Alex Cambell, VP of Enterprise Sales, IMImobile
With the UK population checking their smartphones over a billion times a day, businesses are fast recognising that the battle for customer attention is today won on mobile. And retail banks are certainly no exception.
It goes without saying that mobile devices are now essential to individuals’ interactions with each other and with businesses. You only have to walk down the street to witness a “smartphone zombie” for proof that we as a generation are addicted to our phones. But rather than this being a negative aspect of our society, it represents a real opportunity for banks to capture their customers’ attention via the small screen.
In this digital age, understanding how to engage and interact with customers via mobile devices is fast becoming a prerequisite for businesses, especially now that customer experience is considered a top priority. Banks, in particular, are adapting their digital strategies to reflect the mobile-centric approach their customers now expect. They have realised that mobile messaging is an immediate way of getting the customer’s attention and have increasingly invested in mobile technologies to help optimise the customer experience. But while sending SMS messages to customers may sound like a simple method, there are a number of ways retail banks can make sure they’re maximising its potential.
Trust and transparency is vital when it comes to retail banking. Customers want to feel in control of their finances and expect to have visibility on the status of their accounts, payments, and transfers. And for banks, is there a quicker way to reach these customers than through the mobile phone? More banks are using interactive mobile messaging as a way of connecting and engaging with customers almost immediately, from warning customers who are close to being overdrawn or subject to potentially fraudulent transactions to alerting them of changes to their account status.
This is also beneficial when it comes to instilling trust in a new customer. For example, during the on-boarding process, the bank can keep the customer constantly informed about the status of their account or mortgage application through mobile messaging. The customer is left feeling satisfied because they know they are being taken care of and that progress is being made, helping to build a stronger customer relationship through delivering transparency and trust in the service.
While some customers prefer communicating with a service agent over the phone when making decisions with their personal banking, this can sometimes be more hassle than it’s worth. In today’s culture of immediacy, there is nothing more frustrating than waiting on hold for long periods of time or being transferred from person to person without a resolution. It damages customer satisfaction and puts customers off wanting to engage with the company in future.
The contact centre experience doesn’t have to be painful though. Customers can still have that human contact with the service agent, but can get their responses in a more immediate and efficient way through real-time SMS interactions. Customers can quickly get in contact with customer service teams by texting a dedicated customer service number and communicating with the agent via two-way SMS. That way, resolutions are presented more efficiently in a conversational manner and the customer can avoid waiting on hold for an agent to pick up the phone.
For the consumers that still want that personal touch, banks can also use mobile messaging to “warm up”’ customers before making an outbound call, allowing them to introduce themselves, set the scene, and organise the best time for a call or appointment. This text-based interaction is likely to make customers more inclined to answer the call that follows and, above all, helps strengthen the relationship and improves customer satisfaction.
The benefit of mobile messaging does not stop at an improved customer experience though. It can also be used to detect and prevent fraud, which is a growing threat for retail banks. By blending mobile messaging into customer journeys across the business, customers can be instantly alerted to suspicious activity on their accounts, allowing banks to quickly identify and respond to potentially fraudulent behaviour. Customers are then put at ease, reassured that the bank is dealing with the incident and that further attacks have been avoided.
Banks can also use mobile messaging and location capabilities to detect ATM fraud. For example, when a customer withdraws money from an ATM, a location lookup of the customer’s mobile phone is automatically triggered. If the bank finds that the ATM and device location don’t match, they can suspend the transaction and immediately notify both the customer and would be fraudster. This demonstrates how banks can effectively combine mobile capabilities with existing business processes to optimise the customer journey, proactively intercept the risk of fraud and improve operational efficiency.
Overall, mobile messaging is playing an increasingly important role in retail banking security. For important processes such as authenticating suspicious transactions or delivering one time passwords, banks rely on a customer’s instant attention and since SMS has a 90-second average response time, mobile messaging is the most visible and immediate way of engaging with them.
But as banks turn to mobile-centric strategies, they must also develop new ways to monitor and track engagement levels. Smart links are the hyperlinks of the SMS, MMS and push notification world and allow banks to not only shorten complex URLs, but map individual clicks back to individual customers and devices. By having visibility on which customers interact with specific messages, offers, alerts and notifications, banks can better understand how to maximise the effectiveness of their mobile messaging strategy and ensure that they’re delivering a full mobile experience, tailored to the individual and their device.
In this “omni-channel” world, there are a whole range of platforms which businesses are using to communicate with customers. But for retail banks, mobile messaging remains the most secure and reliable method of communicating with customers. Given that customers are so attached to their mobile devices nowadays, banks should really be capitalising on the opportunities that today’s smartphone society presents, and mobile messaging is a great place to start.
A quarter of banking customers noted an improvement in customer service over lockdown, research shows
SAS research reveals that banks offered an improved customer experience during lockdown
This represents some good news for banks in an extremely challenging time, with 59% of customers also saying they’d pay more to buy or use products and services from any company that provided them with a good customer experience over lockdown.
The improvement in customer experience also coincides with a rise in the number of digital customers. Since the pandemic started, the number of banking customers using a digital service or app has grown by 11%, adding to an existing 58% who were already digital customers. Over half (53%) of new users plan to continue using these digital services permanently moving forward.
Brian Holden, Director, Financial Services at SAS UK & Ireland, said:
“It’s notable that in times of need customers value being able to communicate with their bank and place an even higher value on good customer service. A rise in the number of digital customers means banks can now reach a wider audience online, leveraging AI and analytics to offer a more personalised experience.
