Digital banking is growing in popularity with 53% of consumers using or willing to move to an online or mobile only bank — 27% have moved already, while 26% are considering the switch. This is according to research commissioned by Relay42.
The reasons for this shift included receiving a better online experience and functionality (58%), more attractive finance rates or fees (29%) and better quality of service (28%). In addition, just 13% of respondents said they weren’t interested in exploring new technologies to help them manage their money.
“The banking sector is undergoing significant change, in terms of shifting customer demands and expectations, as well as factors such as legislation and regulation. Customers are on the precipice of embracing future technology and new products, which means their existing banks need to keep pace with demands and innovation to ensure customer loyalty and competitiveness . Very often, the solution lies in orchestrating technology to create a relevant online experience and deliver personalised offers and service quality” says Julius Abensur, industry head: finance, Relay42.
More than half (56%) of respondents said they would actually remain loyal to their banks if they were sent customised offers based on their personal interests and behaviours. While this approach is reliant on data, this presents another operational and regulatory challenge as 41% stated they didn’t know how their data was being used by banks, while 29% expressed concerns regarding how it was being used.
“The appetite that consumers are showing for online or mobile only banking further demonstrates that convenience is shaping customer experience, which actually strengthens the relationship banks have with their customers.”
However, the research showed that 69% of respondents would change banks given the right motivation. Considering that 26% would change to digital-only banking, there is a definite desire for more convenience from customers.
“This openness for new services and offerings suggests they won’t remain loyal to one bank for very long,” says Abensur. “As a result, banks can’t afford to be complacent and must engage with their existing customers, streamline their journey and ensure complete relevance and personalisation on every touch point along the way. Financial institutions need to focus on the customer experience and build that loyalty in order to ensure their future success.”
The research, conducted by Censuswide, independent survey consultants, was aimed at understanding consumer attitudes towards traditional banking, the role of technology in its future, and the idea of customer loyalty. 2,019 people across the UK participated in online interviews in September and October 2017.
For the full findings of the research, download the report here.
(Source: Relay42)
The maxim that ‘failing to prepare is preparing to fail’ is particularly true when it comes to time-critical communication. Companies that take the time to formulate an effective rapid response framework can save both thousands of pounds and potential reputational risk.
Nino Sheikh-Thompkins, from Paragon Customer Communications, outlines how expert guidance can turn a potentially damaging situation into an opportunity to forge a better relationship with customers.
Be prepared to expect the unexpected
The advent of new legislation has generated an increased focus on how companies communicate with their customers. An integral part of this is rapid response communication – when a security breach, for instance, occurs or when there is a sizeable change in interest rates could have a far-reaching effect on a business.
Legislation focused on regulatory reform, such as the MIFID II – due to come into force in January – and the General Data Protection Regulation, which becomes law in May 2018, require businesses to have a clear strategy in place to ensure customers can be reached swiftly and effectively.
Regardless of statutory changes, there are a variety reasons why a business may need to communicate swiftly with customers. These include communicating unforeseen events such as price increases or sudden interest rate rises, to help clients better understand how they will be affected.
This is particularly pertinent in the financial sector, where engaged and informed customers are an important part of a well-functioning market; and to achieve this, people need access to appropriate information so they can make empowered decisions.
While some organisations may already have a rapid response plan in place which can be invoked as necessary, many others may have little or no experience of writing and distributing time-critical alerts.
Formulating a suitable, effective and detailed rapid response strategy may seem like a gargantuan task; however, extensive pressure will be put on resources to meet required deadlines if acting reactively. Without forward planning, the costs of delivery are likely to be increased by thousands of pounds – and up to around £120,000 in some cases.
The risk of using an ineffective or inappropriate method of communication is high, leading to further delays as a second wave of messages is sent and resulting in annoyance and confusion for the customer.
When time is of the essence
There are many options currently available, and new technology that can be employed to provide a rapid response alert in response to unforeseen circumstances is constantly being developed.
Choosing the most appropriate channel is a key factor in ensuring that seamless communication is achieved. Some organisations will have clients who have already expressed a preference on what form of message they prefer to receive, and this needs to be taken into account.
These include:
• SMS messages;
• Email communication;
• Printed letters distributed in the mail;
• A combination of all of the above.
Needless to say, in the event of a security breach, time is of the essence. The creation of pre-prepared, multi-channel templates, ready to be issued to customers with a tailored message, will save valuable time to comply with the 72-hour response deadline.
Is it achievable?
Many businesses may find their existing channels will not be adequate to deliver all aspects of an effective rapid response communication. A robust system will not only dispatch messages, but accurately trace their progress to ensure all customers have been reached within the right timeframe.
Working with a communications specialist will ensure both legal requirements and customer expectations are met. Leading experts will be able to manage any concerns surrounding accuracy, traceability and time frames. In fact, options exist for messages to be automatically deployed to a certain audience in the event that specific conditions are met – particularly pertinent in relation to the MIFID II 10% threshold rule.
