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Redesigning the Banking Experience with Customer Value Management

Redesigning the Banking Experience with Customer Value Management

Banks are equally bad everywhere. A bank customer in US or UK faces the same set of challenges faced by a bank customer in India or Mexico. In a 2017 survey, carried out by the Financial Brand, it was found that most banks do not have a formal customer experience plan in place. In terms of key drivers of customer experience, technology ranked 5th and channel ranked 9th, below branch personnel which was placed 4th. The importance given to branch banking over technology and channels in an increasingly digital world can only be put down to misplaced priorities in the banking sector.

 Banks have a strong reservoir of trust, to be sure, but they seem to be losing ground, with PayPal and Amazon nearly as high as banks in recent study by Bain & Company. Just as intriguing is the increasing willingness of the respondents in India, Mexico, US and UK to run their finances through a fin-tech firm according to the study.  Should banks worry? They do appear to be vulnerable to fin-tech companies providing better customer value propositions with data enabled offerings.

Amit Sanyal

Amit Sanyal

Compared to the rapid pace of innovation in other industries, banking foray into the digital sphere can be best described as rudimentary.  In a way we can say that the digital revolution in banking has just begun, with banks offering mobile apps and high quality websites to their customers, allowing customers the ability to open an account, checking their account balances, and making payments However, all said and done, all these changes are perfunctory, barely skimming the surface considering the wealth of data and customer goodwill at the disposal of the bank.

For a long time, the banking industry was resistant to change, as it was in a comfortable position, with a captive market, little or no competition, robust customer relationships and no pressure to change. Now, new competitors are flooding the industry, with digital only agile models, driving rapid innovations in product and service, leaving banks struggling to regain their loyalty as well as market share.

 The customer’s attitude towards banking has also changed, adding insult to injury.  They are comparing their banking experience to other disrupted industries (Netflix, Amazon) and finding banks falling short of their expectations. In fact it would be fair to say, that even today, after many years of digitization, bank customers are still waiting for that new banking experience, touted as revolutionary and transformational, with customer centricity at the heart of everything.

Therefore, the biggest question that banks have to address today is what is next after digital banking? This comes from the realization that they have to dive much, much deeper than their perfunctory digital offerings allow, in-order to first understand and then serve their customers. Ideally Retail- analytics should have transformed banking by now but it has not. However, the rise of fin-tech and the digital customer have renewed focus on big data, AI, Machine Learning. Here, it is worth mentioning that banks have laid down stringent requirements for account opening, which makes the customer database more robust than the customer database maintained by telecom companies. This data can be used to create a better customer profile, helping banks to segment customers and provide individualized engagement to each of them.

Banking CVM – The next step after digital       

Banking Customer Value Management (CVM) help banks to understand their customer and fulfill their needs with contextualized offerings that are mapped to customer personas. CVM uses customer data to drive sentiment analysis, 360 degree customer profiling, customer segmentation, next best offers, and channel management.

Social media platform are great sources of feedback for improvement opportunities, and banks should know how to leverage this information. In this regard, advances in the field of Natural Language Processing, machine learning, text analytics are helping banks to uncover customer sentiments from structured as well as unstructured data, allowing them to address customer issues quickly.

Banks have much to gain by gaining a 360 degree understanding of their customer, as it gives them the actionable insights for fine tuning marketing campaigns, improving customer’s engagement with the product, predicting customer behaviour and stopping churn before it is too late.

Similarly, customer segmentation allows banks to provide a higher level of personalization, assess customer’s pricing sensitivity, and build relationship with their valuable customers. For example, banks can used card usage data to design personalized loyalty programs, where customers are offered cash back offers according to their card usage. Similarly, banks can optimize their revenues by testing customers across multiple pricing points, and applying the one that is most optimized. Pricing segmentation also allows banks to give preferential treatment to their most valuable customers.

Next best offers (NBO) provide banks with an opportunity to re-engage with their customers and provide a cross sell or upsell opportunity. It helps to increase loyalty by providing relevant offers in a timely manner. NBO helps the bank in identifying products or services customers are most likely to purchase next allowing its marketing managers to run campaigns like Amazon’s “you may like to buy next”.

Finally, CVM keeps track of customer journey, helping in the understanding of channel effectiveness, driving more relevant content, and optimizing conversions.

