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

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CHANGING CUSTOMER EXPECTATIONS AND THE RISE OF THE ‘VIRTUAL BANK’ 1

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

Hugh Morris, VP For Banking And Financial Services, Genpact

Hugh Morris, VP For Banking And Financial Services, Genpact

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.

[i] All figures, unless otherwise stated, are from YouGov Plc.  Total sample size was 2,337 adults, of which 2,241 hold a current account with a bank or building society. Fieldwork was undertaken between 28/08/2013 – 30/08/2013.  The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18+).

Banking

ECB stays put but warns about surge in infections

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ECB stays put but warns about surge in infections 2

By Balazs Koranyi and Francesco Canepa

FRANKFURT (Reuters) – The European Central Bank warned on Thursday that a new surge in COVID-19 infections poses risks to the euro zone’s recovery and reaffirmed its pledge to keep borrowing costs low to help the economy through the pandemic.

Having extended stimulus well into next year with a massive support package in December, ECB policymakers kept policy unchanged on Thursday, keen to let governments take over the task of keeping the euro zone economy afloat until normal business activity can resume.

But they warned about a new rise in infections and the ensuing restrictions to economic activity, saying they were prepared to provide even more support to the economy if needed.

“The renewed surge in coronavirus (COVID-19) infections and the restrictive and prolonged containment measures imposed in many euro area countries are disrupting economic activity,” ECB President Christine Lagarde said in her opening statement.

Fresh lockdowns, a slow start to vaccinations across the 19 countries that use the euro, and the currency’s strength will increase headwinds for exporters, challenging the ECB’s forecasts of a robust recovery starting in the second quarter.

Lagarde saluted the start of vaccinations as “an important milestone” despite “some difficulty” and said the latest data was still in line with the ECB’s forecasts.

She conceded that the strong euro, which hit a 2-1/2 year high against the dollar earlier this month, was putting a dampener on inflation and reaffirmed that the ECB would continue to monitor the exchange rate.

The euro has dropped 1% on a trade-weighted basis since the start of the year, but is up nearly 7% over the last 12 months. Against the U.S. dollar, that number rises to over 10%.

MORE STIMULUS?

Opening the door for more stimulus if needed, Lagarde confirmed the ECB would continue buying bonds until “it judges that the coronavirus crisis phase is over”.

Lagarde also kept a closely watched reference to “downside” risks facing the euro zone economy, which has been a reliable indicator that the ECB saw policy easing as more likely than tightening.

But she signalled those risks were less acute, in part thanks to the recent Brexit deal.

“The news about the prospects for the global economy, the agreement on future EU-UK relations and the start of vaccination campaigns is encouraging,” Lagarde said. “But the ongoing pandemic and its implications for economic and financial conditions continue to be sources of downside risk.”

Lagarde conceded that the immediate future was challenging but argued that should not impact the longer term.

“Once the impact of the pandemic fades, a recovery in demand, supported by accommodative fiscal and monetary policies, will put upward pressure on inflation over the medium term,” Lagarde said.

Benign market indicators support Lagarde’s argument. Stocks are rising, interest rates are steady and government borrowing costs are trending lower, despite some political drama in Italy.

There is also around 1 trillion euros of untapped funds in the Pandemic Emergency Purchase Programme (PEPP) to back up her pledge to keep borrowing costs at record lows.

The ECB has indicated it may not even need it to use it all.

“If favourable financing conditions can be maintained with asset purchase flows that do not exhaust the envelope over the net purchase horizon of the PEPP, the envelope need not be used in full,” Lagarde said.

Recent economic history also favours the ECB. When most of the economy reopened last summer, activity rebounded more quickly than expected, indicating that firms were more resilient than had been feared.

Uncomfortably low inflation is set to remain a thorn in the ECB’s side for years to come, however, even if surging oil demand helps put upward pressure on prices in 2021.

With Thursday’s decision, the ECB’s benchmark deposit rate remained at minus 0.5% while the overall quota for bond purchases under PEPP was maintained at 1.85 trillion euros.

(Editing by Catherine Evans)

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Banking

Bank of Japan lifts next year’s growth forecast, saves ammunition as virus risks linger

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Bank of Japan lifts next year's growth forecast, saves ammunition as virus risks linger 3

By Leika Kihara and Tetsushi Kajimoto

TOKYO (Reuters) – The Bank of Japan kept monetary policy steady on Thursday and upgraded its economic forecast for next fiscal year, but warned of escalating risks to the outlook as new coronavirus emergency measures threatened to derail a fragile recovery.

BOJ Governor Haruhiko Kuroda said the board also discussed the bank’s review of its policy tools due in March, though dropped few hints on what the outcome could be.

“Our review won’t focus just on addressing the side-effects of our policy. We need to make it more effective and agile,” Kuroda told a news conference.

As widely expected, the BOJ maintained its targets under yield curve control (YCC) at -0.1% for short-term interest rates and around 0% for 10-year bond yields.

In fresh quarterly projections, the BOJ upgraded next fiscal year’s growth forecast to a 3.9% expansion from a 3.6% gain seen three months ago based on hopes the government’s huge spending package will soften the blow from the pandemic.

But it offered a bleaker view on consumption, warning that services spending will remain under “strong downward pressure” due to fresh state of emergency measures taken this month.

“Japan’s economy is picking up as a trend,” the BOJ said in the report, offering a slightly more nuanced view than last month when it said growth was “picking up.”

While Kuroda reiterated the BOJ’s readiness to ramp up stimulus further, he voiced hope robust exports and expected roll-outs of vaccines will brighten prospects for a recovery.

“I don’t think the risk of Japan sliding back into deflation is high,” he said, signalling the BOJ has offered sufficient stimulus for now to ease the blow from COVID-19.

NO EXIT EYED

Many analysts had expected the BOJ to hold fire ahead of a policy review in March, which aims to make its tools sustainable as Japan braces for a prolonged battle with COVID-19.

Sources have told Reuters the BOJ will discuss ways to scale back its massive purchases of exchange-traded funds (ETF) and loosen its grip on YCC to breathe life back into markets numbed by years of heavy-handed intervention.

Kuroda said the BOJ may look at such options at the review, but stressed a decision will depend on the findings of its scrutiny into the effects and costs of YCC.

He also made clear any steps the BOJ would take will not lead to a withdrawal of stimulus.

“It’s too early to exit from our massive monetary easing programme at this point,” Kuroda said. “Western economies have been deploying monetary easing steps for a decade, and none of them are mulling an exit now.”

(Reporting by Leika Kihara and Tetsushi Kajimoto; additional reporting by Kaori Kaneko; Editing by Simon Cameron-Moore & Shri Navaratnam)

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World Bank, IMF agree to hold April meetings online due to COVID-19 risks

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World Bank, IMF agree to hold April meetings online due to COVID-19 risks 4

WASHINGTON (Reuters) – The International Monetary Fund and the World Bank have agreed to hold their spring meetings, planned for April 5-11, online instead of in person due to continued concerns about the coronavirus pandemic, they said in joint statement.

The meetings usually bring some 10,000 government officials, journalists, business people and civil society representatives from across the world to a tightly-packed two-block area of Washington that houses their headquarters.

This will be the third of the institutions’ semiannual meetings to be held virtually due to the pandemic.

(Reporting by Andrea Shalal; Editing by Chris Rees

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