An experienced rapid response provider will help organisations plan what action is required, create a choice of templates which can be swiftly edited as required, then trigger the delivery of the message, tracking, reporting and archiving as necessary. This will reduce the impact on the customer and preserve the integrity of the organisation, regardless of the scenario.
In summary, businesses assessing their existing provision should ask themselves:
• Can my current communication provider handle the multi-channel scale of my entire customer base?
• Do I know how best to communicate to each of my clients, balancing their preferences with regulatory requirements?
• Can the progress of each communication be traced, to ensure it is delivered within the necessary timeframe?
If the answer to any or all of these is ‘no’, it’s time to consult a communications expert to help plan, create and deliver an effective rapid response communications framework.
Website: http://www.paragon-europe.com/en-gb/content/paragon-customer-communications
With MiFID II looming, finance businesses across the UK will be reviewing their practices to ensure the way they work complies with the new regulations. Here, Alex Tebbs, Founder at VIA, explains what the regulations mean for the way we communicate as businesses, and how your business can comply come January 2018.
MiFID II is a targeted regulation update that aims to improve transparency and better protect both providers and customers of the finance sector.
In that sense, it exists to make things better for everyone; but with the January deadline looming and uncertainty still rife around the impact of Brexit on the update, many in the finance industry are still considering the best way to achieve compliance in their business.
It’s a regulation update made up of many facets, one being the requirement for businesses to record their communications in any instance where that conversation results in, or intended to result in, a transaction. Those communications must be retained - and be accessible when called upon - for five years after the event.
Creating a post-MiFID communications plan
In many ways, the communication requirements of MiFID II make a lot of sense. By recording our conversations, we can be sure that we are serving our customers in the best way, and that they are protected from any potential misunderstandings or misdemeanors.
But in today’s multi-device, multi-location business landscape, compliance isn’t so simple. While once we would have communicated on one device (likely a landline) and from one office, the reality of business today is that we often use multiple devices (and even encourage colleagues to bring their own devices) and operate across multiple locations, including remote working from home, offices in different countries and communications on the move.
This presents a challenge for finance professionals. How do we achieve compliance in this complex communications landscape?
The best place to start is with a review of your existing communications plan as a business. You’ll need to work out what platforms and devices are used to communicate, and make a record of all of those, as they will need to be included in your recording strategy. Be aware that this mightn’t be as straightforward as it sounds, and it’s likely to take time to uncover all the comms platforms in use.
The next step is then to work out how best to record those communications. On a landline, this would require hardware such as a microphone plugged into the handset. There are various apps that make it possible to record calls on a smartphone or via clients like Skype.
An alternative to this somewhat clunky process is to invest in a unified communications platform. This brings all your communication tools - smartphones, landlines, Skype, instant messaging, text - onto one platform which can be easily controlled from one portal, making recording and keeping those conversations a much easier, quicker process.
However you choose to manage your communications, one thing is clear; you will need to be able to both record, and keep, those conversations from January when MiFID II comes into play.
Security considerations in communications
It certainly won’t have passed by your attention that another sizeable regulation update is taking place in 2018; namely, GDPR, an update to data protection rules.
With GDPR putting renewed emphasis on security - and with MiFID’s requirements for comms recording - security should be placed firmly atop the agenda of financial firms.
There are various options on how we achieve security in communications. The most universally relevant and powerful is that of end-to-end encryption; with the main risk of unsecured comms being that communications could be intercepted en route, end-to-end encryption removes this risk by making the information, even when intercepted, entirely useless.
For those businesses using a unified communications platform, encryption and many other security considerations are included as standard, with large investments being made by those companies into stress testing their platforms and removing any vulnerabilities as soon as they are considered as a potential risk factor. For those using separate communications channels, a strict security testing strategy will need to be in place to ensure all communications are safe and private.
In terms of retaining those recorded conversations, security is a concern once again. Secure servers and storage areas are a must; consider also who has access to these recordings, and ensure they have a signed agreement in place that complies with data protection rules, and that your business’ data protection processes are up to date - especially as GDPR hits in May 2018.
MiFID II and the communications landscape
There is much left unknown about how MiFID II will affect finance businesses in the long run, and it’s likely that the implementation of its regulations will uncover complexities that need to be clarified as we move into the new year.
With that said, the communications element is prescriptive; finance professionals must record and maintain a record of all communications, regardless of device, platform or location. Is your business ready?
More than 50% of the customers of UK financial services brands would be willing to spend more – potentially equating to billions – if only they felt more valued by them, according to new research from Jacob Bailey Group.
Missing Billions is a new report from Jacob Bailey Group, the creative business services agency, based on a survey of 1,200 UK consumers in Spring 2017, to better understand the concerns of financial services customers today.
