By Bob Meara, Principal Analyst, Celent
Banks have offered their retail-banking customers convenient, low-friction access to digital banking services for nearly 30 years now. Mobile-banking apps have been ubiquitous for about half that time.
From the outset, banks embraced digital banking because of its win-win ability to offer customers convenient access to banking services while concurrently lowering the cost-to-serve. As a result, banks across the globe have invested in improving their digital-banking capabilities alongside a variety of efforts designed to boost customer digital adoption. These efforts, in turn, resulted in a steady migration of transactions from comparatively high-cost branch and contact center channels to digital.
Although results differ from market to market, many banks now experience 70 percent or more of their retail-banking customers actively using digital-banking channels. What’s not to like? Plenty. Fortunately, significantly improved outcomes don’t necessarily require major investments.
Putting more branch in digital
Digital banking’s success notwithstanding, most digital-banking customers’ experiences are, well…sterile, impersonal and uninspiring. Although digitally active customers interact with their banks many times a week, they typically use a small fraction of their bank’s digital capabilities. Digital-banking customers don’t know what they don’t know. They never hear from their banks and are easily frustrated with complex mobile apps and prospects of waiting in a contact center’s queue or a branch’s lobby to get a simple question answered.
It doesn’t have to be this way. Celent sees leading banks reimagining the digital-banking experience in three compelling ways. For these banks, digital is becoming personal, proactive and human—more like the branch experience.
- Personal: However useful, most banks’ “one size fits all” views of digital banking leave value on the table. As found through Celent’s Model Bank awards program1, leading banks are beginning to tailor digital-banking experiences at the individual-user level, so their experiences are more relevant, timely and actionable. This leads to emotional connections with customers that can improve the overall customer experience (CX) and extend the lifetime value (LTV) of those individuals’ relationships with their banks.
- Proactive: Leading banks are using digital to provide relevant and timely proactive customer engagement at scale using artificial intelligence (AI) and machine learning (ML). Use cases are many and growing in number. Whether it’s notifying a customer of an impending overdraft, alerting a client of a rate change of which he or she could take advantage or automatically moving money into a savings account to meet a customer-defined savings goal, banks can deliver significant additional value to their customers.
- Human: Banks have done a terrific job of implementing digital self-service transactional capabilities in their digital-banking properties while wholly neglecting the human-to-human (H2H) element. For these bankers, digital is for self-service, while the branch and contact center are for H2H interactions. But for customers, digital isn’t merely a self-service channel; it’s a platform for H2H engagement through a growing number of mechanisms they use daily and expect their banks to offer.
Transactions and engagements are two very distinct experiences. As illustrated below, consumers judge the efficacy of transactions and engagements quite differently. For most consumers, speed and convenience (think fast food) determine transaction efficacy for common events, such as moving money or checking an account balance. Trust and value (think fine dining) determine engagement efficacy for more nuanced processes, such as those that require advice or problem-solving. Automation has a very important role to play, but even the most advanced AI can’t replace a helpful conversation that addresses a consumer’s particular request in a moment of need. Instead of embracing opportunities to personally engage customers on their terms (and making it easy and convenient for customers to do so digitally), many banks make it quite difficult for customers.
There are numerous ways banks can build digital customer engagement. It all starts by designing H2H options within the digital customer journey rather than confining digital to self-service. Let’s look at account opening as an example.
COVID-19 was an epiphany for many banks. With branch networks shuttered during lockdowns, banks rushed to shore up digital customer-acquisition capabilities, such as digital account opening and digital loan origination. Every other retailer on the planet had been selling digitally for decades, but doing so was a new idea for many banks. To varying degrees, most banks stood up capable mechanisms using third-party data sources, digital identity-verification processes and automated business rules to create exceptionally fast, low-friction customer experiences—as long as customers knew exactly what they wanted.
If customers had questions or wanted to interact with bankers, user journeys went from good to bad very quickly. (Inconsistent information sharing and lack of relevant context for bankers and agents when customers use more than one servicing channel, for example, have been common issues contributing to poor user journeys.)
For this and other reasons, many banks today experience high application-abandonment rates. Customers who successfully open accounts digitally typically carry lower balances and use their accounts less frequently than customers who originated their accounts in branches.
What gives? What branch bankers do extremely well is entirely absent in most banks’ digital channels—personal, proactive and occasionally human-to-human engagement with the customer. Branches have their own issues (more on that later), but frontline staff know how to answer and ask questions, make helpful suggestions and follow up. In a 2022 Celent survey of US banks, we found the majority had rigorous onboarding processes for new customers. They ensured that accounts were set up with debit cards, direct deposit was arranged, recurring bills were paid with the new accounts, customers’ questions were answered, and any outstanding needs were met. Most, if not all, of the activities that resulted in profitable long-term relationships among branch-acquired customers were absent in digitally acquired accounts among those same banks.
RBC Royal Bank of Canada offers a great example of putting the branch in digital. RBC won a Celent Model Bank 2021 award for digital onboarding2. The bank introduced digital account opening for consumers and small businesses in mid-2020, shortly after Canadian regulators permitted digital know-your-customer (KYC) processes. In addition to a fully self-service user journey, the bank allowed users to conveniently schedule virtual discussions with advisors at their discretion. After six months in the market, 81 percent of small-business accounts were opened digitally with advisor assistance. The overall abandonment rate for opening remote accounts also decreased by 40 percent. RBC’s omnichannel approach to client onboarding and servicing certainly proved valuable.
Putting more digital in the branch
While banks have been laser-focused on building digital-banking capabilities, most have neglected their branch technology infrastructure. In a high percentage of cases, for example, banks use state-of-the-art digital identity-verification processes for digital customer acquisition but rely on decades-old capabilities in their branches. Wet signatures also abound in bank branches when workflows could be digital. Far too often, currency handling is manual, requiring dual control and time-consuming teller drawer reconciliation at the end of the day—needlessly inflating staffing requirements.
As transactions continue to migrate to digital, branch networks must be better equipped for sales and service. These banks must embrace the efficiencies available through automated workflows, paperless user experiences and AI-powered tools aimed at helping frontline staff better serve customers. By doing so, frontline staff will be freed to engage with customers and build long-term, profitable relationships. That’s the way it should be.
Customer experiences in digital and branch banking are destined to improve as banks adopt common best practices. Why not be a leader? Case studies of innovation in financial services will be highlighted during Celent’s annual Innovation & Insight Day on March 29, 2023. Bankers are invited to attend; register free for the virtual event here3.
1 Celent: “Innovation in Banking 2022: A Snapshot Through the Lens of Model Bank,” Bob Meara, March 16, 2022.
2 Celent: “Royal Bank of Canada: Omnichannel Onboarding at Breakneck Speed,” Bob Meara, March 9, 2021.