Retail banking: the power of the personal

Natalie McLellan, Egremont: A cohesive omnichannel strategy is essential

In 2016, retail banks are facing up to their biggest challenge. A combination of new market disrupters, increased regulation and the continuing pace of technology change is set to transform the industry, shifting power firmly to the consumer. Natalie McLellan, director of financial services at consultancy firm Egremont, offers her insight.

Many commentators argue that customers’ adoption of technology creates a clear opportunity for new “digital only” challengers to enter the market, with a reduced need for personal interaction with customers through channels such as the branch and contact centres.

However, a consumer survey Egremont recently undertook with YouGov shows this wouldn’t be so straightforward. The online survey highlighted that banks continue to benefit from a high level of customer loyalty across every age group and that there is still a demand for personal interaction with their bank, not just through technology platforms.

Digital technology has increased customers’ expectations of a seamless journey across the omnichannel. Results from our online survey point to the ease and speed of digital access being one of the qualities valued most in their bank across all age groups.

Perhaps unsurprisingly, this was particularly the case with the 18-24 group (28%). However, our findings also suggest that whilst customers in this age group may be early adopters in using the mobile platform to service their current account and frequently make basic transactions, they potentially prefer the assurance of face-to-face contact when making major personal finance decisions and applying for additional financial products. This is highlighted by a further finding that 62% of 18-24 year olds with a current account are unlikely to use mobile banking to apply for other financial products.

Clearly, providing customers with correct guidance and service will be vital to attracting customers at all ages and securing high levels of loyalty in a crowded market. With customer trust in their bank in this age group remaining high at 84%, banks should build a specific strategy to target this lucratively long-term age segment of the market, which could yield long-term commercial benefit.

Our research shows that 55% of this age group value the assurance provided by face-to-face interaction with their bank when applying for new financial products such as mortgages or loans, with 37% for retirement and other investments. 54% prefer personal interaction when discussing their current account.

With customers still seeking personal interaction, the role of the branch and the contact centre remain important facets of the omnichannel journey, and in recognition of this a number of high street banks have invested heavily in installing new technology in their branch network over the past 12 months.

These findings suggest that there may be more of a challenge than predicted not just for digital disrupters such as Atom and Tandem entering the market in 2016 but also with established players looking to win new customers from their competitors.

Nevertheless, in a recent presentation to Chatham House, Antony Jenkins, the former CEO at Barclays, suggested the banking industry might be facing its “Uber moment”. However, he cautioned that to achieve the required scale of transformation, banks first need to be “ten times better” at customer service. Our report supports this view. With the scale of market disruption only escalating in the coming year banks can no longer take their customers for granted. Instead they will need to drive innovation and clearly articulate its benefits to consumers. Customer centricity is essential.

Technology is seen as the change enabler, but it won’t win the battle for customers on its own. So what do banks need to do now?

To maintain strong consumer loyalty, banks need to develop a deeper understanding of customer wants and needs, the products they seek, and how they’d like to interact across each step of the omnichannel journey. Banks should respond with relevant and innovative solutions that have genuine benefit for the customer. Customers wish to engage at a time and manner of their choosing. It is essential that banks have in place an individual, cohesive strategy for each stage of the omnichannel plan that clearly articulates how it will innovatively and flexibility deliver for each customer demographic, how it impacts the wider digital strategy, and the different skillset required from staff to deliver it. Banks need to understand what customer-centricity really means and how to achieve it, comfortable with the changes required both operationally and culturally.

In an age of dramatic market disruption, banks should not be afraid of risk; instead they should recognise the need for change and approach it in an entrepreneurial manner to find new ways of engaging with customers in a manner that is positive for both sides. Approached in the right way such change represents an opportunity to drive loyalty and deliver sustainable benefits for both the banks and consumer.

To stand out and engage the connected consumer, banks need to identify clear points of brand differentiation that have genuine benefit for the customer and ensure they are effectively communicated. Personal interaction that supports a proactive management of the relationship across the lifecycle is key. Investment is required to ensure staff have the right skillset to deliver outstanding customer service.

Successful transformation initiatives to build customer-centric, omnichannel organisations which can satisfy increasingly demanding and self-directed consumers is now business critical. In a world of market disruption and in turn such innovation and change, customers in turn expect the same from their bank. In response, banks cannot afford to be off the pace.

All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 2,036 adults. Fieldwork was undertaken on 19-20th November 2015. The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18+).