By Andrew Crowson, Managing Director, Cummins Allison
Facing an increasingly competitive future, banks have been told time and time again of the need for innovation. Indeed, PwC’s 2016 “Retail Banking 2020: the future of the retail banking industry” report asserted that innovation would be the single most important factor driving sustainable top- and bottom-line growth in banking over the next five years. However, understanding the need for innovation is one thing: ensuring that it happens in the right places is another. Recently, much has been made of how technology is leading a digital revolution in banking, with innovation focused on mobile banking and new online services. But is this the whole story?
White heat of technology
There is no doubt that the online sphere has made significant advances in recent years. From the ability to review their balance online, customers can now access a huge number of banking services either from their laptops or mobile apps. We have also seen the rapid growth of online- and mobile-only challenger banks, whose numbers are likely to swell further when the UK’s Open Banking Revolution comes into effect in 2018.
Beyond the services themselves, there is also innovation in how banks use technology. With more online interactions with their customers, banks can amass vast quantities of data: which can then be analysed and used to improve services. For instance, by offering more of the services that customers favour, and personalizing their services so that customers will see information and offers that are most of interest to them.
Yet despite these advances, banks’ reputation for innovation is still stalled. Efma and Infosys Finacle’s October 2016 “Innovation in retail banking: The emergence of new banking business models” study showed that, while a majority (69%) of respondents believed banks are becoming more innovative, only a quarter rated their innovation performance as high. In order to counter this, banks must ensure that they are demonstrating innovation across the board. In particular, they need to focus on bank branches, which all too often are left to wither on the vine.
Home sweet home
While online banking might take precedence for consumers’ everyday needs, the fact remains that the local bank branch still performs a vital service for many customers. This doesn’t only include those customers who, for whatever reason, are unwilling to switch from banking in person to via a screen. There are still services that either cannot be completed online, or that are much more pleasant and effective to do face-to-face. For instance, paying in cash or cheques is still a need for many consumers, while anyone looking to arrange a mortgage, a sizeable loan or a pension will be much happier with an in-depth conversation with an accredited expert.
If banks ignore innovation at the branch level, then those branches will continue to fade away until they are just a memory, and many important aspects of banks’ services will be lost. Yet by pursuing innovation, banks can turn them into a home not only for current customers, but for future generations who will value the level of service that the local branch can provide.
Broadly speaking, innovation in branches can be divided into two: the services on offer, and how those services are offered. If a bank offers specific services online, there should also be a way to access those services in branch, and vice versa. Essentially, a bank shouldn’t be splitting its customers into first- and second-class citizens – deciding whether to bank in person or online should be a matter of convenience instead of a stark either-or choice. Similarly, it should be simple to use online services to begin processes that may have to be completed in-branch, such as setting up meetings to discuss mortgages or life insurance.
Innovation should also focus on making in-branch services as smooth and painless for customers as possible. After all, one of the main attractions of online banking is its immediacy. If something as simple as making a deposit at a bank is a time-consuming process involving long queues, complex forms and endless questions, then consumers will stay away until they have no other choice. Instead, branches should automate as many processes as possible so that, for instance, depositing cash can be done quickly, efficiently and accurately without the need to take minutes or hours out of the day.
This not only provides a better customer experience, thanks to reduced wait times and more face-time with staff for those enquiries that demand it. It also frees up the bank’s own staff to deal with higher value-added activities such as cross-selling or working with new clients, with an ultimately positive effect on profitability and sales.
Choose your friends
Once a bank understands how innovation can change the in-branch experience, it can choose the right technology partners to support its ambitions. Naturally, the organisation will be careful in its choice of vendor, considering matters such as cost, support and whether technology will allow it to maintain all of its compliance obligations. At the same time, it is important to consider the relationship with technology providers. For instance, a good technology partner will allow the bank to share feedback from customers and users, and ensure that its products and services are being designed and updated to support the bank’s and its customers’ needs. A poor one will argue that its responsibilities end with the product and the associated support contract.
Just as technology is making it easier than ever for customers to compare rates and features of different banks and simplify the process of transferring accounts, new or refined technology can go a long way toward helping branches remain relevant in the eyes of customers. As banks rethink their branch strategy, technology investment should be a critical part of the decision-making process.