Banks need their branches as well as their digital tech to satisfy customers

Profile picture for user slauchlan By Stuart Lauchlan January 15, 2017
Salesforce's Connected Banking report throws up some interesting findings on what customers want from the banking sector, things that some leading banks are addressing - but don't forget the human touch.

The digital transformation of the retail banking sector is something we’ve covered in considerable depth at diginomica. It’s a market in which clear divides are emerging between the legacy providers and the challenger brands, the latter swooping in with the most up-to-date technology as an enabler while the former struggles to overhaul archaic practices that date back, in some cases, hundreds of years.

I’ve had considerable travails over the years with banks in both the UK and the US, running foul of the likes of Barclays, Lloyds, Bank of America and even the supposedly customer-centric First Direct. I’m currently with Metro Bank, one of the UK market challengers, and to date, I’ve been very happy with its approach to customer experience.

Today saw the publication of the 2017 Connected Banking Customer report from Salesforce, based on a survey of 2000 people in the US and 1000 in the UK. The findings make for some interesting reading and some useful comparisons with what we can see in the banking sector in terms of strategtic priorities.

First up, trust. Basically we don’t really trust banks, so our relationship with them is one that’s based on reluctant acceptance that it’s something we have to have rather than something we embrace. That said, one in five millennials (21%) does use any form of financial institution to address their financial needs, compared to just 6% of baby boomers and 9% of Gen Xers.

Less than half of Americans who have a checking or savings account (48%) trust their bank with their financial information, and only 26% strongly agree that their bank has their best interests at heart. A case in point is that while banks will contact customers if there are fears of a security problem or an account breach, less than half of US respondents say their bank reaches out to monitor or assess customer satisfaction levels.

Less than one-third (29%) of UK respondents trust their bank with financial information and only 15% strongly agree that their bank has their best interests at heart.

Investment in mobile banking apps is on target for those institutions who worship at the altar of the Millennial customer - which, let’s face it, is every one of them once they start talking digital transformation. Nearly one-third of millennials with a checking or savings account (31%) use their bank’s mobile app for most routine transactions, compared to just 17% of Gen Xers and 6% of baby boomers.

That said, just as the retail sector has been learning about the benefits of having an offline presence to sit alongside the online investment in e-commerce, so too the legacy banks have a built-in advantage in the form of their branches. Some 58% of US respondents said that they have walked into a bank branch in the last four weeks, while in the UK 41% of respondents said the same.

Putting into practice

Does this map onto the strategic priorities of leading banks? The answer to that is, up to a point, as can been seen in recent remarks from banking leaders. At Bank of America, for instance, there’s increased take-up of digital banking services, with mobile devices now representing 19% of all deposit transactions, while sales on digital devices now represent 20% of total sales.

But the bank still sees one million people every day walking into branches around the country, so there’s a balance that needs to be struck, according to CFO Paul Donofrio:

Many of these customers still use our branches to transact, but many also use the branch as a financial destination where they can learn more about products and services, work face-to-face with a specialized professional and generally improve their financial lives.

[Customers] need that channel. They need it to transact some of them. But a lot of them come in for advise and we want them to do that. So, we need a certain footprint of financial centers.

We have digital appointments, so people come into the branch, but they don’t just on walk in. Now, they are coming in for an appointment that they have made with over their smartphones. So that really helps us from an efficiency standpoint as well if we can get people to do that it’s better for them, it’s better for us.

But while there’s evidence that customers want to come in and talk to a human being, Bank of America is planning more tech investment to provide smarter interactions with clients. Donoforio cites a particular example:

We expect to introduce our artificial intelligence application, Erica, this year. She will add to both the functionality and excitement around digital banking. Importantly, as adoption rises, particularly around transaction processing and self-service, we expect to see efficiency and customer satisfaction improve.

Over at Wells Fargo, Donoforio’s counterpart John Shrewsbury is keener on pushing focus on the out-of-branch experience:

We continuously evaluate our branch network and while our physical distribution strategy is driven by customer behavior. While branches continue to be a critical component in serving our customers’ needs, our investment in digital capabilities has enabled us to seamlessly serve our customers across channels providing them with more choice and convenience in how they bank with us. And as a result, more transactions are occurring outside the branch.

But while Wells Fargo has been closing branches - expecting to close 200 this year - it’s not a hard-and-fast policy, but one which may see numbers increase or decrease based on assessment of customer needs:

There’ll be a feedback loop from this process to see how customers react to it, whether we’re right or wrong about the customer attrition, deposit attrition or other things that we’re trying to minimize by taking the strategy that we’re taking. If six months into this, we think there is an opportunity to do more, then we’ll come back and we’ll do that.

We’ve got branches, there is a lot of them as you might know in very low cost locations and so the expense pick up may not be exactly the same as if they were all in coastal communities or major metropolitan areas etc. There is a lot of difference from one to the other. But this is the beginning of a process where…the whole time customers will be reflecting in their use of physical versus virtual, how much they value coming into our branches and we can keep feeding that back.

Similar views have been expressed by Royal Bank of Scotland, whose CEO Ross McEwan is a big fan of tech investment:

It's fair to say we have gone beyond the tipping point in the way banking is now being done with already over 20 times more digital interactions with customers than face-to-face ones and over one-third of our sales are now done through our digital channels.

RBS is also looking to AI as a future enabling tech:

We want our colleagues spending as much time as possible speaking to customers about their needs rather than being tied down in low-level administrative tasks. To help this, we will be piloting a web chat adviser powered by artificial intelligence to deal with simple customer queries. And next year we'll start rolling out a new technology tool to allow customers to make their own investment advice decisions.

We've also introduced technology that allows new business customers to receive their bank account number and sort code in under an hour. This used to take eight days. And we still can get better. But these initiatives and innovations show that we're responding to the way customers want to do business with us and bank for the future.

My take

It’s the customer-centricity thing that matters. Tech for tech’s sake doesn’t change that. People want to go into bank branches to get advice and face-to-face contact. That’s human nature. It’s handy to be able to check balance on my phone or to pay a bill while on the move. But I want to sit down and talk to a human being when things are more complicated.

It’s also about the attitude towards the customer. I initially liked First Direct’s approach to customer service, but over the years it became increasingly ‘Nanny knows best’. Being told by customer service people that ‘it’s for your own good’ when in fact it was about supporting their own internal processes became increasingly irritating, climaxing in the killer statement one day that “It’s not your debit card, sir, it’s our debit card which we allow you to use’. That may be factually accurate, but First Direct found ‘its’ debit card returned to it pretty promptly after that!

So spend on AI, spend on online, spend on mobile - but don’t forget to spend on the human interaction training for your staff in branch as well.