If there’s any upside to a crisis, it’s that we are forced to reimagine. Just a year ago, we predicted that it would take at least another decade for banks around the world to embrace digital transformation. A mere six months later, we were blindsided by one of the worst global pandemics in modern times. Like most businesses, banks were forced to think differently and reimagine an uncertain future—and they were forced to do so almost overnight.
Branch banking has historically played a pivotal role in both acquiring new customers and fostering strong relationships with existing customers. But COVID-19, with the social-distancing measures required to keep populations safe, has caused a sharp decline in branch traffic, a pattern that may linger for several months—or even years. The question that now confronts the industry is: Are banks up to the task? Unfortunately, it isn’t a choice anymore. Bank branches are already becoming high-end service centers offering customers appointments. Banks must further change their approaches if they hope to survive, thrive and successfully operate in a post-COVID-19 world, and digital will lie at the heart of this transformation.
Time for a step-change in omnichannel efforts
In a recent survey[i] conducted by Simon-Kucher & Partners in June 2020, 42 percent of respondents reported that they will reduce their branch visits after lockdowns end in the United States. When it comes to choosing with which institutions to bank, the survey found that the physical bank branch will continue to play a pivotal role for many consumers. And in what could have a significant impact on branch density, retail-bank customers also indicated that they would be more willing to travel greater distances to visit a branch.
Banks traditionally do an excellent job of promoting their products and services at a physical branch due to the tangible value of face-to-face interactions, and the branch model affords clear benefits for both banks and customers. For the bank, it can quickly confirm the identities of new customers and execute and notarize legal agreements. For the customer, branch banking allows them to withdraw significant amounts of cash on short notice, quickly and safely deposit cash into accounts or engage directly with trusted advisors. All of this provides an enhanced level of security, comfort and confidence for customers, especially when it comes to financial issues that can be complicated, highly sensitive or both.
The greatest challenge for banks lies in transferring this same level of trust, flexibility and security to a digital setting, especially during such turbulent times as these and when COVID-19 has forced many banks to move to digital onboarding. Banks can begin to accomplish this by establishing protected digital identities for their customers that allow them to engage with their banks across channels. Customers want the ability to engage securely with their banks via their laptops, to shift to speaking with an executive at a call center (if necessary) and to have the option to complete transactions using their mobile phones if they so desire. And the key to all of this? Omnichannel.
An omnichannel experience offers a customer the ability to interact with a bank in the physical or digital realm using any device. To offer this type of experience, banks need to structure their digital strategies in a holistic manner, orchestrating customer experience by adding a thicker layer of customer engagement. Existing bank strategies may offer a level of omnichannel, but they need a further upgrade based on changing conditions and lifestyles—especially now.
Some banks have already responded to these requirements. Citibank, for instance, has made it simple for customers to raise credit-card disputes online via either a form or through its banking app, whereas many other banks would opt to take the customer through a more time-intensive and often frustrating telephone menu. Several banks have introduced individual chatbots that can address personal queries and offer a one-on-one “conversation” with a customer, which in turn gives customers a sense that their banks are working to take care of them directly and respond to their individual questions and issues. Implementing this type of technology-enabled automation and/or AI (artificial intelligence) response behind the scenes to improve customer experience is a significant upgrade for many banks and represents a step-change in how they can begin to deliver hyper-personalized services to their customers.
Digital banking is no longer an option—it’s an imperative.
2020 has had a clear impact on consumers’ digital-banking behaviors, and banks are wise to take note. The Simon-Kucher & Partners June 2020 survey[ii] showed a clear affinity for online banking during lockdowns in the US, a trend expected to continue as restrictions ease. A majority of respondents indicated that they would now not even consider opening an account at a bank that did not have best-in-class digital capabilities, and all agreed that both traditional and digital-only banks still have work to do to improve their digital offerings. Another recent survey[iii] conducted by management consultancy firm McKinsey (April and May 2020) examined changes in consumer banking patterns during the COVID-19 crisis and found that reliance on cash payments decreased substantially in most countries, while remote payments increased—another trend unlikely to reverse itself post-pandemic.
