Ronald Rubens, Vice President – Europe North, Avaya
How often do you visit your local bank branch? The prospect of facing long queues, few available staff and inconvenient opening hours means that for most of us, visiting our local branch is not an experience we relish. In fact, we only tend to physically go to the bank when we have no other choice, such as when taking out a loan, opening a new account or applying for mortgage. For more mundane transactions, technology has provided numerous options to seamlessly process them, thus reducing the need to visit a branch. As a result, banks have been steadily closing down branches.
Despite the rapid increase in the use of mobile and online banking solutions, banks have realised that physical branches still play an essential role in their business model. Not only do they help customers carry out their more important transactions, they also provide them with the peace of mind that comes with knowing they are able to receive face-to-face advice from an expert, should they not feel comfortable doing everything remotely.
As a result, today’s banks find themselves facing a dilemma – on one hand, they need to invest in new technology and give their customers the opportunity to process as many transactions as possible remotely. At the same time, they feel pressure to maintain at least some of their branch networks, as customers still view them as the safest and most reliable way to interact with a bank.
Since banks can’t continue to provide the wide range of local resources they previously offered, they are looking to technology to help bridge the gap. By putting in place technologies that not only bring out the best of what a local branch has to offer, but allow for seamless communication and collaboration between banks and their customers, the banks hope to achieve the best of both worlds.
For example, having pension experts and specialist mortgage advisors located in every single branch is no longer beneficial for banks, as the level of training and resources required is simply too high and costly.
To overcome this challenge, major British high-street banks have – in partnership with Avaya – come up with a solution that meets their customers’ needs: by creating video consultation rooms within branches, they are able to meet the demands of walk-in customers as well as deal with last minute remote requests. What’s more, through the use of tools such as e-signatures and screen sharing, customers’ crucial need for a sense of security and intimacy is maintained, regardless of the physical location of the advisor.
Another solution banks are using is creating micro-branches within larger enterprises or public locations. In that respect, Avaya have partnered with Video Teller Machine (VTM) to guarantee the availability of an agent should a customer require assistance and guidance when carrying out a transaction.
The use of technology can also allow for greater efficiency by pointing the customers in the right direction for, self-service. According to research conducted by Avaya and BT, almost half of UK consumers check their balances using a computer, while over a quarter regularly use banking apps on their smartphones. Tellingly, the research also indicated the need for customers to be recognised as unique by their bank – hence the importance of local branches.
Through the use of omnichannel customer experience technology such as Avaya’s Oceana, banks are able to seamlessly keep track of their customers’ activities regardless of the method of contact,thus enabling them to personalise the customer’s experience based on specific needs, suggest a video interaction or even anticipate the customer’s potential requirements.
What’s more, modern contact centre solutions can determine if the last agent the customer interacted with is available, or even automatically contact an agent that is within closer reach to the customer, thus truly offering that personalised and individual approach that customers demand.
Technology has come a long way over the last few decades, and the banking industry has and will continue to be one of its biggest beneficiaries. While branches are likely to still be part of banks’ structure for the foreseeable future, technology-enhanced branches using innovative customer experience software can offer exactly what customers need, regardless of the their location: a rapid, safe, personalised and seamless service.
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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