CHANGING CUSTOMER EXPECTATIONS AND THE RISE OF THE ‘VIRTUAL BANK’

By Hugh Morris, VP for Banking and Financial Services, Genpact

Banks today need a better mix of high-tech and high-touch interactions to be able to satisfy customers. Recent research on consumer banking preferences conducted by YouGov revealed that retail banks are facing a sweeping transformation of customer habits, with younger customers migrating to online and mobile banking while others demand more consultative services at the branch.  The widespread interest in more personalised services across all channels supports the view that retail banks need to adapt quickly to meet evolving customer expectations.  By implementing a more efficient target operating model, banks can standardise and automate processes in functions such as working capital management and account setup, improve customer interface, and enable the use of data analytics to identify new and profitable customer segments.  This enables transactional services to be conducted through more efficient channels while freeing up resources for consultative sales, leading to greater market share and customer loyalty without increasing costs.

The generation gap

Members of the “millennial generation” demand mobile banking services, but the proportion of people who prefer mobile banking declines steadily with older customers according to a Genpact survey[i] of 2,241 adults living in Great Britain who hold a current account with a bank or building society. The online survey, conducted by YouGov, revealed that just over 1 in 10 respondents aged 18-34 preferred mobile banking, compared to just 1 in 30 respondents aged over 35. Web-based banking on the other hand is not so polarising, with a majority of customers (59%) using some form of online banking services. However, regardless of which channel customers use, there is a constant demand for more personalised service. Banks need more flexible ways of delivering high-touch transactions while continuing traditional services for older customers, who still prefer to bank in person.

As new channels are added, none of the existing channels are retired, requiring banks to support branches, call centres, on-line, and mobile customer channels.

This increases the cost and complexity of banking operations and to offset this, banks need to find direct, customer modes of interaction that make routine processes as automatic and defect-free as possible.

As banks redesign their channels and focus on selling customised products, the branches’ role will evolve towards a sales-focused function while low value transactional processes move to alternate channels, like internet or mobile, enabling branch staff to focus entirely on revenue generating activities.

The personalisation imperative and pitching the jaded customer

While certain customer complaints around things like branch hours or accessibility help to explain the popularity of online banking, some people express resentment of the downsizing trends and lack of face-to-face interactions for certain activities. Ideally customers want expedited access to face-to-face contact for high-touch transactions such as investment advice as well as quick phone access to someone who can help them with online activities.

The key is to create a transformation in the way banks operate so that more transactional supporting activities happen in a more efficient manner away from the branch, while consultative selling occurs within the branch.

New operating models enable a more effective bank

As banks try to cope with evolving customer demands, the implementation of a more flexible and cost effective operating model is a good starting point.  Removing operating silos allows for better insights into customer behaviours and eventually leads to better customer interactions.  It also enables banks to split out transactional and high-touch activities in a way that both reduces costs and improves cross-sell opportunities by ensuring these activities happen over the right channels. In order to redefine their operating models more efficiently, banks should use a significant amount of pre-existing, specialised knowledge to navigate design and implementation choices. In the end, the right operating model can harness the continuum of people and technology through the use of shared services, global workforces, and analytics to create truly industrialised business process operations to meet the changing needs of today’s retail banking customers.