By Bob Meara, Senior Analyst, Celent
Ask any banker for his or her strategic intent for investing in digital (mobile and online) channels, and you’d get a fairly uniform response. The bulk of digital-banking activity has been around facilitating a growing variety of convenient, low-friction transactions. Investments have been aimed squarely at making the experience faster and more convenient. Ask any other retail enterprise on the planet the same question, and you’d likely get a very different response. Virtually every other nonbank retailer invests in digital channels to improve sales and service. Facilitating low-friction transactions has been table stakes for years. Today, retailers are all about improving customer engagement—digitally and in-store. It is time for banks to do likewise. The bar has been raised.
As everyone knows, consumers throughout the world—particularly young adults—have been increasingly using digital mechanisms to interact with friends and family. The chart below reflects a 2018 Celent survey of banked adults in the United States. While video utilization has been comparatively slow to take off, the majority of US adults use chat/text, social media and e-mail to engage personally.
But these same consumers have a very different disposition when asked how they would like to interact with their primary financial institution if they had a matter they would like to discuss. Celent asked that question in the same survey, separately for quick questions versus lengthier matters. We found remarkably few consumers preferred the digital mechanisms they use routinely for personal engagement. Instead, for quick questions, most preferred to simply call the bank’s contact center. For lengthier topics, more than three-quarters of all US banked adults preferred to visit a branch. Why the disconnect?
At Celent, we think this apparent disconnect is important for two reasons. First, it clearly illustrates the enduring importance of physical locations. Even after two decades of digital banking, most consumers purchase new financial-services products in-person. How quickly and how much sales will move to digital channels remains to be seen. In large measure, we think it will be a function of banks’ digital-engagement efficacy.
Secondly, we find the data to be a stunning indictment on banks’ digital channels. Banks are keen on the cost-savings opportunity afforded by greater digital utilization, such as call deflection, but the far greater opportunity lies with improved customer engagement. Everywhere you look, consumers are engaging digitally—except with their banks. Transaction capabilities are many, but engagement capabilities are few, reactive and usually high-friction.
For perspective, roughly half of US banked adults are mobile-banking users, but they are simply transacting: moving money, checking balances, depositing the occasional cheque. Interactions may be convenient, but they are sterile, uninspiring, impersonal and taken for granted. As banks grew through consolidation, they continued to reactively serve customers, but largely stopped engaging them. How could they if they didn’t know their customers? Knowing about someone is not the same as knowing them. This has not been lost on consumers.
In the same survey referenced earlier, Celent asked respondents to indicate their level of agreement to a number of questions designed to measure how consumers regard their primary financial institutions.The result is both good news and bad news for banks. The good news is that, overall, trust levels remain high, and most consumers find banks convenient to interact with. Even better, two-thirds of surveyed US adults think their institutions provide excellent customer service. Here is the problem: banks have done a good job safeguarding money and facilitating transactions but have failed to convince most customers they can improve their financial lives. That may sound harsh, but consider:
- Just 59 percent of consumers think their bank is a credible place to seek financial advice;
- 55 percent are confident their banker can solve their financial problems;
- Just 43 percent feel their bank knows them;
- 39 percent would consult their bank for financial advice when facing a major life event.
Worse yet, these metrics are even less favourable among customers of large banks.
How can banks reclaim this lost ground? Not easily, as it was lost over many years. Doing so starts with a focused effort to proactively engage customers by building relationships, learning from them, and offering advice and low-friction interaction in order to consistently demonstrate value in unique and relevant ways to each customer. Banks must meet customers where they are and on their terms. Increasingly, this means digital: online and mobile, chat, social and other mechanisms as they develop.
This isn’t going to happen with a simple mobile-banking platform refresh. It won’t be achieved through a single initiative. It will be a journey of experimentation and discovery led by a fundamentally different way of thinking about customers and how banks deliver value. Done well, it will require a step change in culture, technology, business model and organization. The most apparent examples of large banks leading in digital customer engagement are doing so from the top-down.
A model example: Royal Bank of Canada
Digital engagement will take a variety of forms. There isn’t a single answer. There is no silver bullet. One example, Royal Bank of Canada’s (RBC’s) NOMI (pronounced “know-me”) earned a Celent Model Bank award in 2018 for personal financial experience. The initiative is one of several that was spawned from the bank’s 2015 decision to maximize digital activation throughout the bank and among its clients. The NOMI initiative began in 2016 and resulted in an October 2017 launch after extensive testing.
RBC is the first bank in Canada, and among a handful globally, to launch a mass-scale artificial-intelligence (AI) based digital service that offers insights about a client’s financials and a fully automated savings solution that uses predictive technology to identify money in a client’s cash flow that can be automatically saved. NOMI Insights™ provides personalized, timely and relevant insights to help clients manage their day-to-day finances on the go through the RBC Mobile app. NOMI Find & Save™ helps make saving simpler for clients by using predictive technology to find amounts of money clients can spare, and automatically saving that money. NOMI uses a client’s account activity to identify trends, unusual activity and potential savings opportunities.
After just five months in market, NOMI increased client engagement with RBC’s mobile app 20 percent. Clients save two times more regularly with NOMI Find & Save than they do with traditional savings products. More than 100 million insights have been read by clients—insights proactively offered by NOMI designed to help customers achieve their financial goals. This is the kind of digital engagement banks will need to create in order to remain relevant as the digital bar continues to be raised.
Bob Meara | Twitter @Mearaman | Celent, a division of Oliver Wyman, is a research and advisory firm specializing in financial services technology. For more information, see www.celent.com.
A detailed case study of RBC’s NOMI initiative is available free of charge from Personetics