easy as 1-2-3 there can be no greater incentive for banks to make sure their customer marketing experience is up to scratch.
By Jed Mole, European Marketing Director, Acxiom
By Richard Kelsey, Head of Software Sales at Backbase
Though you might be familiar with the popular seaside town of Newquay, you may not be familiar with its historic financial district aptly named, Bank Street. Dozens of banks and building societies have dominated this area since the late 1800s. However, the street hit the headlines recently as, 120 years after the first bank opened its doors, the last bank closed them.
This is not new. Bank closures have been part of the news agenda for years, and now, COVID-19 has further accelerated the physical turning into the digital. Across the globe, banks have had to close or limit the operating hours of their in-person locations, forcing banks to digitise at speed. Keeping the pipeline of digital sales flowing for new clients, increasing digital product origination and facilitating those cross-sell journeys to customers is key to survival.
Digital take up
Delivering seamless digital customer journeys was already a fast-growing priority for banking and wealth management organizations pre-pandemic. Research shows that 38% of customers stated UX as the most important factor when choosing a digital bank. In response, banks have been investing in digital technology and collaborating with third-party providers as they strive to offer a superior customer experience and stay competitive. But the global lockdowns – which have restricted people to banking digitally – have turbocharged these trends. Growing demand for digital onboarding, and digitized services to support the ongoing customer journey, must be matched by effective capabilities though.
Plugging the leaks
Conversion leakage is a particular problem during the digital client acquisition process. With branches shuttered during the coronavirus lockdowns, and subsequent openings and customer footfall likely to be severely limited for the foreseeable future, this leakage presents a major, and costly, challenge as institutions seek to convert digital sales and boost their return on investment.
The key is understanding why leakage happens in the first place and time and time again, there are three main trends that cause the most problems:
- Switching from a customer’s current provider is too difficult (for example, in transferring bill payments and direct debits).
- The digital process is too cumbersome (particularly where existing offline processes are simply put online).
- Customers lack human touchpoints and advice when they need it (especially for more complex products).
Combating these levels of leakage requires firms to take an outside-in approach, to see the process from the customer’s perspective. From this viewpoint, they can design a more customer-friendly experience that streamlines the job at hand.
One way to simplify the acquisition journey is to incorporate human/AI advisor interventions at points of friction, where customers may become stuck. Another is to adopt retargeting strategies that address customers who abandon the application process partway – for example, by storing their details in a CRM system and sending them notifications to complete the application, or referring them to an outbound call centre employee who can pick up the process by phone. Such approaches can boost completion rates by 40%, delivering substantial benefits to the bank.
Stronger digital growth
Banks’ return on tangible equity has plateaued globally at approximately 10.5% over the past decade, and the lower-for-longer interest rate environment will add to the pressure. Addressing cost-income ratios has become a matter of urgency.
Firms now face a strategic inflection point. Continuing with old business-as-usual practices will leave institutions struggling to attract new (especially younger) clients, while grappling with an exodus of existing customers and an overburdened cost base. But by digitising processes to enhance the client experience, banks and other financial institutions can increase their revenues and reduce costs, and have a loyal customer base who don’t feel the impact of the branchless bank.
- Financial performance impacted by the pandemic
- Expected credit loss (ECL) charges of £45.8 million recognised on loans and advances to customers
- Profit before tax (PBT) was impacted by the adverse effects of COVID-19 and the subsequent provisions set aside, reducing by 89% to £5.9 million
- Customer deposits rose by 25% to £7.6 billion while capital remained strong with a CET1 ratio of 12.3%
- A total of 15.9k payment holidays granted across the Group
- The specialist bank continued to operate effectively through COVID-19
- 98% of employees moved to remote working within days and no staff furloughed
- Successfully achieved accreditation under UK Government’s CBILS
- Continued investment in technology to digitalise the business
- Shawbrook “cautiously optimistic” as momentum begins to return to certain specialist sectors
Shawbrook Bank has today (Monday 10 August 2020) published its half year financial results for the period ending 30 June 2020.
