“For the 21st century, we are glad we never got the ballast of an extra 4,000 branches. I’m certain it’s going to turn out to be a very fortuitous thing.” – Stephen Bird, Citibank’s CEO of global consumer banking, May 2019
We have seen various posts on this blog that cover the ongoing disruption in the banking industry as customers trend to preferring digital channels for carrying out their daily banking tasks. Mobile customers demand personalization of their services as well. Banks need to balance the meeting of this need with complying with regulatory mandates such as KYC/AML/Basel etc while well as fending off agile competitors & Fintechs.
From an IT standpoint, the definition of Digital is somewhat nebulous, I would like to define the key areas where it’s impact and capabilities will need to be felt for this gradual transformation to occur.
A true Digital Bank needs to –
- Offer a seamless customer experience much like the one provided by the likes of Facebook & Amazon i.e highly interactive & intelligent applications that can detect a single customer’s journey across multiple channels
- offer data-driven interactive services and products that can detect customer preferences on the fly, match them with existing history and provide value-added services. Services that not only provide a better experience but also foster a longer-term customer relationship
- to be able to help the business prototype, test, refine and rapidly develop new business capabilities
- Above all, treat Digital as a Constant Capability and not as an ‘off the shelf’ product or a one-off manner of executing projects
To this end, it comes as no surprise that a leading bank such as Citigroup is leading the charge on declining branch investments.
According to an article in the WSJ [1] (paywall), Citigroup executives have begun a shift to digital banking at the expense of the conventional branch. Citi added $1 billion in digital deposits in Q1 of 2019, more than they did last year. And about 2/3rd of this billion came from new customers and more than half came from people who don’t live near any of their roughly 700 branches.[1]
Could it be that the Uber moment is finally here for retail banks?
To some degree, in Citigroup’s case, it is also the result of their deliberate business shift, as both BofA and JPMC continue to invest in branch banking, Citi has been focused around serving big cities and retrenching unprofitable branches. They have also been focused on integrating their cards business with retail banking. Other initiatives include rewarding mobile customers with more incentives such as rewards to drive higher adoption.
Key Lessons
So, what are some of the key business lessons Banks and Credit Unions can draw from these stories?
#1 Invest in Customer Journey Mapping
Across retail banking, wealth management, and capital markets, a unified view of the customer journey is at the heart of the bank’s ability to promote the right financial product, recommend properly aligned portfolio products, keep up with evolving preferences as the customer relationship matures and accurately predict future revenue from a customer. But currently most retail, investment banks, and corporate banks lack a comprehensive single view of their customers. Due to operational silos, each department has a limited view of the customer across multiple channels. These views are typically inconsistent, vary quite a bit and result in limited internal collaboration when servicing customer needs. Leveraging the ingestion and predictive capabilities of a Big Data platform, banks can provide a user experience that rivals Facebook, Twitter or Google and provides a full picture of the customer across all touch points.
#2 Invest in Customer 360
Customer 360 can provide the following benefits –
- Provide an Integrated Experience: A fully integrated omnichannel experience for both the customer and internal stakeholder (marketing, customer service, regulatory, managerial etc) roles. This means a few important elements – consistent information across all touchpoints, the right information to the right user at the right time, an ability to view the CJM graph with realtime metrics on Customer Lifetime Value (CLV) etc.
- Continuously Learning Customer Facing System: An ability for the customer facing portion of the architecture to learn constantly to fine-tune it’s understanding of the customers real time picture. This includes an ability to understand the customer’s journey.
- Contextual yet Seamless Movement across Channels: The ability for customers to transition seamlessly from one channel to the other while conducting business transactions.
- Ability to introduce Marketing Programs for existing Customers: An ability to introduce marketing and customer retention and other loyalty programs in a dynamic manner. These include and ability to combine historical data with real time data about customer interactions and other responses like clickstreams – to provide product recommendations and real time offers.
- Customer Acquisition: An ability to perform low cost customer acquisition and to be able to run customized offers for segments of customers from a back-office standpoint.
Demystifying Digital – Why Customer 360 is the Foundational Digital Capability – ..(1/3)
#3 Harness all your Data Assets with specific business capabilities in mind & use them to enhance your Bank’s CRM
Customer Relationship Management (CRM) systems primarily resolve around customer information and captures a customers interactions with a company. The strength of CRM systems is their ability to work with structured data such as customer demographic information (Name, Identifiers, Address, product history etc)
Industry customers will want to use their core CRM customer profiles as a foundational capability and then augment it with additional data as shown in the below diagram –
- Core CRM Records as shown at the bottom layers storing structured customer contact data
- Extended attribute information from MDM systems,
- Customer Experience Data such as Social (sentiment, propensity to buy), Web clickstreams, 3rd party data, etc. (i.e. behavioral, demographics, lifestyle, interests, etc).
- Any Linked accounts for customers
- The ability to move to a true Customer 360 or Single View
#4 Adopt Advanced Analytics
A strategic approach to industrializing analytics in a Banking organization can add massive value and competitive differentiation in five distinct categories –
- Exponentially improve existing business processes. e.. Risk data aggregation and measurement, financial compliance, fraud detection
- Help create new business models and go to market strategies – by monetizing multiple data sources – both internal and external
- Vastly improve customer satisfaction by generating better insights across the customer journey
- Increase security while expanding access to relevant data throughout the enterprise to knowledge workers
- Help drive end to end digitization
Big Data & Advanced Analytics drive profits in Financial Services..(1/3)
The Road Ahead
The time has come for global banks to relook legacy systems that hinder transformation. Investment in business capabilities such as Customer 360 and Customer Journeys along with technology capabilities such as hybrid cloud computing, containers, open APIs and AI will drive explosive growth across digital channels. However, customer centricity is not possible when you are still running antiquated legacy systems that incur large technical debt.