Benefits

Shift to personalized banking

Banking CVM provides a shift from mass marketing to n=1 marketing, where services are tailored according to user personas.

Increasing loyalty

CVM provides valuable insights on customer’s lifestyle by analyzing transactional data. This information can be used to design loyalty programs with vertical partners that reflect customer lifestyles. By allowing the customer to indulge in activities and content of their choice, the bank improves customer loyalty.

New revenue through cross sell and upsell opportunities 

Similarly, it will help the bank to realize new revenue streams through up-sell and cross sell opportunities based on customer segmentation, Next best offers.

Identifying the right channel

In today’s omni-channel world, the customer is leaving his footprint on multiple channels like mobile, social media, web, chat, branch and so on. Big data analytics analyzes customer journey in order to understand where the sale is taking place in order to make the conversion funnel better and improve marketing effectiveness by driving the right content on the right channel.

Allows banks to plan for the long haul   

Customer segmentation allow banks to take a long term business view by targeting customer segments, like students, who are likely to evolve into a profitable segment in the long run.

Conclusion

According to Financial Brand, Analytics is the CX initiative that is most challenging for brands. It further goes on to say that most bank marketers are using the same outdated data sources and marketing methodologies they have used for decades, which is only alienating their customers further. In this light bank needs CVM to utilize data at the same level of sophistication of digital disruptors like Netflix or Amazon to drive higher customer engagement and revenues.

 About Author

Amit Sanyal is the Chief Operating Officer of the Consumer Value Solutions at Comviva, a business focused on Customer Value & Life-cycle Management solutions in the telecom space. A marketer at heart and with over 11 years of work experience in the telecom and internet service provider spaces, Amit has also worked with various industry leaders such as Bharti Airtel and Sify Technologies in a multitude of marketing functions across the Usage and Revenue/Retention and Value Added Services domains. A PGDM (Marketing & Finance) holder from TAPMI, Manipal, Amit graduated from the University of Delhi with an Honours degree in Economics.

Banking

What does the future hold for accessing earnings? Introducing the world’s first Earnings on Demand payment and debit card

What does the future hold for accessing earnings? Introducing the world’s first Earnings on Demand payment and debit card 1

By James Herbert, CEO & founder, Hastee

Let’s begin by looking at how our brains are wired. Think about the hunter-gatherer mindset: when we expend effort, we expect an immediate reward.

It’s therefore no surprise that over time, different areas in society have adapted to our nature as humans. Almost everything we want, we can get on-demand. Whether it’s instantly streaming movies on Netflix, online shopping from Amazon, or fast-food delivery from the likes of Just Eat. And, because of such technological innovations our expectations have accelerated when it comes to the pace of delivery. This isn’t individual to us as consumers in our day-to-day lives, it’s also reflected in the workplace. We ultimately want work to work for us.

Part of this of course comes down to accessing wages. Workers should be able to access a portion of their earned wages whenever they need it, in advance of the monthly pay cycle – whether to help during challenging times or in day-to-day life. We solved this solutionBut, to take this up a level, ready for the future, we introduced the world’s first Earnings on Demand contactless debit card, powered by Visa – giving users access to their accrued earnings in real-time, with the card’s balance dynamically increasing every day they work.

So what is the card, and how will it change how we access earnings in the future?

The basis is very much the concept of Earnings on Demand. At university I set up a company called Brightsparks to connect students with work opportunities so they could earn money. Yet I noticed a common trend. With students often having to wait for the monthly pay cycle to get their earnings, many were having to turn down work simply because they couldn’t afford the travel day-by-day. It became very apparent that not having £20 today could stop them earning £200 tomorrow.

It struck me that payday itself doesn’t have to be a rigid construct that people have to wait for. But this isn’t specific to students. Liquidity is a widespread issue faced by people in all industries and of all ages, and according to our most recent Workplace Wellbeing Study, 82 per cent of people turn to high-cost methods of financing to tide them over when needed.

The Hastee Card effectively makes wages directly accessible: it simply lets people spend a portion of  what they’ve already earned.

Some people might wonder why they’d want to step away from the standard monthly pay cycle. But consider this: the monthly payroll (via a cheque) only came about in the 1960s as an Act of Parliament. Before this, most people were paid weekly in cash. The first major firm that shifted to monthly payments did it for cost-cutting. It worked for the employer more than the employee. In fact, that firm’s employees had rejected their employer’s change of payment type when it was first trialled a decade before (look up ‘Pye Radio’). So the way that workers and organisations interact around pay is not set in stone – it changes as technology and society shifts.

