Looking to China’s Skipped Generation

Ericson Chan is CIO at Standard Chartered China

China’s new generation of youngsters will continue to drive adoption of new technologies and new channels across traditional sectors including banking and payments. Current trends show that this rate of adoption will continue to increase. For banks to stay relevant, they will need to push boundaries to stay ahead of customer adoption, while remaining sensitive to the intricacies of development of their customer needs, writes Ericson Chan.

China’s miraculous economic catch up since reform and opening up has created an unprecedented generation of consumers. The way this generation has adopted the on-line world in China is very different from that in the West. This generation has skipped the natural evolution of customer experience, leapfrogging to the latest on-line world experience – and can be termed the “Skipped Generation”.

The “Skipped Generation” are those who went from having no direct access to the internet to active users of the internet and online services from a smartphone as their platform of choice.

Over the last 10 years, the cost of smartphone technology has decreased exponentially, so that by the time of internet adoption, many users were able to skip the PC entirely and opt instead for the handier smartphone.

Data from the China Internet Network Information Center shows that of China’s 564 million internet users, 420 million are accessing the internet via smartphones – up 18.1% on the previous year. This is much faster than the overall growth rate of internet users.

The report also points out that smartphone use is increasing in popularity across all indices – including Weibo applications, on-line shopping and mobile banking. The Skipped Generation is largely responsible for these growth figures.

Customers in the West may browse products in a retail stores, and then return home to purchase them on-line – they are familiar with the brand and merchandise before completing their transaction on-line, However, in China many Skipped Generation consumers, especially those in tier-3 or growth cities, have never visited the physical retail outlet of the luxury brands which products they browse and purchase on-line. When items of clothing are delivered to a customer, part of the service includes having the deliverer wait until the customer has tried on the clothing item. This on-line phenomenon is like bringing the offline world straight to your doorstep. This on-line-offline integration that we are observing is a unique phenomenon in China.

China’s Skipped Generation consumers have different expectations and requirements of products and services when compared to the generation of consumers that accessed the internet only from their desktops.

In addition to the same and next day delivery culture of convenience that has grown out of the availability of low cost delivery resources, Skipped Generation consumers expect even more instant gratification – whether that be receiving a mobile coupon directly to their smartphones which can be used on the spot; completing a task on-line (for example, paying a bill or making a transaction) or near-immediate social network responses from companies to which they are taking their experience.

The inevitable next level of demand will see an increased level of personalisation in consumers’ interactions with a service or product provider – this could come in the form of a location triggered push notification coupon based on the users’ spending patterns, unique design of a product or personalisation of a service.

In actual fact, the data and technology to affect a high level of personalisation is already widely available. Big data can provide the what, and smartphone technology can provide the delivery mechanism.

Rates of adoption and perceptions towards security can be in fact what hinders wider usage of newer personalised products and services. The preferences of the Skipped Generation are important to monitor and understand, because of all peer groups, this generation will be the first to adopt new trends.

As the retail sector has embraced this new model to create a new retail experience, the on-line to offline fulfilment has become a key preference of the Skipped Generation. There is a natural expectation that the on-line to offline experience will be unified. Customers expect to be treated in the same manner regardless of whether they transact on-line or offline. A request can be triggered online and be seamlessly completed in a retail outlet.

Mobile is revolutionising the way China and the world banks, and it is key to commanding customer relationships. Ubiquitous connectivity, networked devices, social media, NFC and mobile payments are some of the powerful forces shaping the banking eco-system today – and these capabilities are what our Skipped Generation customers expect from their bank.

Some initiatives we have launched in China include Breeze – Standard Chartered’s suite of banking and lifestyle apps, including Breeze Banking, Breeze Home, Breeze Good Life and Breeze Trade, these provide a differentiated mobile banking solution to customers. Our customers can bank with us anytime and anywhere. We design our solutions to be fully integrated with our customer lifestyle. Even the background of our mobile apps alter according to the time of day. This is very much our way of catering to the instant gratification and personalisation expectations of the increasingly affluent Skipped Generation. As at the end of 2012, about 1.2 million users had downloaded Breeze.

We have also created a unified on-line/offline experience. Our customers expect to have a seamless interaction with their bank and be addressed in the same manner across different channels, regardless of whether they are using an ATM or transacting on-line. Customers can choose to start a request on-line, such as account opening or acquiring an investment product, and complete it by meeting in person with an investment advisor at our branch.

Despite these great strides, banks can and must do better. As organisations, we can be slow moving when it comes to experimenting with and implementing new trends – which is understandable due to the risks involved.

It is increasingly important for banks to develop flexible test and learn capacity in customer facing technology. Apart from investing in the resources to develop and test new technologies, attitudes will have to move away from adherence to traditional channels and banks will need to exercise their ability to anticipate customer trends.

Ideally banks would be able to significantly adapt their technology, innovation and digital development models to implement a more agile decision making and execution process to help improve the speed to customer for new initiatives.

A suggested model could be a capsule that contains researchers, technology implementation specialists, plus legal and compliance expertise. The capsule would be responsible for staying ahead of the consumer technology trend curve and, where necessary instigating, alterations, add-ons and innovations around a bank’s current offerings to bring it in line with the expectations of customers and potential customers. Once the new initiative is launched it can be passed over to the operations team.

While every organisation is rushing to conquer the on-line experience, it is just as important to integrate the on-line experience with the offline world. An organization should not treat an on-line customer like a stranger when they visit the retail outlet.

China is an extremely dynamic environment to work in and as such it is important to keep pace with change. Banks should continue to push internal boundaries in order to be able provide customer banking experiences that are simple, instant and personalised.