The specialist bank confirmed it had set aside £45.8 million of provisions to provide for potential future loan impairments caused by COVID-19. The bank reported it had also granted a total of 15.9k payment holidays to support its customers through the pandemic, of which 10.8k remained in force at 30 July 2020.
As a result of such provisions, the bank’s profitability was impacted with a reduction in PBT by 89% to £5.9 million.
Despite the challenging market conditions, the bank retained its active position in the UK savings market, increasing its retail savings deposit base by 25% to £7.6 billion. During the period, Shawbrook also successfully completed a £75 million Tier 2 re-financing to further optimise its capital structure.
Ian Cowie, Shawbrook Bank’s Chief Executive Officer, said that COVID-19 has had a clear impact on the bank’s financial performance, but Shawbrook remained in a position of strength.
He commented: “Prior to COVID-19, the Group had continued to make good financial progress, starting 2020 with a strong balance sheet and prudently positioned capital and liquidity base.
“To further optimise the Group’s capital structure, during H1 2020 we initiated a Tier 2 refinancing and, despite the challenging market conditions, successfully completed the £75 million issuance in July.
“We have also maintained our active position in the UK savings market. However, the longer-term economic impacts of the pandemic remain hard to predict and as a result we have recognised expected credit loss charges in the period on loans and advances to customers of £45.8 million and on loan commitments of £1.5 million.
“While this has clearly had an impact on profitability, our capital strength positions us well to support our customers and grow our business in line with appetite as we enter the second half of the year.”
Throughout COVID-19, Shawbrook maintained full operational functionality, with no staff furloughed and 98% of employees transferred to remote working within days of the UK lockdown being announced.
The bank adopted a series of concession opportunities across its product range to help alleviate the financial impacts of COVID-19 on its customers. During this time, Shawbrook also successfully achieved accreditation to the UK Government’s Coronavirus Business Interruption Loan Scheme (CBILS) to provide further funding support to its SME clients.
Mr Cowie added: “Since the outbreak of COVID-19, our focus has remained on supporting our staff, customers and partners while at the same time safeguarding the long-term sustainability of our business.
“When the UK lockdown was announced in March 2020, we acted with speed and agility, moving to an almost entirely remote operation within days. Led by a stable and experienced management team and with the support of new and existing technology, we have continued to operate effectively throughout this period.”
Throughout the first half of the year, the bank also continued to identify investment opportunities to further digitalise its proposition, with a core focus on its SME offering.
Mr. Cowie added: “Notwithstanding the pandemic, we have continued to invest in our business to help drive our strategic ambition to become the UK’s Specialist SME Lender of Choice. As well as the ongoing deployment of targeted digital solutions across the Property, Consumer lending and Savings businesses, our investment in the development of a new growth platform in our Business Finance franchise will serve to further modernise our offering, delivering an enhanced customer journey as well as significant operational efficiencies.”
Looking to the future he continued: “Although significant uncertainties regarding the broader macroeconomic impact and pace of recovery remain, we are cautiously optimistic in our outlook as we start to see signs of momentum returning to certain of our specialist sectors.
“Our management expertise and prudent approach to credit decisioning, combined with investment in our digital propositions, means we are well positioned to adapt and respond to opportunities as they arise throughout the second half of the year.”
Better banking—everyday in everyway
By Bruno Pešec president at Pesec Global.
Some of the most innovative companies are also great at continuous and incremental improvement. I want to talk about three key points when it comes to succeeding with implementation of continuous improvement.
First is acknowledging that employee empowerment is at the heart of continuous improvement. The second is striving for total involvement by everybody, everywhere, everyday. Final, third point is that improvement is improvement. Cents turn into dollars.
Let’s expand on each.
Employee empowerment is at the heart of continuous improvement
In “Kaizen: The Key To Japan’s Competitive Success” Masaaki Imai divulges following as the core principles of continuous improvement:
- Process orientation. “Before results can be improved, processes must be improved, as opposed to result-orientation where outcomes are all that counts.”
