Over the last several years, globally, banks are working to reduce their brick-and-mortar footprint, primarily in the reduction of full-service branches. One recent report anticipates the closure of 11,000 branches by 2030, or around 18% of the existing physical banking presence. Similar reports show that this is an increasing trend in many markets globally. However, some markets, such as India are not seeing declines in the branch network. Is replacing traditional bricks and mortar branches with alternative channels then a foregone conclusion?
So, if a bank were to see 100% adoption of their digital channels, would that mean that customers have stopped using the branch and the bank could close its physical branch network? For most banks in most countries, the short answer is probably no. A physical presence for a bank is still a requirement for multiple reasons and is still driven by the fact that for some transactions, customers prefer to deal with the bank “face to face” in a bank location.
What is occurring in the market today relative to the bank branches is no different than other times when new channels were presented to customers. The adjustments made today are operational adjustments that reflect delivering the right products and services to the right channel to meet and exceed customer expectations. The branch reductions do not signal an end to the branch. It necessitates branches to be transformed to support the digital world and included as part of the “omnichannel” capability of the bank.
According to Tony Virdi, VP/Head of Banking at Cognizant, “One thing is clear: Bank branches are here to stay. They’re not in demand like they once were, due to the rise of digital banking. But retail branches will continue to maintain a prevalent role in acquiring, retaining and serving customers across digital and physical channels. Fewer, smaller, smarter and more open: That’s the future of retail bank branches.”
In banking, first impressions are a crucial first step in establishing successful and profitable customer relationships. Customers have many banking choices in the market today, both in terms of product and service offerings, as well as channels offered by the bank. For many customers, brand loyalty isn’t what it was for previous generations and one bad customer experience is all it takes for a customer to make a change. Customers are more empowered today in choosing what best meets their needs and fits their lifestyle and are not opposed to having multiple banking relationships to meet those needs. The increase of capabilities in digital banking has been a contributor to this change in mindsets.
1. All About the Experience
For customers, the branch needs to be part of the digital experience. It’s not “either/or” relative to how a customer engages with the bank. Digital engagements and digital capabilities must be woven into the fabric of banking operations. Starting with customer touchpoints, to back-office fulfilment and product design. The bank must take a holistic approach to address the needs (and to some degree, predicting the needs) of its customers.
There have been no greater influences in the market relative to customer expectations of how their bank should engage with them, than Retailers and FinTechs (or startup banks).
- The likes of Amazon and Alibaba have contributed to setting a standard on what customers should expect. They provide a user experience that allows the customer to navigate and find things easily and make purchases with little effort. However, what makes them stand out, is how they use your previous experiences to enrich your interactions. Leaves customers wondering, “why can’t my bank do that?”. Thinking about it, fewer businesses know as much about a customer as bank knows about their customers.
- Fintechs, startup banks, challenger banks have made it their mission to disrupt the traditional banking models. Not being encumbered by tightly coupled back-end systems allows these banks to provide banking services as “straight-through” processing with little hindrances to clients. It’s not that traditional banks can’t do this, but it takes a bit more effort and time to achieve the same results. For many Fintechs, their IT eco system was designed with customer insights as a key element of what the eco system must support.
While a customer’s banking journey is filled with opportunities for banks to excel at the digital experience, nowhere is this more evident and crucial than the on-boarding of new customers and new accounts. With the regulators adjusting policies to reflect the accuracy of the technology, banks are positioned to transform and embrace a new approach to customer acquisition in the following ways:
- Biometrics is a key supporting technology using facial identification
- AI/ML technologies are also key to provide document authenticity and facial matching
- Designing a customer experience that uses OCR to “kick start” the data collection process is a key improvement;
- Real-time interfaces to governments and private companies who maintain customer information to aid in risk management now put the bank in a position of understanding risks and managing those risks immediately during the onboarding cycle
- Ultimately, giving the consumer the right choice of product offerings then opening the account and funding the account immediately so the customer can use the account provides an end-to-end experience that matches what customers see in the Retail industry or more nimble banks
- Where the regulators still require some form of visual validation, the on-boarding process can include
real-time video chats or even book an appointment at the nearest branch
2. Show me the money
At the end of the day, banks are still in business to make money. So, every decision made by the bank to spend money on technology, including digital technologies, must have a clear business and/or customer benefit. There are limited levers that can be pulled to quantify the business benefit: cost reduction, increased customer acquisition (of profitable customers) and expanding existing relationships.