Key findings include:
Brands are missing out on billions
- More than 50% of financial services institutions’ existing customers would be willing to spend more money on multiple products with the same provider if only they received better communications;
- This would equate to: £2.6 billion spent on debit cards, £2.3 billion on credit cards, £2.3 billion on car insurance, £1.9 billion on home insurance, £1.7 billion on mortgage lenders, and finally £1.6 billion on life insurance;
- 15% of people would spend more than £100 extra per year.
Customers do not feel valued
- More than one third of people (37%) do not feel valued by their current bank; while one in ten (12%) do not feel valued at all by bank brands;
- Nearly a third of people (31%) do not feel valued by their credit card provider;
- Just over a third (35%) do not feel valued by their home insurance company;
- 22% do not feel valued by their life insurance company.
Communication is poor
Almost one fifth of people believe their financial services provider does not communicate with them enough. This figure is higher for people who earn between £45,000 to £55,000 (22%), as well as people with an income above that bracket (21%).
The study uncovered a number of issues around how financial services brands communicate with their customers, including lack of timely, relevant, personalised and helpful information, and general misunderstanding of financial circumstances.
The Missing Billions report also ranks financial services companies according to how valued their customers feel. Out of 20 brands examined, Bank of Ireland was the top performing company with the fewest customers feeling undervalued (22%), followed by Nationwide (31%) and RBS (33%).
Rob Manning, Strategy Director, Jacob Bailey Group, said: “In an age dominated by digitisation, convenience and personalisation, the financial services sector has never been under so much pressure to evolve.
“We set out to understand why these brands are failing, losing out to savvier, more agile new market entrants, finding that how financial services brands communicate with their customers is potentially costing them billions every year. To unlock these missing billions, these brands need to connect relevance through microtargeting, based on the best use of data, technology and creativity, leading to brilliant customer experiences.”
(Source: Jacob Bailey Group)
Today marks the 50th anniversary of the ATM (the Automated Teller Machine in case you never knew), and Auriga is urging banks to seize the opportunities presented by the ATM as part of a shifting financial landscape and look at the opportunities the next 50 years bring. Below, Auriga explains to Finance Monthly what ATMs could really amount to for the banking sector and its customers.
“Brits still love their ATMs – they’re a key part of the banking process and are incredibly valuable. 43% of UK respondents to the survey using an ATM on a weekly basis so banks who don’t embrace the technology are missing out on a chance to communicate with their customers and build trust,” explains Mark Aldred, who leads Auriga’s International business.
But banks are running the risk of missing out on new revenue streams and opportunities. “1 in 10 UK consumers thinks the UK doesn’t have enough ATMs that can do more than just dispense cash,” explains Mark, “they’re much more than just cash machines now. They can process bill payments, exchange currency and even sell event tickets. The demand is there from UK customers, but banks now need to meet it.”
With bank branches around the country closing, ATMs can be the middle-ground approach between the ex branch and empty buildings with no contact at all. “A combination of self-service machines and staff could be the ticket to reviving the dwindling number of bank branches,” explains Mark, “this hybrid approach appeals most to customers, if banks can strike a balance between customer autonomy and personalised support and advice. Customers want more personalisation and ATMs are a great channel to deliver this - for example pre-set fast withdrawals for the customer who always takes out £70 for weekend expenses or allowing customers to set up their dashboard to meet accessibility needs. It all adds up to a better relationship and more trust with your customers, which can only be a good thing.”
The challenge for banks is to achieve these steps despite the constraints of sometimes outmoded legacy technologies. There are countless examples outside of UK where the right software could rejuvenate existing ATMs. That’s one of the reasons we started in this industry - we began in the Age of the Internet and challenging the internet banking market to be better than ever before and it was logical for us that the ATM could benefit from the same cloud based approach – it reduces the total cost of ownership, improves time to market and eases the development of new services.”
“What is needed is a mind-set change from the current position of offering very limited services and reducing operating cost as the single most important focus, to a more optimistic outlook of expanding revenue-generating consumer services with operating costs being only one management metric. The ATM is on the brink of some very exciting developments – with technology like artificial intelligence, data analytics and chatbots poised to bring an even better experience to the ATM – but without the right infrastructure in place banks could risk missing out” concludes Mark.
The number of purchases using debit and credit cards has more than doubled in the past 10 years, as contactless payments and online retail have driven a change in the way consumers pay, a new report from The UK Cards Association shows.
Debit and credit cards were used to make 16.4 billion purchases in 2016, up 146% from 6.7 billion in 2006. It means that 518 card payments were made every second last year by cardholders both in the UK and travelling overseas.
Over the past decade the growth in the number of card transactions has outstripped the rise in the amount spent, showing consumers’ increasing preference for using cards instead of cash for lower value payments. Last year the average value of a card transaction fell to £43.47, its lowest level in 15 years.
The new report, UK Card Payments 2017, highlights the impact of the growth in online spending and contactless payments. By the end of 2016, four in 10 (39%) card transactions were either online or made using a contactless card, compared to a quarter (24%) the previous year.