- Improving and maintaining standards. “Lasting improvements can only be achieved if innovations are combined with an ongoing effort to maintain and improve standard performance levels.”
- People orientation. “Improvement is people-oriented and should involve everyone in the organization from top management to workers at the shop floor. Further more, it is based on a belief in people’s inherent desire for quality and worth, and management has to believe that it is going to “pay” in the long run.”
These principles are interlinked and interdependent. Without empowered people there can be no improvement. Micromanaging and overbearing bureaucracy stifle human creativity and desire to do better.
Due to the nature of my work I have residence in two countries, Croatia and Norway. Consequently, I have bank accounts in both as well. On one occasion I was had to make a bank transfer while in Croatia, and went to my local bank office to do so.
To my surprise they requested my debit card. I explained that I’ve forgotten it, but surely that shouldn’t be a problem as I’m here in person, have my national ID as well as passport, and cash required for transfer. The bank teller explained that he can ask branch manager to approve it, but it takes seven days.
Since the manager was right there, I asked why can’t we do it right now, since we are all here. “Sorry, such are the policy and procedures. I know it doesn’t make sense, but we must follow them.”
Banking is a highly regulated industry; fraud detection and anti-money laundering processes must be impeccable; but above is neither.
Everybody, everywhere, everyday
Bottom up is usually brought up when discussing implementations of continuous improvement. While it is true that those closest to work are most suitable to improve it, they often lack decision making power and budget to do so on a scale.
That’s why “everybody, everywhere, everyday” is a better mental model. No one is absolved of improvements. At any given moment there are at least hundred things you can improve right now, right here.
Think deeply about following:
- Everybody in the organisation should be aware and have an understanding of organization’s strategy and objectives. There’s shouldn’t be multiple interpretations, and it should be unambiguous. Without clarity improvement efforts are going to be scattered and without impact.
- No elitism, no absolution. Everybody should be actively committed to daily improvement, regardless of their rank or seniority. Leaders should be especially cognizant of leading by example. After all, how can they demand from others what they themselves are not doing. That’s hypocrisy at its finest.
- To improve is to learn, and to learn is to improve. Unlock even more value from your continuous improvement efforts by capturing the learning and sharing it broadly and deeply within the organisation. Ideas spawn ideas, perpetuating a virtuous cycle. Peer learning is also a powerful intrinsic driver.
Improvement is improvement
Director of one European bank invited me to their customer service centre, and we were to discuss how could they innovate better. After the meeting I asked him to take me on the walk around the office so I can observe the processes. He was more than happy to oblige.
The walls were plastered with wallpapers and dashboard, colourful metrics were displayed one the hanging screens, and there was a special area dedicated to the “Hall of fame.” Much to my delight there was a wall dedicated to the improvement ideas.
It was covered with large sticky notes, each with few sentences about the problem and potential solution. I picked a few at random, and noticed that they have dates written in bottom left corner. All of the dates were months ago.
Perplexed, I asked the nearby call operator to illuminate me. What’s going on? She fired her response like she was just waiting for someone to ask her that question:
“After each call we used to write down some improvement ideas. At the end of the week we collated and submitted them to the improvement department. They were constantly rejecting our proposals for either being too small or not innovative enough. After few weeks we stopped sharing and tried to implement what we can. That resulted in one of us being scolded for taking initiative without approval, so we just stopped altogether.”
Director was blushing, but hasn’t said anything. I thanked the operator for her honesty, and told the director that he should find time to fix this. By ignoring small, incremental improvements, they are effectively atrophying their organisational muscles. And not to mention all the savings that are left behind, lost forever. Cents turn into dollars.
I’ve talked about three key points in regards to the role of employee empowerment in the implementation of continuous improvement, and what you can do to use them well. Let me remind you that if you really want to engage in this, the first thing to do is take any of them and start today.
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