Looking to the future, it’s clear that banking customers increasingly enjoy the ease and convenience of a digital model that empowers them to manage their finances in one place—from setting up automatic payments to making deposits and more—without having to queue in a bank. To truly capitalize on this, accelerate their digital transformation and deliver a new level of personalized customer offerings, banks will need to embrace a new way of thinking that enables them to reimagine their holistic systems, processes, data and people. And this type of change needs to be strategized thoroughly before being operationalized.
Customer-centricity is key.
If banks continue to operate solely in their current form, they risk becoming nothing more than a utility service. But if they can create an ecosystem by partnering with businesses that offer connecting services, they can build lasting relationships with their customers and deliver new levels of measurable value. Banks are in a unique position to orchestrate this for the ultimate benefit of their customers.
For instance, if a customer reaches out to his or her bank for a mortgage, what stops that bank from helping that customer to own that house—instead of just selling its mortgage business? Or what stops a bank from partnering with restaurants and entertainment hubs to enhance its customer’s experience?
Banks need to enable a set of partner-capabilities that will permit them to deliver products and services based on customers’ evolving needs and immediate requirements. Several banks have recently shared notices on their websites to warn their customers about the prolonged wait times for services during the pandemic. Providing this type of proactive client notice is good, but what if a client needs to reach the bank urgently? What are the digital options for that customer? Banks must be savvy and intelligent enough to move from being reactive to prescriptive and, eventually, cognitive. Banks must take that digital plunge to improve the customer experience across multiple channels and implement a customer-centric approach that ultimately enables them to improve time to market, drive personalization and enable growth.
Measure customer value, and build resilient, agile capabilities.
Technology can connect services and provide unmatched insight into customer behavior and sentiment. All businesses have one thing in common: the financial dimension. And here’s where banks can play a major role if they can rethink how to measure customer value and build a resilient, agile capability to adapt to market changes. That will require them to alter the way they interact with customers by bringing all customer-engagement capabilities into one enterprise layer, just like other customer-centric brands, such as Amazon or Apple. Services need to be flexible, respond swiftly and offer configurability to each customer that creates transparency and allows customers to drive their relationships with their banks. The focus must always be on the customer, and the bank must manage the value offered to the customer across its ecosystem.
It’s clear that physical bank branches will continue to play a role in attracting new customers and retaining existing ones in a COVID-19-shaped environment. Convenience cannot be ignored for some banking customers; branch proximity will always be a deciding factor for some consumers. Branches will need to become experience centers, like Apple stores. But to really build a long-term strategy and roadmap and ensure branch banking can coexist with online banks and new fintech (financial-technology) offerings, traditional banks will need a systematic process to create resilience, choice and convenience tailored to each bank’s wide-ranging demographic. That may mean understanding that branches may instead become the place to solve more complicated problems or offering premium services to select clientele, such as wealth management and small-business banking.
Although the current economic downturn is not a direct result of a financial crisis, the banking industry must be careful not to exacerbate the impact of the pandemic by ignoring the needs of its most affected customers. If banks are unable to make themselves available to their customers when they’re needed the most, how will the reputation of the banking industry fare by the end of this pandemic?
There’s a dire need for banks to build a resilient, agile distribution and servicing model to not only enhance but sustain the customer experience during and long after the pandemic has ended. They need to simplify historically complex operations and infrastructure and embrace intelligent technology and strategic partnerships to create a new level of services and products for their customers. Critically, banks must also ensure that evolving banking behaviors, required social-distancing measures and the current global health crisis do not inhibit how they build and maintain customer trust. This must be a fundamental goal if banks hope to validate their existence and also future-proof themselves as we as an industry prepare for a new normal.
Banks now have the unique opportunity to show their customers the values they hold, demonstrate just how much customer loyalty means to them and allow customer-centricity to guide them. Times like these force us to think differently, and if banks can reimagine their offerings with a sense of urgency, empathy and optimism, this can only translate into significant value for both themselves and their customers.