While Banks are getting more and more pressure from customer’s increasing demand, highly competitive market and strict regulations – in the current environment, understanding customer behavior, attitudes and requirements is more vital than ever for banks’ strategic thinking, operational planning and day-to-day customer treatment, according to Ernst & Young.
What Banks can do?
- Product Bundling and Relationship Pricing – Banks need to think beyond ‘one-size-fits-all’ strategy to cater to customer’s increasing demand. Customers also will leave an institution for another based on getting the services they want and the best price available for it, so relationship pricing and product bundling become ever more important. Banks should look at products and pricing based upon a total customer view and respond to the value that customers bring to the bank across the spectrum of rates, fees, features and services. Many banks are now-a-days bundling identity theft alerts and credit score reports with a checking account which provides increased account sales because of the attractiveness of the bundled features.
- Cross-lob data sharing and building a 360 degree Customer View - Though there are many challenges in integrating cross-lob data like extracting data from multiple disparate systems, existence of duplicate records in business applications/ databases and data sharing impediments due to opt-out policy/other regulatory requirements, it is crucial to have a 360 degree view of customer which will help to get a holistic picture of a customer’s demographics, engagement, need and preferences. This knowledge enables organizations to precisely target products and services to current customers, ac quire more profitable customers, reduce marketing costs, improve customer satisfaction and maximize lifetime value.
- Sophisticated customer segmentation is the key to cater to individualized needs and should be based on standard banking metrics – tenure with the bank, number of accounts, balances of accounts and loans, frequency of interaction with the bank, channel preferences along with psychographic (values, attitudes, lifestyles), behavioral (usage rate, price sensitivity, brand loyalty, and benefits sought) and demographic variables (occupation, income, and family-status).
- Real time cross –selling/up –selling - Banks can use real-time events and deep customer insight to offer cross-channel marketing campaigns where “moments-of-truth” (wedding, home purchase/sale, new job, stock transactions, etc.) are acted on as a way to deepen customer relationships - to determine the next best action, be it an offer, channel, message, piece of content etc . The more customized product/service offering, the higher are the barriers to switching banks.
- Innovative Reward Design - In today’s hyper-competitive market, banks need to move beyond a “one-size-fits-all” reward model particularly for the most profitable clients. They need to design a system which let profitable customers enjoy premium benefits and redeem rewards points easily and in various ways (for gift cards, merchandise, events and experiences, or cash). Celebrity Cruises has joined with MBNA America Bank to create a comprehensive rewards credit card offering both cruise and non-cruise vacation benefits, including travel, merchandise and cash rewards. According to Celebrity, the Celebrity Rewards(SM) WorldPoints Visa(R) credit card is designed for people seeking ways to balance their work and leisure time. Capital One‘s innovative ‘Purchase Eraser’ unique rewards redemption feature provides consumers the ability to erase the cost of previous travel expenses using their reward miles.
- Automating customer care – In the digital age, customers demand more self-service options and any-time, anywhere service. So expanding customer self-service, case management, dispute management and event-based decision-making can be perceived as better customer care, while lowering operational costs and increasing effectiveness. However, banks should continue to make compelling offers as incentives for customers to use lower cost channels.
- Digital Revolution – Well…it might just be feasible that what social media is really doing today is more than socializing the web. It might be possible that this drive towards great usability, human interaction design, multi-touch, augmented reality, geo-location and connectedness is actually creating a digital service platform that could revolutionize the ability of an organization to look after customer. Banks should try to engage consumers through digital channels and advance its leadership in the digital space as well as expand its social media engagement on Facebook, Twitter, Pinterest and LinkedIn. Though there can be several roadblocks and complications – like online account opening is expensive on per-account bass - however, prices for new delivery channels always commoditize as usage grows. It is a myth that importance of branches will diminish as the digital channel usage will increase on the contrary, if branches are tightly integrated with other channels, that promote and support them and that quickly finish transactions started there will be more successful than ever.
- Big Data – The big data is the new disruptive technology for changing the game. Big data capabilities provides banks the ability to understand their clients at a more granular level and more quickly deliver targeted personalized offers. Being able to anticipate customer needs and resolve them before they become problems allows banks to deliver timely, concise and actionable insight to contact center agents. This can lead to increased sales, improved customer satisfaction and a reduction in operating costs. Fighting fraud, financial crimes and security breaches, in all forms, is among the most costly challenges facing the finance industry. Big data technologies provide a scalable, integrated, secure and cost effective platform to more quickly prevent, detect and mitigate internal and external frauds. Big Data Benefits include: Reduced costs of fraud screening and monitoring fewer false positives, reduced cost of fraud investigations, reduced payment fraud losses, real time fraud detection and mitigation, optimized offers and cross-sell.
- Multi-Channel Seamless Experience – Banks should seek to attract and retain customers with a compelling multi-channel experience across all touch points (branches, online, mortgage and investment advisors, etc.)Technology continues to rapidly change the way consumers behave and interact. Virtual channels are becoming more relevant, with the increasing penetration of high-speed Internet connectivity and Web-enabled mobile devices allowing consumers to spend more time online. Bank customers will not only continue to use a mix of channels, but will use non-branch channels for increasingly complex banking transactions While retail branches remain a core banking channel, research shows that customer traffic is in some cases flat or declining, as customers come to rely more heavily on digital/phone channels. In fact, online banking and call centers account for 55 percent of transactions today. This shift can be a positive development for banks, but they must be ready to provide customers with a rich set of capabilities and a seamless experience across all channels. Successful execution of such a strategy has tangible economic rewards, but requires the right set of investments and development of new capabilities.
- Innovative Bank Branch Design - Hip, modern, and fun. That’s exactly the vibe many of the nation’s banks are trying to achieve as they reimagining their branches and try to lure more customers into brick-and-mortar offices. The high-counter old teller stations and staff, who are versed in transactional banking, won’t work in the BANK 2.0 world.Withdrawals and deposits aren’t attracting customers to brick-and-mortar offices anymore, so banks are turning to perks like coffee bars and yoga to keep an important gateway open.
At one West Coast bank, customers can spread yoga mat and strike a tree pose or grab a free beer during an Oktoberfest-style celebration. Another national bank offers macchiato at its coffee bar and couches designed for lounging. Locally, banks are adopting Apple Store-like designs, adding concierges, and setting aside space for community groups to meet. Bank of America, for example, recently launched what it calls a flagship office in Boston’s Back Bay, housing in one place the variety of financial services offered by the banking giant. Teller services are squeezed behind a column, while private offices where more lucrative business is conducted dominate the floor space. Capital One Financial Corp., well known for its credit cards, is breaking into the Boston banking market with six new marketing offices called “cafes.” Scheduled to open over the next several months, they will resemble coffee shops more than banks. Employees will serve up java and sandwiches, along with advice on how to set up online accounts and access other services. Modern and innovatively designed branches will drive customer engagement and is the key to branch long-term success.
Rather than decrying customer’s increasing demand and competitive market, if bankers can embrace the new reality – and focus on innovation, disruptive technology and automation--- the profit will follow!!!!