Graham Peacop, Chief Executive of The UK Cards Association, said: “Card payments play a central role in our economy, with spending equivalent to a third of the UK’s GDP. As consumers continue to make the switch from cash to contactless and with the rise of the app-economy, we forecast that the number of card payments will grow substantially over the next decade too.”
With card payments providing significant benefits to businesses, the number of retailers accepting cards increased to just over 1 million last year. The number of individual outlets accepting cards has jumped by 63% in the last 10 years to 1.3 million in 2016.
A total of £709 billion was spent by UK debit and credit card holders both domestically and overseas last year. Debit cards represented 75% of this total, amounting to £530 billion. This month is the 30th anniversary of the introduction of the debit card to the UK.
Payment cards were used for three-quarters (77%) of all retail spending in the UK last year. Cardholders spent the most on food and drink (£114 billion), followed by other services (£100 billion), financial services (£80 billion) and entertainment (£57 billion). A third of all card purchases in 2016 were made at supermarkets, while every fifth payment was on entertainment.
In 2016, there have been significant developments in the delivery of digital services to consumers, such as in-app purchasing and a new trend of fusing social media formats with payment capabilities.
In the next decade, the increasing use of contactless and mobile payments, particularly by younger people, will be a major source of growth for debit card payments, the report says.
The volume of debit card purchases is forecast to grow by 57% to 18.2 billion in 2026, four times the number made in 2006. In a decade’s time, half of all debit card transactions (51%) will be contactless. Credit card transactions are expected to increase to 3.7 billion by 2026.
(Source: The UK Cards Association)
Bhupender Singh, CEO of Intelenet® Global Services, explores the competitive challenges that banks face from FinTech players.
The finance and banking sectors have experienced a radical shift, driven by mobile technology, Artificial Intelligence (AI), automation, and the emergence of new FinTech players entering the market. Traditional banks are now facing the challenge of high customer expectations, outdated technology, the pressure of regulation stemming from the financial crisis, and cultural resistance from those who are apprehensive or unable to utilise digital services.
With high street bank branches closing down, elderly people and those who do their banking in person, are at risk of making costly financial mistakes. In addition, a high proportion of customers maintain the desire for face-to-face interaction, particularly in the case of making major financial decisions, such as applying for a mortgage. Even in the case of common customer needs, such as the need to discuss overdrafts or the replacement of a bank card, face-to-face interaction is better equipped than a machine to efficiently handle the process from start to finish.
A major bank reported that 90% of customer contacts were through digital channels in 2016, an increase of 10% from the previous year. It is this shift in consumer behaviour that can be attributed to the increasing number of bank branches closing.[1] In order to ensure customer satisfaction, banks will need to keep up to date with the latest technological advances, whilst also maintaining and providing new channels of communication to ensure that their customers are kept happy.
With the number of FinTech players and challenger banks slowly increasing, the need for banks to ensure their customers remain loyal has never been more important. Whilst the new breed of banks provide a mostly digital banking experience that can offer features such as real-time balance information, deep-dive spending data, biometric security, and instantaneous money transfers, the issue of trust still remains. Customers like to know that they can speak to another person when they need more information about a product or require help fixing a concern. In today’s automated economy, modern companies are conducting more and more business online, and so it has become increasingly important to not underestimate the importance of having a ‘face’ for your business. Relationships are built by people and based on these interactions and the level of customer service, customers will be more inclined to return.
Despite having the upper hand, in terms of a well-established customer base, the scale and speed of the digital revolution has left major players in the financial services sector struggling to keep up. Challenger banks actively seek to be different, and so to even the playing field, traditional banks must embrace technology innovations and employ next-generation tools. The technological revolution in finance is not a new phenomenon, yet, embracing this new landscape remains a challenge for most established financial institutions. Recent PwC research found that only 20% of finance executives feel their organisation is structurally ready to embrace a digital future[2].
In order to compete, traditional banks need to start offering a seamless blend of online and in-person banking which complement traditional services. An effective omnichannel experience is one that will allow customers to benefit from the advantages of a physical bank branch, with the speed and agility available through a digital offering. Next-generation technology is heading in a direction where it will be possible to combine both the full benefits of online banking and face-to-face customer services. The future of branch banking, as we see it, could result in banks moving towards a mobile branch model.
One option could be a mobile advisor workforce, where customers can manage their services through a mobile app, and maximise the effectiveness of customer facing staff. By implementing this, banks could allocate mobile teams to nearby appointments. The next-generation technology available also has the potential to enable banks to connect roaming advisers to nearby customers, at any location and at any time.
One of the main advantages of a technology such as this, is that the high proportion of customers that prefer face-to-face interaction, will still be able to interact with banking staff – a service that banks are currently able to provide via the use of ‘micro-branches’. With market pressures to cut costs, and many providers being forced to reduce their front-end outlay, tools that allow banking staff to be mobile, are a step closer to modernising banks.
