By Mark Jackson, Head of Financial Services,Collinson Group
With the evolution of digital banking, there are fewer opportunities for face-to-face interactions with customers.Is it therefore becoming harder to drive customer devotion, attracting and retaining loyal customers in this era of digital self-service? Banks are investing huge amounts of capital in digital capabilities such as chatbots,artificial intelligence (AI) and open APIs.According to Goldman Sachs, machine learning and AI will enable £26 billion to £33 billion in annual “cost savings and new revenue opportunities” within the financial sector by 2025. The availability of new technologies such as cloud computing and machine learning algorithms have created the perfect conditions for the expanded use of AI in banking. So much so that the Royal Bank of Canada announced it would explore how to better integrate machine learning, and JPMorgan Chase recently hired a global head of machine learning from Microsoft.
However, the increased use of AI does not have to mean a less personalised experience for customers, for banks trying to maintain customer loyalty, increase Customer Satisfaction and Net Promoter Scores– it is essential that it does not. We examined the banking motivations of the affluent middle class in Brazil, China, India, Italy, Singapore, the United Arab Emirates, USA and UK. When it comes to this highly desirable segment, nearly two-thirds expect greater recognition and reward from banks in return for their loyalty. We found that those who feel loyal to a bank are 72% more likely to purchase a product from them in the future, and 70% would be prepared to recommend a banking brand to their friends and family. Furthermore, if a customer purchases additional products through their bank, over half are less willing to switch provider.
Improving digital experiences
There are many opportunities for AI to recognise customers, offer personalised experiences,services, and build loyalty by offering suggestions based on customer behaviour. AI can use transactional and other data sources to help banks understand customer behaviour to improve their experience, to ultimately encourage them to use their payment cards –ahead of a competitor’s –more frequently. For example, if a customer uses their bank card to book a flight, AI could help to suggest relevant, personalised and contextual offers to the customer, linked to their card. This could be anything from an offer for an Uber to get to the airport or an Airbnb at their destination, to travel insurance or retail offers at the customer’s departure airport. If AI can make it easier for banks to analyse and understand customer preferences, and if the bank is able to use this knowledge to personalise the offers and services it provides,it will increase brand loyalty, encourage repeat business and generate incremental revenue for financial organisations.
AI can also drive efficiency allowing contact centre employees to act in a more consultative, advisory capacity.When chatbots are deployed to automatically handle basic calls to update personal details or answer more common questions, this can free up customer service agents to spend more time talking to customers about complex problems and providing more tailored advice about services. Financial organisations could utilise these interactions with customers to offer improved financial advice and planning and capture additional lifestyle data for future product and service offerings.
AI enhanced in-person interaction
Although customers are increasingly comfortable using digital financial services, some still want face-to-face interactions with their banks. When we asked how the global mass affluent customer likes to bank, more than a quarter (26 percent) said that they prefer to visit a branch, 24 percent bank via an app, 29 percent favour using a website and 21 percent showed a preference for the phone.
Much of the talk about AI in banking has been about how technology can replace some functions currently performed by humans. However, AI could also help banksserve their customers more effectively by giving them easier access to relevant information.
This year,U.S. Bank announced the formation of an artificial intelligence enterprise solutions unit, which sits inside its payments, virtual solutions and innovation group.The bank has begun experimenting with how AI can serve customers that have product, service or loyalty programme-related queries that are not frequently asked. Machine learning will ensure that over time these less typical queries have readymade responses, versus the current situation where advisors often have to consult experts in another department to provide immediate advice. If AI could contain an encyclopaedic knowledge of U.S. Bank’s offerings, advisors could quickly provide relevant information, enhancing the overall customer experience.
Nordea bank also recently introduced artificial intelligence technology, which analyses customer text queries and automatically forwards them on to the relevant person in the correct department. The software can process hundreds of messages a second, speeding up response times and improving customer service. It is worth noting that customer experience is most often cited as the reason customers feel loyal to a brand and remains critical to retaining profitable customers
Finally, AI is also playing an important role in fraud prevention, helping to analyse customer behaviour to anticipate or identify fraudulent purchases. It can also be combined with real-time voice recognition to authenticate the customer, or run a voice sample through a database of known fraudsters to prevent fraudulent activity.
In the dynamic and aggressively competitive environment that organisations operate today, financial services brands need to work harder to understand their customers, to engage with them, to reward them appropriately and ultimately retain them. Through the effective application of AI,banks can leverage technology to offer enhanced products, services, communications and programmes that achieve the ultimate in customer behaviour – devotion to a brand.
ECB stays put but warns about surge in infections
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%.
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)
Bank of Japan lifts next year’s growth forecast, saves ammunition as virus risks linger
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)
World Bank, IMF agree to hold April meetings online due to COVID-19 risks
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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