A glimpse inside the retail bank of the future

coins-bankingIn previous blogs we referred to the operating models of retail banks by identifying certain product and channel features that drive the changes in the industry. This post will focus on the evolving operating model and the impacts it has on people, process and enabling capabilities, which is more than the technology that drives most of these changes.

A recent Accenture paper explains why the current branch-based distribution models are no longer sustainable when banks are faced with a triple challenge to their traditional operating model:

  • Restoring customer trust and engagement
  • Defending their payments business against new entrants (including online, mobile and tech companies)
  • Avoiding commoditisation of their products and services

We will explore the operating model impacts in the following layers of a simplified business architecture:

  • Channels
  • Features & Processes
  • Systems & Infrastructure

operatingmodels2Let’s discuss how each layer of the target operating model will be affected by the anticipated changes in the industry, and give you two examples as how that may play out for certain products and services.

1. Channels

The repositioning of branches in the channel mix and the adoption of a seamless mobile and online customer experience will have a fundamental impact on customer relationships. This is already felt by current day call centres and branches. Banking operators will need to resolve the inherent obstacles by:

  • Accepting that the branch is no longer the primary channel to market anymore; at best it is an extension of omni-channel customer engagement – this has profound implications for the way retail banking organisations are structured and run
  • Recognising customers and customer needs at the point of contact independent of channel choice; the ability to track customer activity across channels, especially aborted transactions and behavioural patterns that lead to timely and valuable (context aware) recommendations
  • Applying micro-segmentation and personalised offerings around the individual rather than the more presumptuous broad categories that dominate the traditional marketing campaign approach

These fundamental changes in customer interaction have a profound impact on the supporting processes and infrastructure of a retail bank.

Cheerful young woman using tablet computer on the trainExample: Whilst on a train, a customer uses her tablet to raise a question about the interest received on a savings account and questions whether she’s got the right savings product. Whilst at work she receives an SMS with a prompt to read an email in her inbox to discuss her needs. The email contains a web link to a dedicated savings site and a live-chat facility that starts with an appraisal of her product and an invitation to reflect on her question. There is also an option to either defer the live-chat online, or book an appointment at a branch of her choice, or call a savings product expert on a dedicated number. Any bank customer service representative, irrespective via which channel the service is delivered, is provided with a unique reference code giving them access to the latest conversation, offers and alternative ways to save money in relation to that individual customer. The customer decides to walk into her local branch the next day and she is met by the branch manager, who greets her and picks up from the conversation where it was left the previous day. She is introduced to the savings product expert, who explains that she can use a more competitive product. This product does not give her the best annual percentage rate, but has a lot of redeeming features that she wasn’t aware of when prompted by a headline message from a comparison site.

2. Features & Processes

The key themes for enhanced operational readiness for omni-channel and micro-segmentation are:

  • Customer-centric systems and services; everything from personal data, profiles, history and behavioural patterns should be commonly available to all channels, including the branches and operators interacting with the increasingly mobile customer base.
  • Single (end-to-end) and channel aware customer delivery process that is service based and overlays internal and external data sources, as well as specialist applications, e.g. inline chat, mobile payments, PFS portals
  • Automated recommendation engines: similar to what has now become mainstay in retail environments, banks will prompt customers to consider new or more appropriate products or services that are based on recognised changes in personal circumstances, maturity of existing products or external triggers, based on locations, expressed preferences or social media activity.

Bank Teller Counting Money for CustomerExample: The automated account activity monitoring of high net worth customers of a bank picks up on a trend of account terminations in a particular postcode area. This information is correlated with sector specific newsreel information for that area, sees the arrival of a new bank in two key locations and suggest a clear pattern: a new bank luring their high value customers away with a particularly savvy new investment product. After an intervention by the regional sales manager, the bank decides to limit the damage and contact the individual 200 customers via a highly targeted campaign, lowering the charging structure of its flagship investment programme and appointing a regional wealth manager to look after their treasured portfolio. The analysis shows that each retained customer in this segment, will have on average a net lifetime added value of £35K.

3. Systems and infrastructure

At the heart of the changed operating model is the technology that supports the new features and processes and delivers the information across the organisation via a central hub, which could be a service-oriented architecture or a combination of connected applications (via open API’s) and data stores, powering standard processes and advanced analytics.

The ICT services provided by in-house or outsourced service providers will have to create and maintain a highly architecture-driven solution, characterised by:

  • Service-based applications that can be delivered to any front-end system or device
  • Enhanced data availability, standardised enterprise meta-data and content management solutions (big-data ready)
  • Flexible and scalable data centres, network and communications infrastructure, able to handle and analyse larger volumes of structured and unstructured data
  • Certified security and data protection solutions, closer to the data itself, rather than the databases and carriers of that data – data will travel faster and via multiple applications and too many physical or domain checks will slow down traffic.

Given the current prevalence of legacy environments, many of the traditional high street banks will look to their incumbent ICT partners to provide these platforms and capabilities when planning for the operating models of the future. There may be a case, however, to consider the services of less conventional service providers that are emerging in this sector. We will look at the emerging ICT landscape for Retail banks in a future post and how they are perceived in the market place.

Tags: , , , , ,

Categories: Customer Experience Management, Disruption, Finance, Financial, Tech Strategy

Author:Rob Rensman

Business transformation & change professional

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One Comment on “A glimpse inside the retail bank of the future”

  1. October 7, 2013 at 12:24 pm #

    Reblogged this on beats per minute.

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