The way we perceive and use money keeps evolving. Apple Pay, Monzo, and PayPal have completely changed the way payments can happen, yet payroll still remains largely unchanged. It’s only a matter of time before disruption becomes more widespread.

Looking at it from the employer side, it has its benefits too. Before the climate changed, businesses were accommodating enhanced workplace benefits such as no-desk policies, flexible or remote working. In all cases by businesses offering more, they tend to see a more engaged, happier and less financially stressed workforce – leading to increased productivity.

Earnings on Demand is ultimately a perk that presents an ethical alternative to high-cost credit options such as payday loans, credit cards and overdrafts. And existing solutions offer zero impact on payroll processes, zero impact on the cashflow of the business and are designed for quick, simple integration.

The Hastee Card is an evolution of this all – preparing for the future. It builds upon and enhances the user experience by reducing friction and offering immediate spending power as well as a path to greater benefits such as cashback and rewards in the not-to-distant future.

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Banking

Going branchless: How banks can keep customers coming through the virtual doors 

Going branchless: How banks can keep customers coming through the virtual doors  2

By Richard Kelsey, Head of Software Sales at Backbase

Though you might be familiar with the popular seaside town of Newquay, you may not be familiar with its historic financial district aptly named, Bank Street. Dozens of banks and building societies have dominated this area since the late 1800s. However, the street hit the headlines recently as, 120 years after the first bank opened its doors, the last bank closed them.

This is not new. Bank closures have been part of the news agenda for years, and now, COVID-19 has further accelerated the physical turning into the digital. Across the globe, banks have had to close or limit the operating hours of their in-person locations, forcing banks to digitise at speed. Keeping the pipeline of digital sales flowing for new clients, increasing digital product origination and facilitating those cross-sell journeys to customers is key to survival.

Digital take up

Delivering seamless digital customer journeys was already a fast-growing priority for banking and wealth management organizations pre-pandemic. Research shows that 38% of customers stated UX as the most important factor when choosing a digital bank. In response, banks have been investing in digital technology and collaborating with third-party providers as they strive to offer a superior customer experience and stay competitive. But the global lockdowns – which have restricted people to banking digitally – have turbocharged these trends. Growing demand for digital onboarding, and digitized services to support the ongoing customer journey, must be matched by effective capabilities though.

Plugging the leaks

Conversion leakage is a particular problem during the digital client acquisition process. With branches shuttered during the coronavirus lockdowns, and subsequent openings and customer footfall likely to be severely limited for the foreseeable future, this leakage presents a major, and costly, challenge as institutions seek to convert digital sales and boost their return on investment.

The key is understanding why leakage happens in the first place and time and time again, there are three main trends that cause the most problems:

  1. Switching from a customer’s current provider is too difficult (for example, in transferring bill payments and direct debits).
  2. The digital process is too cumbersome (particularly where existing offline processes are simply put online).
  3. Customers lack human touchpoints and advice when they need it (especially for more complex products).

Combating these levels of leakage requires firms to take an outside-in approach, to see the process from the customer’s perspective. From this viewpoint, they can design a more customer-friendly experience that streamlines the job at hand.

One way to simplify the acquisition journey is to incorporate human/AI advisor interventions at points of friction, where customers may become stuck. Another is to adopt retargeting strategies that address customers who abandon the application process partway – for example, by storing their details in a CRM system and sending them notifications to complete the application, or referring them to an outbound call centre employee who can pick up the process by phone. Such approaches can boost completion rates by 40%, delivering substantial benefits to the bank.

Stronger digital growth

Banks’ return on tangible equity has plateaued globally at approximately 10.5% over the past decade, and the lower-for-longer interest rate environment will add to the pressure. Addressing cost-income ratios has become a matter of urgency.

Firms now face a strategic inflection point. Continuing with old business-as-usual practices will leave institutions struggling to attract new (especially younger) clients, while grappling with an exodus of existing customers and an overburdened cost base. But by digitising processes to enhance the client experience, banks and other financial institutions can increase their revenues and reduce costs, and have a loyal customer base who don’t feel the impact of the branchless bank.

