Transforming the Business of Banking
The arrival of the Digital Age brought about a dramatic transformation in banking. And customers are driving much of the change. They expect their banks to be at the forefront of digital transformation, offering solutions that transform how they interact and transact business with their financial institutions.
Banks that resist digital transformation will be punished by their customers, seeing up to a 35 percent erosion in profit margins. In contrast, banks that ride the digital wave, creating new product and service offerings and empowering their customers with digital technologies, will see the opposite—a more than 45 percent growth in profitability.
Most banking leaders recognize the value of digital and have embraced technologies such as Internet banking and online lending applications. But this is just the tip of the iceberg.
By 2018, McKinsey predicts that as much as half of new banking revenue will come from digital channels, up from 10 percent in many sectors today. This growth accounts for nearly every aspect of banking—from savings and term deposits, to investments, to accounts, to insurance and pensions, to mortgages.
Digitization of Customer Service
Once the centerpiece that banks used to build and manage relationships with their customers, the branch is looking increasingly like the now-extinct train caboose. An astonishing 81 percent of bank customers indicate they would not switch banks if their local branch closed. If they aren’t already, digital channels will become the primary means of customer engagement.
But here’s the problem: an alarming percentage of customers are dissatisfied with their digital customer experiences, and the numbers continue to go up. Less than half indicate they are happy with the service they receive, and only five percent report that their sales and services experiences exceed expectations. Sixty-four percent even admit they have experienced rage as a result of a customer service issue.
Failing to deliver great customer experience has an undeniable bottom-line impact. Eighty-seven percent of customers reveal customer service—whether good or bad—significantly influences their decision to do business with a company. And with the majority of customers preferring to self-serve—finding answers and solving problems without engaging a live agent—and banks seeking to give them what they want while tapping a dramatically less expensive service channel, one would assume this is good news from a customer satisfaction standpoint.
However, this isn’t the case. The reasons banks and their customers want self-service are diametrically opposed. Customers want self-service as a means of solving their problem or answering their questions easily and quickly, while banks see self-service as a way to reduce their customer service costs. Ironically, neither are getting what they want from current self-service models such as interactive voice response (IVR) systems and online community forums. Twenty percent of call center volume is the result of failed self-service interaction. Thirty percent of self-service interactions are rated as unsuccessful by customers, the same success ratio achieved through Twitter.
Why? Today’s self-service solutions force users to do a lot of guesswork and digging to find what they need. Often, self-service isn’t even the correct channel to solve their problem or answer their question. Contrary to what some believe, automation and self-service aren’t the problems. The issue is unintelligent, one-way service channels that are time consuming and frustrating to use and lack personalization.
Digital Repercussions of Customer Service
Customer experience matters in very tangible ways. Forty-five percent of customers signing up for a new service or making a purchase will abandon their sign-up window or shopping cart if they cannot get a quick answer to a question. Eighty-two percent will stop spending with a company because of bad service. Not a big deal? Consider that it is six to seven more times expensive to acquire a new customer than to keep one, and you will change your mind very quickly.
Yet, with the rise of social media and digital outlets, sub-par customer service influences more than just those directly impacted. Compared to only five years ago, customers are three times more likely to share brand information with someone they don’t know. Forty-five percent share their bad experiences on their social networks. At the same time, there are positive implications when customers have good service experiences. Fifty-five percent recommend the company to friends and family, and 47 percent increase their spending with the company. Thirty-one percent write positive reviews about their experience online.
Staying Ahead of Technological Disruption
Banking isn’t for the faint of heart. Disruption is right around every corner, forcing banks to remain constantly vigilant from being disrupted. In addition to customer demands for end-to-end digitization of their banking experiences, most banks are faced with outdated, legacy back-end technologies that are time-consuming to manage and difficult to integrate. Developing or adding new technological solutions isn’t easy either. These projects often require substantial resources, budget, and time. Add a burgeoning list of regulatory compliance requirements and growing talent shortages, and the list of challenges become overwhelming. Simply holding onto your market share is hard enough, let alone increasing it.
