Banking Article, Banking Finance 2021, Banking Finance January 2021

TECH REVOLUTION IN BANKING –IMPACT ON CUSTOMER EXERIENCE

Introduction:

Nowadays we are asked to share our feedbacks for almost all products and services we avail, be it retail store, hotel, bank, everywhere. The feedback reflects our overall experience with the business entity. The endeavour to improve the customer experience (CX) in the banking industry is remarkable for the past few years. Competition is now own not by pricing and product features but with the degree of ease of availing the products and services. Ease of doing banking implies 24*7 availability of banking services in smart phones and other electronic devices and with simple processes and navigations.

The challenge lies in the fact that the customers now compare the products not only across the institutions within the industry but across sectors. A 2018 Capgemini report says that 71% of bankers think that positive experiences in other sectors now drive customers to expect more from the banking sector. The time taken for online application of loan to the credit of loan amount in the account is compared with the convenience of ordering and paying for daily needs online. Balance enquiry, mini statement, and fund transfer is expected to be done with one or two clicks in place of more than eight clicks traditionally. Bank of America allows balance enquiry without even signing in. A PwC 2018 report shows that positive customer experiences influence 75% of customer decisions in banking. Continuous innovations in technology like machine learning, artificial intelligence, blockchain, virtual reality, etc.and its adaption in the banking sector is aimed at enhancing the experience of the customers banking with them. Banks are involved in the relentless process of reimagining their business process in today’s hyper-connected world. Banks are increasingly deploying User Experience (UX) professionals to create smart products. The study of human psychology is done to understand the financial behavior of the customer to come out with customised solution for each individual separately and all these endeavours are focused on making banking a pleasant experience to the consumers. In a financial system where all institutions are offering the same products at a nearly similar cost, the difference in experience is the only feature that now distinguishes one financial institution from another.

Customer Experience Model:

Business organizations design models of customer experience.  McKinsey says customer journey should be understood by seeing the businesses through the customer’s eyes. Figure 1 explains two approaches to creating the customer experience.

Figure: 1

Top-down push

Bottom-up adoption

Courtesy: McKinsey&Co.

 

The business tries to create value for the customers by creating a whole set of new experiences based on market conditions, analyzing data, etc. This is the top-down approach. The bottom-up adoption approach measures improvements in customer experience and involves employees in implementing changes by analyzing the feedback received from websites, social media and app stores across customer segments. In the middle is the outcome of the efforts of the management and the employees i.e. the end to end journey of the customer.

 

 

Tools to improve customer experience in the banking sector:

Banking in a smart phone device:

People nowadays run their day to day life with the help of their mobile phone devices. Booking tickets, paying bills, purchasing goods or utility services are done through this device. Performing banking activities is also expected in the same form by the customers. It is seen that the millennial workforce comprises of the highest share of the customers doing banking in smart phones. Data by The Financial Brand, 2018 shows that above 60% of millennial perform banking digitally with their smart phones, where the Gen Xers and seniors continue banking from their desktops. An overall 42% of customers use their banking providers’ mobile app more than they did a year ago. And all the millennial together do about 72% of bank transactions digitally, shows FIS Consumer Banking Report.

Figure: 2

Courtesy: The Financial Brand

Hence seamless progress in the bank mobile apps is an important tool to retain and capture especially the millennial clients. Studies also reveal that there is now lesser brand loyalty among the end consumers. They move where convenience exists. Study shows that about 54% of customers are loyal to banks compared to 64% loyalty towards insurance companies.

Internet of Things and Data Analysis:

Billions of devices are now connected to each other and data flow around the interrelated things. This vast pool of data is analysed on the cloud system. The most widely used ‘thing’ is the smart phone which has grown at a breathtaking pace over the years. Figure 3 shows the trend.

Figure: 3

Courtesy: Infosys

Utilising the real-time data from smartphones, banks design suitable products and rewards for its customers. ATM is the oldest version of IoT inthe banking sector. The data on usage of ATM in anarea enables banks to decide whether to increase or decrease the number of ATMs in a particular geographical location.  Data of card-swiping is a significant enabler for analyzing customer’s spending habits. An entrepreneur’s data from the IoTs he uses can give an insight to the demand and supply value chain of the customer and banks can offer him discounts on business loans, or competitive price for tax and accounting services. Hence the best customer experience can be offered by having a 360° view of customers’ financial behavior and upon analyzing its pattern.

Now financial products are pushed in the customer’s smart phone or wearable gadgets depending on the analysis of direct and indirect data gathered from customer’s browsing history on bank’s websites, types of videos watched on Youtube, etc. Sometimes, offers are sent in customers’ phones right on entering a bank branch premises. Credit cards with suitable limits are offered by analysing the shopping pattern of the customers. Extending discounts on purchases made with the card further enhance customer experience. A reminder of redemption of cash reward points, travel rewards, allowing to check credit scores makes banking experience exciting.