“There is work to be done, though. Even greater personalisation is needed if banks are to win over the 12% of customers who felt banking services deteriorated over lockdown. And this personalisation will need to get right down to a segment of one to properly reflect the unique circumstances some individuals now find themselves in due to the pandemic.”
While the number of digital users grew over lockdown, there is still a quarter (24%) of the banking customer base that have chosen not to make the switch to digital services.
Meanwhile, failure to offer a consistently satisfactory customer experience could prove costly for banks, with a third (33%) of customers claiming that they would ditch a company after just one poor experience. This number jumps to 90% for between one and five poor examples of customer service, so this just underlines how much retail banks can win or lose in these difficult times.
For more insight into how other industries across EMEA performed during lockdown, download the full report: Experience 2030: Has COVID-19 created a new kind of customer?
Swedish Bank Stress Tests in Line with Recent Rating Actions
The Swedish Financial Supervisory Authority’s (FSA) latest stress test results show major Swedish banks’ robust ability to absorb credit losses. The results support Fitch Ratings’ view that short-term risks have abated in recent months, and are in line with Fitch’s assessment of major Swedish banks’ capitalisation at ‘aa-‘, which was a factor when Fitch removed the ratings of Handelsbanken, Nordea (not covered by the FSA’s stress test) and SEB from Rating Watch Negative in September.
The FSA estimated about SEK130 billion of credit losses over 2020-2022 for the three largest banks (Swedbank, Handelsbanken and SEB) under its stress test. This represents about 220bp of their loans, or about 70bp annually. However, the banks’ pre-impairment profitability in the stress test could absorb credit losses of up to about 110bp of loans annually. Fitch’s baseline expectation is for credit losses below 20bp of loans in 2020 and 8bp-12bp in 2021.
Capital remained strong under the stress test. The average common equity Tier 1 (CET1) ratio fell by only 2.8pp (1.9pp if banks did not pay dividends) from 17.6% at end-June 2020. The capital decline was not driven by credit losses, which could be absorbed by pre-impairment profitability, but by risk-weighted asset inflation.
The three banks’ 3Q20 results showed that capital has been resilient despite the coronavirus crisis. The banks had a CET1 capital surplus over regulatory minimums, including buffers, of almost SEK100 billion (excluding about SEK33 billion earmarked for dividends). SEB had a CET1 ratio of 19.4% at end-September, Handelsbanken’s was 17.8% and Swedbank’s 16.8%.
The SEK130 billion credit losses under the latest stress test are lower than under the FSA’s spring 2020 stress test (SEK145 billion), which also covered a shorter period of two years. However, they are still larger than the actual losses incurred by the three banks during the 2008-2010 crisis. This is despite tightened underwriting standards by the three banks in recent years, including, in the case of SEB and Swedbank, in the Baltics, the source of most of their loan impairment charges in the previous crisis.
In its baseline economic forecasts, the FSA assumes a harsher shock to Sweden’s GDP in 2020 and 2021 (-6.9% and 1%, respectively) than Fitch’s baseline (-4% and 3.4%), although it assumes a similar recovery by end-2022. It also assumes real estate price corrections, which appears particularly conservative in light of a 11% housing property price increase over January to November 2020.
The ratings of Handelsbanken (AA), Nordea (AA-) and SEB (AA-) are on Negative Outlook due to medium-term risks to our baseline scenario. The rating of Swedbank (A+) is on Stable Outlook, reflecting significant headroom at the current rating level following a one-notch downgrade in April due to shortcomings in anti-money laundering risk controls.
Future success for banks will be driven by balancing physical and digital services
Digital acceleration due to COVID-19 has not eliminated the need for bank branches
Faster service (23%), smaller queues (26%) and longer opening hours (31%) are among customers’ biggest asks of their bank branch, new research from Diebold Nixdorf today reveals. But with 41% consumers saying they would be comfortable to engage with all banking services via an app, it is vital that banks respond to the full spectrum of customer needs – balancing and evolving their offerings on multiple fronts.
A third (35%) of customers say they will always want access to physical, in-branch banking services in some capacity and one in ten (10%) consumers will never bank predominantly online in the future. This demonstrates that there remains an important role for the services a branch provides. This role, however, continues to shift away from purely transactional banking:
A quarter (26%) value face-to-face advice when it comes to their banking needs
One in five (18%) seek advice on different products
17% want to speak to the staff or other customers.
Matt Phillips, Diebold Nixdorf vice president, head of financial services UK & Ireland, said: “The majority of banks have spent the last decade focusing on their digital strategies and investing in improving – or establishing – their online customer experience. However, the data shows that there is still an essential role for physical branches. Banks now increasingly face the challenge of continuing to provide customers with access to a range of physical and as well as digital services, giving them the flexibility to choose the best service for them at any given moment in time.”
When looking beyond the impact of COVID-19, planned branch visits by customers are expected to rebound to 28%, following a dip to 11% during lockdown. And when asked about the new services they’d like to see inside their bank, sixteen percent of respondents said more self-service machines would improve their in-branch experience.
Matt Phillips continues: “In a world that is fast evolving and where the future is digital, there’s no doubt that high street banks must, and are, responding to the needs of highly digital customers. But not every customer requirement is digital. There is still a strong need for physical bank branches and the interaction and services they offer, and striking this balance between physical and digital is where the industry must come together to provide solutions. For example, building a strong, leave-behind strategy is something we’re seeing across the board when banks have to close branches, ensuring customers have access to self-service machines to complete all their transactional needs.”
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