Are we ready for IKEA-style banking?
First published in Chartered Banking magazine, Spring 2020 edition
Technology has become integrated into almost every aspect of our daily lives and banking is no exception. Yet for most of us it is something of a love-hate relationship – it can be easy to forget the huge gains in convenience that banking technology has brought to customers over the past 50 years when we are waiting in an automated queue on the telephone to speak to a human being.
When it comes to customer service, banks are not so much in competition with each other as with the levels of service offered by other sectors.
“It’s no longer good enough to say ‘this is what we do in FS’ because customers’ expectations are based on best-in-class in other sectors,”
Louise Hill, COO of children’s prepaid card app gohenry, suggests that the coming generation of banking customers will be even more demanding. “They are not just digital natives, they are cashless natives. Anyone who has grown up using our kind of service will expect a slick digital interface, they’ll expect real-time transactions.”
Financial institutions face a difficult task in delivering across multiple channels, from website, social media and chat through to telephone banking and the face-to-face experience in-branch. However, customers’ expectations are only getting higher – and are often not being met. The experience needs to be seamless across all these channels. From the customer’s point of view it is often not consistent and not easy to access.
Customers’ needs continue to be focused on convenience, personal service and competitive products. It’s about knowing me as a customer and treating me as an individual, online and offline. Using what you know about me to provide products customised to my needs.The value equation comprises two parts, the ‘what’ and the ‘how’. While banks have a tendency to focus on the ‘what’ in terms of products, customers tend to make judgements based on ‘how’ these products are delivered.
All about the ‘how’
The ‘how’ is the service component. Do I trust you? Do you treat me as an individual? Are you empathetic? Responsive? Reliable? Do you do what it says on the tin? Then finally there’s the cost, which is not just about the price of the product but the ‘hassle factor’ involved.
Jo Causon, CEO, the Institute of Customer Service, points to her organisation’s own research in this regard. “About 26% of us will pay substantially more for great customer service. And about another 60% of us are interested in paying what we would call value for money.” Causon recognises there is a strong role for technology in delivering for customers: “What you don’t want is human beings processing because that’s a waste of resource. If there is anything that is purely transactional then tech should take the strain.”
“About 26% of us will pay substantially more for great customer service.”
Compliance vs common sense
However, bank customer service tends in itself to be too transactional. There’s a regime of ‘computer says no’, which is there because banks are scared stiff of doing something that will get them into trouble. And staff are worried about personal liability, so they don’t apply common sense, they’re too worried about being called out for not following to the letter.
Regulation intended to ensure better service for customers has made banks more motivated by compliance than solving issues for customers, with the result that staff are often hamstrung. The rules are intended for the benefit of the customer rather than the bank. Empathy and curiosity are unlikely to break the rules. There’s a tendency to be ‘bank first’ and about protecting the bank rather than addressing customer need. It’s about permission to operate within a frame of reference.
Ask most customers what most annoys them about their bank and they are likely to refer to waiting in a queue for human intervention. The gating process is a ‘necessary evil’ but one that most banks need to manage more effectively. It’s a balancing act between the desire to enable people to get through quickly and an inability to forecast accurately the flow of calls. Tech has a role to play in terms of artificial intelligence [AI] filtering questions.
There is a role for technology in dealing with more routine queries. AI can be useful in terms of giving consistent and appropriate advice, rather than the potentially more variable advice even from a trained professional. Consumers will hopefully grow to trust AI to do this.
As well as systematised advice, a 2019 report by Foresight Factory for CYBG identified several further ways in which technology can deliver a better experience for customers, including:
- • More sophisticated budgeting tools offering account aggregation and predictive analytics
- • Virtual reality to enable more direct remote interaction and an immersive view of key financial information
- • Mass adoption of biometrics, including behavioural biometrics, for seamless and secure identification.
Ripe for disruption
There is a ‘major failure’ around banking products that are too complex and focused on the needs of the provider. Banks could learn from retailers by packaging products to appeal to the needs of customers. Most banks have regular savings accounts or ones where you can pay in when you can. But what about having a ‘First Car’ account or a ‘College Fund’ account? There’s no complexity as it’s essentially the same product but the experience is much more customer-focused.
Another area where traditional approaches are ripe for disruption is in commercial banking, at least in terms of small and medium-sized enterprises (SMEs). With SMEs banks tend to be even more wary of regulation, because of the risk of money laundering. For businesses there’s even more need for speed of gratification, yet the documents required are more complicated and response times longer.
The way in which IKEA is disrupting how we buy kitchens as a good model for the future of banking in which the customer is in control. Fewer, bigger stores provide inspiration and advice, giving you access to a consultant with whom you can start designing the right solution for you. When you’re ready you can then press the button to order and either pick the boxes or have someone come in and fit the wholething for you. It’s full service or DIY. There’s no reason not to do mortgages or pension plans in the same way.
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