In the face of mounting competition against new players that are able to implement technological innovations quickly and effectively, it is essential for banks to overhaul their existing IT systems. Well established financial institutions tend to operate using outdated technology. These legacy technology stacks make it extremely challenging for them to compete with their more nimble competitors, as the aging technology obstructs the movement of data between silos, preventing the 360-degree view of the customer that is required to provide personalised services to customers anytime, anywhere. For this reason, we are witnessing a real desire from companies to work with experienced IT solutions partners, in order to adopt the latest technology and modernise their information security frameworks.
Legacy systems are one of the biggest barriers in keeping banks from imitating the digital experiences provided by the likes of the latest FinTech players. These companies deliver personalised services faster than banks can and are not hindered by aging systems. In order to start levelling the playing field, banks must first invest in the right partnerships. Banks must then look to provide a far more seamless omnichannel approach that embraces new technologies and will bridge the gap between their brick and mortar operations and their digital offerings.
Collinson Group research has revealed that just 38 percent of bank and financial service customers in the UK feel rewarded for their custom. Customers are looking for more opportunities to earn loyalty currency and more choice when redeeming their points.
Reward and recognition are becoming increasingly important for customer retention and revenue growth. As regulators encourage greater competition in the financial services market, new competitors emerge and consumers are given more opportunities to compare and switch services. Brands must consider how best to remain attractive to this sophisticated set of consumers who have a greater access to information and are always after the best value for money.
The Collinson Group research with 2,250 consumers across the United States, United Kingdom, Singapore and the UAE revealed that more than three quarters of respondents (77 percent) look for loyalty programmes with a greater choice of rewards. Furthermore, four in five respondents (82 percent), said that the value of a programme decreases when there is only a limited range of rewards available.
In the UK, research respondents cited three ways that financial services loyalty programmes could be improved: the ability to combine points with cash (37 percent), have a larger selection of rewards (37 percent) and a simpler user experience (33 percent). This indicates that usability and accessibility of rewards are top of mind for financial services loyalty programme members.
Two of the strongest categories of reward that are most popular with global financial services customers are travel and leisure. In the UK, customers consistently place a high value on benefits such as airport lounge access, concierge services and unique social and cultural leisure experiences[1]. Collinson Group research reinforces that customers value products and experiences offered outside of company core inventory as part of a financial services loyalty programme.
Respondents also expressed a desire to have more redemption opportunities. In fact, 66 percent of global financial service customers said that they specifically look for a loyalty programme that has both in-store and online redemption capabilities. This capability does not currently feature in many financial services loyalty programmes, with 70 percent of UK respondents revealing that they would like the opportunity to redeem in-store. An enhanced redemption experience is delivered through a programme that offers the customer the ability to redeem in both retail outlets and leisure stores, as well as an e-commerce platform. Survey respondents were clear that the value of a loyalty programme decreases if points cannot be redeemed in physical retail outlets, with 51 percent in the country agreeing.
Christopher Evans, Director at Collinson Group said:
“Traditional financial services models continue to evolve, with a focus on improved digital services and experiences, but a key area brands need to consider is how they recognise and reward existing customers. Other sectors such as travel and retail are demonstrating new ways of offering more personalised, timely and relevant rewards.
“A key element in enabling this is providing customers with more ways to earn and redeem loyalty currency. Offering the opportunity to ‘spend’ points against non-financial products such as travel, leisure or more altruistic rewards is increasingly attractive to programme members. The chance to redeem points in physical stores such as retailers and to part-pay with loyalty points and cash all make programmes more relevant and therefore more valuable to consumers.”
[1] Collinson Group mass affluent research – rethinking the customer relationship: https://www.collinsongroup.com/insights/consumers-shun-loyalty-programmes-forcing-brands-to-rethink-the-customer-relationship
If you’re reading this article, you know all about digital. As of 2014, more than 99% of the world’s information was stored digitally. That’s astounding, considering we’ve only enjoyed around 50 years of a digital world. Here James Sheldon of Experian confronts the issue of individual engagement and the importance of user interaction in today’s markets.
In an addition, despite internet-based banking being first introduced in 1983, it took until 2011 for it to become a staple way for the public to engage with banks. There’s a lag between the introduction of new technologies and new ways of doing business whilst society gets to grips with it – but when we do, the whole world changes – fast.
This is why it is important that a digital approach is considered beyond the technology that delivers it. Equally, it is important technology isn’t generalised as ‘innovation’. Innovation is derived from formulating a response and journey from the customer needs; technology to deliver should be a secondary point.
It shouldn’t need to be said, but in a world of apps and widgets, sometimes innovation seems to happen for its own sake, and not focused on customer need. As more people engage online they become used to rapidly evolving processes and become fast adopters of new ways of working. Yet their fundamental needs haven’t changed. They still want support to manage their finances – perhaps in a more convenient way than they’ve been able to before.