Bank’s main branch is in customer’s hands:

Under the above- mentioned scenario, today banks have to believe that their main branch is resting in the Smartphone devices of its customers. Banks have to redesign their systems in such a way that smart phone, laptops can play the role of a bank teller, an ATM or a financial advisor. Today banks are increasingly focusing on offering end to end digital on-boarding of their customers.

Omni-Channel Banking:

Besides the availability of banking facilities in mobile apps, the same should also be available in desktops, on phone calls, and at bank branches. 65% of businesses think that it is essential to have a live engagement platform available on all devices and operating systems.Also, customers like to compare services offered by banks on online and offline platforms as well as from social media channels. They do not want to be forced to use a particular channel advised by banks as per banks’ convenience. For example, onecan easily contact the call centre while driving a car where writing messages on chatbots will not be a feasible option for him. Detailed discussions on corporate loans of large amounts need face to face discussions with banking professionals for better understanding the financial needs of the applicant. Measurement of the customer journey through all possible channels will indeed allow banks to have an insight on customer behavior for offering customers with the finest experience.

Artificial Intelligence, Machine Learning:

The Chatbot is the new alternative of the FAQ section and a substitute for call centres. The long waiting time at the call centres is easily replaced by chatting. These AI-enabled chatbots pull information from various sources like bank’s knowledgebase, transaction records of customers and navigate customers to the required page, and if the navigation is not able to providea suitable solution, the chat is taken over by a live service representative. Smart chatbots use natural language processing and machine learning to provide customers with a more humanised interaction experience. AI improves customer experience further by giving money management tips. Erica of Bank of America, Amex bot of American Express, SIA of SBI, Eva of HDFC Bank are a few examples of modern chatbots.

Customer experience improved in availing credit facilities from the bank as machine learning and AI have improved the retail credit process by application of more efficient risk modeling, finer predictability of credit early-warning system.

Blockchain to improve security:

Customer experience cannot be superior if their money is stolen by the fraudsters.  The Financial Cost of Fraud Study, 2019 estimated the global cost of financial fraud to be $4 trillion globally. These concerns are now being increasingly addressed by the banks. Better customer authentication is provided by blockchain technology. Business Insider report states that financial institutions are spending about $1.7 billion annually on blockchain technology.

Voice Banking:

Siri and Alexa are already improving lives and transforming the world. Bank of America’s virtual Assistance Erica interacts with voice, text and gesture commands. Erica helps with queries related to a transaction on the account, bill payments, locking/ unlocking debit/ credit cards, keeps track of customers’ preferences and records the same through machine learning. During September 2019, Financial Software and Systems (FSS) in partnership with Amazon launched a voice banking platform for the United Bank of India. Customers are able to access account balance and transaction data and can request for issuing cheque book. In a span of only one year, the usage of Alexa increased more than two-fold from 33% in 2016 to 77% in 2017.

Self Service Video Assistance:

Interactive video contents on how to open an account online, transfer funds, invest and many more ‘how-to’ videos on the Bank’s website and on other public domains is a great source of customer delight empowering customers for doing banking on their own. Few ATMs now have live video support in case customers need additional assistance. Banks are also focusing on digital on boarding of new customers by extending handholding support on how to open an account with them. A 2017 Accenture report shows that nearly 75% of customers are willing to receive automated support while deciding on the type of bank account to open. Institution offering video banking services have found that 72% of their customers think that their bank is an innovative organization and their customer satisfaction rate is higher.

Helicopter banking:

Banks are to be on and accessible to their customers 24*7, says FIS Consumer Banking Report. It is expected to work as a long term personal finance manager and advisor. Personal Financial Management (PFM) system categorises transactions, applies spending and budgeting tool, offers dynamic income and spending comparison, calculates spending trends and net worth, helps in setting a financial goal, etc. E.g. SBI has spend-analyser in its YONO app. These personalised experiences simplify human lives.

Virtual Reality:

The use of virtual reality (VR) technology in banking is an advanced process of giving some tangibility to the intangible nature of services provided by banks. Visualising how much Rs1000 saved today grows after 15 years renders pleasant customer experiences. BNP Paribas, Citi, Commonwealth Bank of Australia are few among the names offering VR assistance in banking.

