The COVID-19 pandemic has brought economies to a standstill and has provided considerable challenges to banking and financial institutions. However, the banking industry has shown tremendous alacrity during the ongoing pandemic. To give an example, bank branches were closed branches when clients stayed at home, redirecting their resources and customers to digital channels. Banks extended loan deferrals or moratoriums to help financially distressed customers weather the crisis.
As the knock-out effect of the pandemic spreads, the domain of retail banking juggles to reposition and recalibrate the business priorities and customer expectations. The banks realise today that the product, process and experience delivered to customers needs re-orientation. With social distancing norms still in force, re-orienting the digital banking approach is a primary agenda for the industry.
The article endeavours to analyse critical value factors relevant to the banking industry to stay relevant now and rise above in the future.
Challenges for Retail Banks
Banks now confront additional hurdles as the new reality begins to take shape. The pandemic has accelerated changes already underway and sparked new ones. Owing to the pandemic, the banking revenue has taken a significant beating, and the industry’s revenue pool is under pressure. Relevant reports suggest under the most optimistic scenario; those pools are not expected to return to pre-crisis levels until 2022.
Customers are making a move to the digital channels faster than they have earlier. Online banking and mobile banking use has increased to a considerable level. These changes are expected to last, speeding up the transition to digital media by three to four years compared to pre-crisis trends.
As more customers go online, bank’s position at the crossroads of the customer and financial services is under threat. A crowded industry landscape is emerging, with various types of firms competing at various levels. Nonbank entities such as fintech’s are making significant inroads in distribution, threatening to commoditize many banking products.
As a further reiteration, the article focuses on significant factors that the banking industry may realise the value of and further adopt to retain customer delight and loyalty.
Comprehending & Prioritising the Value Factors
- Re-Skilling the Workforce
Digital banking transformation and automation must be guided by a deeper understanding of how humans use technology. Factoring the principle of human experience in the design of systems becomes critical. Although digital banking improves efficiency and reduces costs but for the new system to work, we need to ensure that people are re-skilled to adapt to the new technological paradigm. An understanding of employee strengths and limitations amalgamated with the priority to augment human skills is essential for many banking tasks. As the banking workforce becomes more mobile, diverse, and dependent on technology, observing the buying behaviour of the customers requires constant learning, un-learning and, re-learning.
- Accelerating Digital Transformation
There is much that goes on behind the lines when it comes to creating a seamless digital banking experience. Today, the customers have a plethora of options as banking organisations, fintech players, and others in the eco-system further tweak the paradigm for digital transformation in banking. Moreover, as the lines between fintech players and conventional banks begin to blur in the digital landscape, accelerating the pace of digital transformation is indispensable. Initially, digital transformation was perceived as merely changing manual processes to automation. However, from the perspective of customers, digital transformation encompasses the path to a delightful digital customer experience. Essentially, banks need to introspect how customer insights, process redesign, and technology implementation can be aligned to achieve the strategic goal of organisation and build value for consumers.
- Comprehending changed buying behaviour
The pandemic has had a significant effect on the mindset of the consumers, changing their buying behaviour. Today, banking consumers are looking for greater digital convenience and are more comfortable transacting from their homes. As per BCG’s recent retail-banking survey report (2021), throughout the pandemic, an average of 13% of customers in 16 major markets utilised internet banking for the first time (12% for mobile); and for other markets, the figure is significantly higher.
During the crisis, cashless payments are also gaining a lot of traction. More than 20% of respondents reiterate that they have increased the use of digital payment solutions, such as those provided by internet banking and third-party apps, and more than 10% said the same about credit and debit cards. Such behavioural changes are impacting branch banking negatively.
- Leveraging Remote Work
Primarily, banks have to realise how teams work with a focus on remote and distributed teams. Leave alone banking, even the traditional companies across industries, have embraced remote work to stay connected with customers and employees. But, having seen the benefits of work from home/work from anywhere, people will be hesitant to come back to the previous way of working. And the organizations will have to adapt and leverage a new working model that does not compromise on the service levels and customer experience.
- Pursuing the Fundamentals of Customer Centricity
With a weak digital offering, it might be the “now or never” time for the banks. Banks have to be more focused on serving customers through digital touchpoints. In the forthcoming years, traditional banks either keep retaining existing clients and acquire more through proper digital touchpoints or face the certainty of being insignificant. More importantly, banks have to speed up the digital transformation of internal processes and legacy systems that pursue the fundamentals of customer-centricity. Understanding real and often unmet customer needs and delivering them is core to customer delight and loyalty.
- Becoming the “One Step Ahead” Leader
In times that represent disruption and sudden behavioural change, employees have to learn fast but, leaders need to learn faster. For organisations to navigate the troubled waters, leaders need to quickly adapt to have a clear vision of organisational growth and success. Without a doubt, the majority of banks with sufficient capital will survive the crisis. In a post-crisis environment, successful banks will be led by infinite-minded leaders who can adapt and inspire.
Refining the Retail Bank Value Streams
A value stream, according to Wikipedia, is the set of actions that take place to provide value to a customer from the first request to the customer’s realisation of value. Importantly, value stream analysis helps in incorporating:
- Value-added steps (adds value to the customer of your financial product or service),
- Strengthening business value-steps (include bank regulatory compliance, risk management necessities)
- Eradicating non value-added steps (No value to the customer, nor are they required in any way)
In the banking domain, it helps in analyzing the different transactional and operational processes that are currently required to deliver value to a customer, from customer on-boarding to attending service requests. The following is the description of the value stream for a retail bank.
Implementing an Integrated Approach
This is the appropriate time to consider the customer’s actual circumstances for financial and underlying nonfinancial needs and to identify relevant products and solutions. Consulting agencies of repute reiterate that:
- Banks should design processes and solutions from scratch as opposed to trying to adapt those currently in use.
- Integrating artificial intelligence (AI) tools into the value stream will eliminate work and duplication of capabilities across products and customer segments.
- The pandemic is a clarion call for process re-optimisation across sales, operations, and service functions to simplify work and eliminate re-work.
- Maintaining a cautious approach as the pandemic persists by balancing ambitious targets with incremental progress.
- Integrating technology, digital, and data to eliminates duplications across silos and helps integrate the design and delivery of products and services.
- Bringing employees from disparate functions together for a shared goal can avoid backlogs across digital and non-digital channels.
Although retail banks worldwide responded to the COVID-19 crisis with speed and a sense of purpose, remaining true to the profit, social and, corporate governance goals is a challenge. Supervisory and compliance functions that were never designed for remote work need innovation, ingenuity, and focus. While market conditions and customer behaviour may alter as the crisis progresses, banks must reconsider their strategy and brand building to determine the industry’s future.