Digital processes, interactions and transactions
It doesn’t need an in-depth focus group to know that customers want fast, responsive and personalised interactions. Financial organisations know this, and in order to deliver, use digital as the engine and technology as the way to serve it up. A key element to consider is the difference in both interactions served by digital, and transactions made by digital.
To achieve real-time, personalised interactions, there’s only one method that will enable a business to achieve the rapid pace and total awareness: A single customer view.
How do you tailor your communications and add value to any interaction? By understanding who your customer is, their needs and their wants. Further elements such as understanding an individual’s future propensity for product needs, or pre-qualifying customers, add new levels of personalisation.
Equally, transactions should be customer orientated. It’s easier to implement and manage your own and your customer outcomes with automation and process optimisation, which digital processes provide.
Experian found 70% of businesses would admit they are ineffective at delivering an optimised digital experience across all of their touch points. It’s clear that there’s a way to go before businesses are properly aligned to their customers.
What’s the result? More customer churn (35%), and more customers abandoning their journey mid-way (26%). So all in all it’s clear that optimising a process can add value; from pre-defining credit limits to identifying what the best channel of contact is at the right time.
When it comes to mobile, Experian and Forrester research showed that in 2015, mobile commerce grew 38% and mobile devices accounted for 37% of all website visits. More than half of millennials said they need constant internet access on the go, and spend about 9.5 hours a day online. Their perception is that everything will be facilitated by mobile.
For a business, mobile use can also enhance understanding of customers, from identifying device usage for fraud detection through to understanding more about the individual for marketing and customer engagement.
Competition, customer insights, and making change
When Open Banking is introduced in 2018 competition will ramp up. More data will be available and there will be greater transparency on customer benefits. It’s possible that new entrants and fintech companies can capitalise on their youth and ability to adapt. For these firms, just as much as any other, focusing on building trust should be a priority. Open banking provides a foundation to deliver fast and personalised information that supports the customer, their applications and needs. It will impact multiple areas and roles, but it will also change what customers expect, changing their journey will become the future.
To respond to the challenge of adapting to this new era of the customer, organisations must be able to:
- Deliver a 360 degree view of the customer across the lifecycle;
- Fight fraud without compromising the customer experience;
- Break traditional constraints to serve today’s non-traditional customer.
APIs are one area where businesses are benefiting from true technology-led innovation. Data can add value to any risk identification and functions like ‘pinning’ can enable organisations to pin data to an individual, giving a true single customer view that is validated from internal and external data.
Our recent survey conducted with Forrester highlighted that eight out of 10 businesses consider improved customer insight to be their top business priority over the next year. Growth, cost efficiency and data security are further top priorities.
It’s easy to see why. After all, it’s no secret that merging offline and online processes can lead to friction in the customer journey, increasing costs and leading to missed opportunities. Two thirds of organisations recognise their top business priority is to integrate physical and digital channels better. Getting it right will create a solid foundation for the future.
Be holistic above all
As businesses embark on transforming customer journeys via digital delivery, the danger is that it is done at the expense of other channels. Businesses should adopt a holistic, omni-channel approach to maintain focus across all channels, side-lining none.
Customers are more comfortable interacting with companies across a range number of channels. As a result, they are demanding a seamless and consistent approach across each. Companies with true omni-channel customer engagement strategies retain an average 89% of their customers, compared to 33% for companies with weak omni-channel customer engagement. Customers are also expected to have 30% higher lifetime value.
With any change, businesses need to consider flexibility for their ‘back end’. Agile, flexible systems will enable quick and efficient delivery that supports change instead of stalling it from the point of an idea. That way, whatever the next channel, or technology of the future, businesses can be ready to embrace their next opportunity.
And speaking of embracing, many organisations are looking at their partnerships and finding gaps. As a result, it might be that new partnerships should be formed to deliver the end-to-end solution that’s right for the challenge. Such partnerships may see the end of disjointed, legacy systems and encourage those involved to combine expertise, offering a fast and comprehensive solution to satisfy the changing needs of customers.
Complaints data released by the FCA estimates that the total number of complaints decreased in the second half of last year by 14%, although changes in the way FCA measures complaints means that the number has gone up. A key new metric reveals firms’ ability to close complaints within three days, highlighting the increased pressure on firms to respond in real-time and to fast-track communication. The FCA report highlighted that 43% of complaints were closed in this time period, rising to 63% when PPI claims are excluded.[1]
According to today’s FCA complaints data report, which helps assess how well financial services treat their customers over time, the largest number of complaints were related to general administration and customer service. 40% of complaints are related to this topic, up from 27% in the first six months of last year.[2]
Bhupender Singh, CEO of Intelenet Global Services, comments: “Poor customer experience costs banking and financial services £5.81 billion.[3] Changing customer expectations put pressure on financial services firms to offer a round the clock service and many firms have adopted new technology solutions in response.