Sadly, many banks struggle to understand the ROI for many of their technology projects. There are multiple forms of the quote “What gets measured gets managed” and this business principle holds true today.
As an example, if the bank is going to spend US$250K to provide a digital onboarding capability. The design and implementation of that system must include the ability to provide a full set of analytics to support the business growth objectives that would be provided in terms of increased customer acquisition growth. This includes understanding how customers are using the onboarding app and specifics of the accounts being opened by customers. Over time, understanding the customer behavior of the account will determine profitability and the ability to upsell to additional products
3. DNA Change
Traditional banks have long been accused of being slow to act, siloed in their approach to solving problems and generally, inefficient across the silos. The best banks today are:
- Digital-first in their thinking (some banks consider themselves an IT company with a banking license)
- Holistic approach to embracing change
- Consider the customer experience as an “end to end” experience with the bank (digital and non-digital)
- Finds innovative ways to solve old problems. By the way, innovation is not just limited to technology
Challenges for the banks are not just in the area of customer satisfaction on the on-boarding process. But, there is a monetary impact for poor onboarding. Bain & Company report states that major banks across the globe have paid over $200 billion in fines between 2009 and mid-2016 for Anti-Money Laundering breaches.
Other data points include:
- In 2013, JPMorgan Chase had to pay $13B to settle regulatory issues;
- In 2014, Citi bank paid $7B and Bank of America $16.7B
This led to more stringent KYC requirements from customers that made the onboarding process even more difficult. Rising costs, regulatory fines have contributed to a “fraud first” mentality instead of finding the right blend of risks and customer experience.
Each step of the on-boarding cycle represents an opportunity for the bank to excel in meeting the customer’s expectations and providing meaningful interactions.
Once you established the customer’s interest, starting the process of data capture through to opening the account should be frictionless.
Technology plays a key role in improving how this process is delivered through a mobile channel. Data capture can start with using the phone camera to take a selfie or take a picture of an ID, such as a passport.
AI / ML technologies can be used to authenticate the documents and to ensure the selfie photo taken matches the ID submitted.
Open API adoption allows the bank multiple options for integration to third-party sources for additional risk validation and to determine any mitigation actions required for this particular customer.
Besides, using available third-party data alongside additional information you may capture about the customer, i.e. family, hobbies, life events, will allow the bank to present the right products and services. This may have started with the initial inquiry that initiated the onboarding cycle. A web promotion or mobile promotion that provides a financial incentive for opening an account, i.e., fee waivers or coupons for discounts at merchants who also use the same bank.
Finally, opening the account and funding the account in real-time means the customer is ready to do business as soon as the process is complete. One thing to keep in mind is that while the bank should use the onboarding process to make a great first digital impression, it doesn’t stop with onboarding. If the bank’s existing digital capabilities are not at the same level as the onboarding experience, the customer’s “first” impression will be weakened by a poor digital experience post onboarding.
As the bank thinks through the user journey(s) you want for your customers, data privacy and security should be forefront of your thinking. Secure by design is foundational.
Starting your relationship with the customer at this level will surely lead to a long and prosperous relationship for both the consumer and the bank.
Mobeix Digital Onboarding
Mobeix Digital Onboarding enables banks to accelerate the customer onboarding journey by automating the end-to-end process in a simplified and streamlined manner by using the most current biometrics capabilities, capturing accurate information, adhering to regulatory standards, and optimizing operational efficiency.