Figuring out where to spend your time and resources is an important starting point. Highest performing banks tend to focus their efforts on solutions that address customers. They also leverage application protocol interfaces (APIs) to build communications across disparate applications and data stores. And while many banks indicate they have embarked on the journey to connect their different data stores and applications, the work required is immense, and there is much left to do. Yet, mounting the “digital” board and riding the wave of digital transformation seems an impossibility for many banks. There is simply too much legacy baggage and too much application development work to be done. And the task quickly becomes overwhelming for a bank lacking resources, budget, and time.
Digital Imperatives
There are a lot of ingredients that need to go into a digital strategy. There are three that are non-negotiable when it comes to banking. Banks that get each of these three legs to their digital “stool” correct lay a great foundation for their digital transformation.
1. Multi-Channel Integration
Banking customers use multiple channels irrespective of device and location when they interact with their financial providers. Eighty-one percent of customers indicate companies should always offer different engagement channels to meet their needs. Having a seamless experience between each of these channels is a top priority. However, over half of customers report frequently receiving conflicting information when they navigate between the different channels. Considering most need to use two or more channels to resolve service issues, this is a substantial problem.
This problem isn’t simple to solve; it requires integration across different channels, information sources, and applications. With customers listing valuing their time as the most important thing that a business can do to provide them with great service, declining customer service scores make a lot of sense. This is a predominant reason omni-channel and digital engagement have fallen short in moving the customer service needle.
2. Personalization
Customers have very high expectations for their banks when it comes to personalization. Three-quarters expect their banks to offer full personalization in their interactions—in-branch and digital—with 83 percent wanting them to predict their banking requirements and deliver information and services accordingly. But here is the catch: 79 percent consider their banking relationship merely transactional.
Customers want two-way, proactive conversations with their banks. The interactions customers want with their banks go far beyond service transactions and problem resolution. For example, 70 percent want to receive digital alerts about fraudulent activity on their accounts, 45 percent want to be notified about a late or missed payment, and 37 percent want updates on the status of their loans or mortgage refinancing. Here, text messages or mobile app alerts are viewed as preferred communications methods.
Why is this important? Engaged customers are three times more valuable than those who are disengaged. A recent survey by Gallup finds that giving customers the ability to engage with their banks through the channels directly impacts their level of satisfaction. In fact, a less than satisfactory experience in just one of the engagement channels causes the entire customer satisfaction score to plummet to 15 percent. The extrapolation for banks is that they provide customers with multiple channel options while delivering personalized experience consistently through each channel.
3. Security and Trust
The vast majority of customers trust their banks to securely manage their information and personal data. Customers expect their banks to provide new service offerings that enhance the security such as data protection services and online password vaults. The digitization of the customer banking experience must maintain this level of trust and moreover capitalize upon it.
Conversational Banking
The solution to many of these digital challenges is conversational banking. Unlike traditional banking applications that use graphical user interfaces (GUI) to facilitate one-way interactions with customers, conversational banking is bi-directional and speaks the language of the customer.
A crucial linchpin in conversational banking is text- and voice-based bots. Using a combination of Natural Language Processing (NLP), machine learning, and artificial intelligence (AI), bots are contextually aware and connect customers to the banking applications and information stores they need through open APIs. Customers get their problems solved and questions answered faster and easier than ever before. And because bots use heuristic learning and AI, they are able to offer solutions that anticipate the needs of the customer. Service interactions become something customers welcome and enjoy, instead of something they dread.
Banking IT staff overloaded with development and integration projects see particular value in bots. With as much as half of application development time now dedicated to GUI design, they can shrink development cycles from months to weeks or even days. They also eliminate the need for the cycle of updates and releases.
Join the Banking Bot Conversation
Conversational banking is a transformational shift in how banks engage with their customers. Bots put customers in control and allows banks to expose and integrate applications and data into a centralized bot that puts legacy applications and information at the fingertips of the customer. To learn more about how Kore is simplifying and transforming how companies connect with their customers, visit www.kore.com or call us at 1-844-USE-KORE.
Kore’s revolutionary platform streamlines business workflows and communications with a single message-based interface. With Kore’s powerful “bots,” users can both receive alerts from the systems they use and send information back to those systems from a message. Kore provides robust administrative features and enterprise-grade security to comply with regulatory mandates.
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