“The emergence of voice assistants and chatbots offer a new way of communicating with customers but firms mustn’t ignore the continued need to provide the possibility of speaking to a well-trained customer service professional. The technologies that will help firms to reduce friction in customer service are those which boost the efficiency of back-end administration so that agents can respond more quickly to customers. A harmonious blend of human interaction with digital tools should be the aim. Financial services companies should focus on modernising their IT infrastructure through automation so staff can redirect their focus to the customer, by taking away the headache of the more mundane repetitive tasks.
“Although we are seeing a trend in the total number of complaints reducing, financial services firms need to be constantly on top of the customer experience they offer. Automation matches speed with quality service and gifts banks with the agility their Fintech competitors have to ensure customer retention. Banks have an established customer base compared to new entrants, but in order to gain brand value they need to ensure they can service customers as efficiently and effectively as possible.”
Bhupender continues: “Customer Service inefficiencies are mirrored with high costs. Front line staff who are not equipped with the right skills and knowledge will result in longer queues and high abandonment rates. Many banks are turning to banking bots and voice assistants, as customers do want more choice in how they bank. But whilst the option of self-service is highly desirable for customers, firms must not forget to blend this an element of human interaction to enhance the customer’s experience.”
(Source: Intelenet)
[3] http://www.mycustomer.com/experience/voice-of-the-customer/poor-service-costing-the-uk-ps37bn-as-customer-complaints-soar
Customers have never had more choice when it comes to selecting the providers, brands and services to help them manage their lives. Nowhere is this truer than in the banking industry, but what takes precedence in that choosing, logic or emotion? Here Karen Wheeler, UK Country Manager at Affinion analyses current trends and provides Finance Monthly with a detailed outlook on this key customer conundrum.
We’re witnessing a global trend of consumers faced with a vast number of providers, all vying for their attention with big-budget advertising campaigns and attractive offers such as cash incentives to switch current accounts. HSBC for example has been offering £200 ‘golden handshakes’ to new customers throughout March. But although banks are competing desperately to retain their customers, the arrival of new Open Banking APIs are set to make it easier than ever for customers to switch banks, with the first stage of the implementations having gone live this month.
Moreover, the traditional landscape of high street banks has also been disrupted in recent years with the emergence of FinTechs able to adapt quickly to incorporate the latest in digital innovation. Consequently, it’s never been a more challenging time for banks to attract new customers and keep existing ones loyal. When you consider how integral banking is to everyday life – in the UK, the British Bankers Association revealed customers logged onto banking apps 4 billion times in 2015 – it’s crucial that providers understand not only how consumers like to engage with their services, but the factors which influence their choice of bank in the first place.
A global view of customer engagement
With this in mind, we recently commissioned global research with Oxford Brookes University to uncover what influences customers to choose their banks – as well as what makes them stay. The aim of the study was to develop a comprehensive model that maps the path a customer takes from their first interaction with a brand, to the point at which a company has become a meaningful part of a consumer’s life.
The Customer Engagement Model can help banks understand the rational and emotional attitudes of their customers which can then inform the development of product propositions, marketing programmes and user experiences to increase their connection with the customer. The evolution of customer engagement is not linear, but dependent on a complex mix of motives, attitudes, experiences, and satisfaction – all coming together to influence the customer’s overall assessment of the products and services they choose and buy.
As well as banks, we investigated customers’ relationships with their mobile phone provider and favourite retailer to compare how engagement varies by industry. Perhaps unsurprising given its association with leisure time, retail came top for customer engagement, with banks in the middle and telcos lagging behind.
So, what do banks need to understand about how customers form their brand perceptions, and how can they build on this to enhance engagement and, ultimately, promote feelings of loyalty and advocacy?
Emotional versus rational – which is more important?
The study shows that the journey of customer engagement begins with a very rational decision but, as we move further towards commitment and loyalty, emotions play the bigger role and achieving engagement becomes more difficult. It seems the rational part of the decision-making process is crucial to the initial stages of investigating, considering and comparing providers (where are the branches located? How do the interest rates compare?) – but emotional factors are also critical.
For banks, in the battle of ‘head versus heart’, it seems the heart wins – the influence of family and friends were revealed to be the most important factors when it comes to customers choosing a financial provider. In fact, banks were the highest-scoring industry in our study for customer recommendation to family and friends. Consumers perceive their relationships with money to be important and, consequently, care about where they put their money and pay close attention to what banks say and communicate.
Banks do not skimp when it comes to investing in their marketing and advertising campaigns - it’s estimated that US financial institutions will spend $9.08 billion on digital advertising this year, up 12.1 per cent from 2016. But our study found that, crucially, family influence is surprisingly more powerful than advertising when customers are deciding where to bank, with more than half of customers (55%) following their parents and other relatives. Therefore, this ‘hand me down’ mentality could mean the difference between having a customer for life – or not at all.