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Banking

Shawbrook Bank “cautiously optimistic” as it Publishes Half Year Report for 2020

Shawbrook Bank “cautiously optimistic” as it Publishes Half Year Report for 2020 3
  • Financial performance impacted by the pandemic
    • Expected credit loss (ECL) charges of £45.8 million recognised on loans and advances to customers
    • Profit before tax (PBT) was impacted by the adverse effects of COVID-19 and the subsequent provisions set aside, reducing by 89% to £5.9 million
    • Customer deposits rose by 25% to £7.6 billion while capital remained strong with a CET1 ratio of 12.3%
    • A total of 15.9k payment holidays granted across the Group
  • The specialist bank continued to operate effectively through COVID-19
    • 98% of employees moved to remote working within days and no staff furloughed
    • Successfully achieved accreditation under UK Government’s CBILS
    • Continued investment in technology to digitalise the business
  • Shawbrook “cautiously optimistic” as momentum begins to return to certain specialist sectors

Shawbrook Bank has today (Monday 10 August 2020) published its half year financial results for the period ending 30 June 2020.

The specialist bank confirmed it had set aside £45.8 million of provisions to provide for potential future loan impairments caused by COVID-19. The bank reported it had also granted a total of 15.9k payment holidays to support its customers through the pandemic, of which 10.8k remained in force at 30 July 2020.

As a result of such provisions, the bank’s profitability was impacted with a reduction in PBT by 89% to £5.9 million.

Despite the challenging market conditions, the bank retained its active position in the UK savings market, increasing its retail savings deposit base by 25% to £7.6 billion. During the period, Shawbrook also successfully completed a £75 million Tier 2 re-financing to further optimise its capital structure.

Ian Cowie, Shawbrook Bank’s Chief Executive Officer, said that COVID-19 has had a clear impact on the bank’s financial performance, but Shawbrook remained in a position of strength.

He commented: “Prior to COVID-19, the Group had continued to make good financial progress, starting 2020 with a strong balance sheet and prudently positioned capital and liquidity base.

“To further optimise the Group’s capital structure, during H1 2020 we initiated a Tier 2 refinancing and, despite the challenging market conditions, successfully completed the £75 million issuance in July.

“We have also maintained our active position in the UK savings market. However, the longer-term economic impacts of the pandemic remain hard to predict and as a result we have recognised expected credit loss charges in the period on loans and advances to customers of £45.8 million and on loan commitments of £1.5 million.

“While this has clearly had an impact on profitability, our capital strength positions us well to support our customers and grow our business in line with appetite as we enter the second half of the year.”

Throughout COVID-19, Shawbrook maintained full operational functionality, with no staff furloughed and 98% of employees transferred to remote working within days of the UK lockdown being announced.

The bank adopted a series of concession opportunities across its product range to help alleviate the financial impacts of COVID-19 on its customers. During this time, Shawbrook also successfully achieved accreditation to the UK Government’s Coronavirus Business Interruption Loan Scheme (CBILS) to provide further funding support to its SME clients.

Mr Cowie added: “Since the outbreak of COVID-19, our focus has remained on supporting our staff, customers and partners while at the same time safeguarding the long-term sustainability of our business.

“When the UK lockdown was announced in March 2020, we acted with speed and agility, moving to an almost entirely remote operation within days. Led by a stable and experienced management team and with the support of new and existing technology, we have continued to operate effectively throughout this period.”

Throughout the first half of the year, the bank also continued to identify investment opportunities to further digitalise its proposition, with a core focus on its SME offering.

Mr. Cowie added: “Notwithstanding the pandemic, we have continued to invest in our business to help drive our strategic ambition to become the UK’s Specialist SME Lender of Choice. As well as the ongoing deployment of targeted digital solutions across the Property, Consumer lending and Savings businesses, our investment in the development of a new growth platform in our Business Finance franchise will serve to further modernise our offering, delivering an enhanced customer journey as well as significant operational efficiencies.”

Looking to the future he continued: “Although significant uncertainties regarding the broader macroeconomic impact and pace of recovery remain, we are cautiously optimistic in our outlook as we start to see signs of momentum returning to certain of our specialist sectors.

“Our management expertise and prudent approach to credit decisioning, combined with investment in our digital propositions, means we are well positioned to adapt and respond to opportunities as they arise throughout the second half of the year.”

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