Humanised Digitisation:

Considering all the above-mentioned modes for improving customer experience in banking, it is understandable that even when banking is experienced on a digital platform, the human touch should not be completely missing. At times, chatting with pre-programmed machines become frustrating in case of problems of a complex type. Human to human interaction is required to understand the emotion of the customer to offer him the best possible solution. A PwC 2018 report shows that 65% of consumers find it important to have a local branch while choosing a bank and 25% of consumers wouldn’t open an account without a local branch. So today’s banking environment needs to be high-tech as well as high-touch. AI personalizes interactions to make customers feel interacting with humans to a great extent. Still at times technology appears to be a depersonalizing force. Therefore integrating technology with human interaction makes banking experience dynamic and less impersonal.

 

Future of Customer Experience in Banking:

The future of customer experience in banking lies in the continuous improvements in all the above-mentioned tools. It is clear that a shift from the product-centred thinking to customer-centred thinking is necessary for the optimum level of customer experience. Banks will have to continue incorporating up to date technology intoitssystem.And in place of fearing replacement of human jobs by machines, a new set of skills will be required in the banking sector for digitization and launching hybrid of human and machine support. Unlike SIRI and Alexa, each bank will have its own voice support which will become the voice of the institution with changeable accents and pronunciation. Doing banking in the 5G environment, an offer of advice and rewards in other areas of life, simpler navigation in apps and WebPages are among the primary customer expectations.

Challenges:

No attempt at developing customer experience in banking will become beneficial to the customers unless best practices of transparency, security, and ethics are exercised. If customers have to struggle to keep trust in their banks, solely advancement in digitization will not be sufficient for achieving better customer experience. Huge data is accessed and analysed every day. Access to data may easily lead to a breach of privacy. Customers might rightfully want to know where and how their data will be used. Customers look for convenience and value and they are ready to exchange their personal data for good deals and discounts but with permission. 2017 Accenture report shows that 67% of consumers would grant banks access to their personal data if they receive more personalized advice. Robust security features, on the other hand, help improving brand loyalty. Therefore suitable policy has to be in place for ensuring data and cyber security and for addressing conflicts. If these aspects are not taken care of, the customer experience is bound to be hit.

 

Discussions and Suggestions for excellent Customer Experience in Banking:

There is only one and most important key to providing customers with great experience in banking that is, stepping into the shoes of the customers. Banks have to visualize the customer’s world. Then only the real pain points will be identified. E.g. a student facing difficulty while paying fees to his/ her college or inquiring for an education loan should be provided with suitable guidance through modes like live video chat, catboats, etc. A pensioner applying for pension loan may be supported by co-browsing by a bank teller on the other side so that the pensioner does not have to lose his way into the navigation paths and further he maybe assisted by filling up required forms jointly. When the customer starts to feel that customer-centricity is the way of activity of the organization he is banking with, he starts to keep faith with his financial institution and considers his bank to be the support system in his need. When banks start working towards creating real value to its customers, customer experience is maximized resulting in a win-win situation; the wining situation for a customer as his unmet requirements are met and a winning situation for the bank as its customer has been retained.

Also, spending on the digital platform with the aim of augmenting customer experience starts proving to be beneficial for the bank in the long run and eventually the digital strategies it has embraced, starts reducing the costs. Achieving extraordinary results with minimal resources is the aim of all businesses. According to the Business Insider Intelligence report, conversational assistance is set to cut banks’ operational costs over $8 billion by 2022 worldwide.Banks are deploying more and more resources to improve their digital presence than they used to invest in developing product features. June 2019 Bloomberg report showsthat a study done on banks across 21 countries revealed that these banks spent $1 trillion on IT for the past 3 years. PwC’s report called Industry 4.0: Building the Digital Enterprise Report’ says that by 2021, nearly 39% of companies in India have plans to invest 8% of their annual revenues on digitization. According to Business Insider Intelligence reports, by 2020, the bank’s IT budget are to rise by $297 billion globally, an increase of 14% from $261 billion in 2018. According to Gartner, more than 66% of companies now compete primarily on the basis of customer experience compared to 36% a decade ago. Maximising customer experience, as well as banks’ revenues, is not contradictory to each other anymore. Increasing reliance on technology from transactions to financial advice is creating great opportunities for banks to enhance the customer experience. Technology is dramatically improving access to financial services irrespective of income or location.

 

 

Conclusion:

It is evident that the scope of improving customer experience in banking is endless. The current strategic technology trends in banks should aim to make improvements in human lives and not only should it point towards the best cost-benefit analysis for the banks themselves. Banking on digital platforms is already the centre of lifestyle and customer experience is the talk of the banking industry. The right combination of technology, strategy, products, services, and outreach is poised to integrate better towards fulfilling the financial objectives of the customer, leading to enhanced experience and real value to the customer and will also boost productivity and revenues for banks. Reshaping the overall banking system with a human touch and a holistic view is the most important differentiator for customer experience. An open ecosystem with the inclusion of customers is what customers want to experience in the banking sector at the present moment.

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