Why does customer engagement matter for banks?
So, why is it important for banks to understand the emotional components of the decision-making process? Our research showed that customers exhibiting the highest scoring levels of engagement are consistently emotional in nature and the lowest scoring statements are rationally driven. Critically, the most engaged customers are more likely to stay with a brand for longer, spend more and recommend to family and friends – the primary aim of any bank.
Advocacy is the highest point in the evolution of the path to customer engagement, but the most significant in terms of customer value because it can only come from a customer who is completely immersed in the relationship. It is also the hardest outcome to achieve as it is dependent on the overall experience, interactions and perception the customer has built of the business up until that point. Satisfaction and trust are boxes banks need to tick before customers will think about recommending them to others.
The power of the customer marketer should not be underestimated as an invaluable tool for banks when it comes to attracting new customers. This means they must nurture their relationships with their existing customer base, but also look to extend influence in their lives to build engagement and hopefully secure loyalty and recommendation. In an industry where the customer’s heart wins over their head, advocacy should be the ultimate goal for banks.
Data should be one of your strongest assets, not a confusing uncertainty or a burden to work with. Alastair Luff of global information services group Experian here talks about how you can make the most of the data you gather and use it for e key decision making in your operations.
Big Data has become a buzzword in the Financial Services industry. Put simply, it’s about businesses having an amount of data so large, it becomes difficult to digest and define a clear strategy.
Information is created every second of the day, and its complexity is advancing as new data comes onto the scene. The volume of data is growing significantly, presenting a notable challenge to businesses. On its own, data isn’t valuable – it’s the business insights it provides which makes it a vital asset. The more information, the greater the insight, and the bigger the opportunity to drive optimum outcomes.
Data – a confusion or a complement?
Data can seem daunting. It needs to be controlled, understood and used to avoid hindering compliance, and to create real value. It can also confuse the customer – with less than 8% understanding how their data is being used within organisations.
But it can also complement. Organisations are not only faced with external data sources, but also first party data generated internally. But two data streams doesn’t result in a complete customer profile, and in some situations, information captured over an extended period of time may become outdated. Overlaying current and validated data, such as credit bureau data, can add a layer of insight that fills gaps and helps complete a fuller picture.
The more comprehensive view available, the better lenders can tailor credit risk policies to ensure financially inclusive lending strategies that consider all relevant data assets, e.g. within credit scoring.
Scoring with the customer
Credit scoring is nothing new, but it’s not just about banks and lenders. Industries outside of finance are beginning to recognise its benefits and scoring is offering enhanced outcomes for customer engagement and enhanced credit risk provisioning. In Africa, for example, data from mobile phone usage is helping with credit scoring where no financial services data exists, giving more people access to credit.
While scoring itself is well established, the process behind it has evolved. Organisations, lenders especially, are approaching scoring differently, considering individual risk strategies, profiling and in some instances different data assets. All of these factors, whether standard or bespoke, can provide an automated risk assessment that identifies the credit strategy of an individual.
Simplifying complex information
The ability to make responsible lending decisions comes down to how well information is interpreted. This is where scorecards come in to their own. They can help rationalise complex insights and automate decision making. Businesses who overlay internal insight into scoring, with enriched external insight achieve a more comprehensive view of each customer’s credit history.
In an era confused by a mass of information, a more demanding customer and pressure on minimising loss, businesses need to understand the value and opportunity – but balance both. This extends beyond scoring as an action, and therefore it would be prudent businesses automate this area – using available insight to free up resource to support developments across other business areas which aren’t so easily resolved.
Using comprehensive scoring can provide advanced data feeds that contain varying benefits for the organisation, for example:
- Understanding affordability. What does the future financial health of an individual look like? Are they likely to experience problems?
- Geographical insight. Some people have little or no bureau data. Using geographical analysis can provide a view of how the region and area is trending to support any credit review.
- Considering circumstance. Data for those with limited data, for example people living at home with their parents, can have their profile enhanced by overlaying relevant data. In addition lenders can consider the financial status of an individual, or an associate who they are linked to financially. This can provide a rounded view of any associations and identify any causes for concern.
- Ensuring the person is genuine. Fraud is on the rise and using data to assess and identify the genuine intent of a person can be critical to losses and also protect customers.
- Understanding how a person behaves. Behavioural data can provide rich insight into a person’s financial behaviours. From cash advances on credit, to limit vs. spend assessments. This can be particularly helpful in understanding a person’s financial trends and providing a prediction into their probable future trends.
Differing and advanced data assets can be used to on-board, and when a customer is on-boarded. It can be particularly useful during the lifetime of a loan in order to understand better any potential alignment to a business’s growth strategy.
In a world of Big Data, organisations have the opportunity to translate information into a currency. Understanding what insight it can bring, embedding it within credit risk and scoring policies can ensure accurate assessments and appropriate lending. Businesses just need to understand what data provides what – and why.
