Banking’s Digital Tipping Point: Clicks vs. Bricks In The Customer Journey

By 2019, banking will hit a tipping point when half of all new accounts will be opened digitally. Consumers are quickly making the shift to digital channels, but are financial institutions ready to sever their umbilical dependence on branches?

Subscribe TodayRetail banks and credit unions have a problem than branches can’t solve. It’s estimated that by 2019, only about one-half of all new account sales will occur in the branch. This is what CEB calls “the digital tipping point” — the moment in history when financial institutions will need to generate more sales using their digital capabilities than they do in their branches.

According to CEB, this digital tipping point came about suddenly. As recently as 2013, more than one-third of consumers still preferred to bank in branches. Two years later that number had fallen to 19%, while 23% only wanted to access their bank using technology.

Today, consumers frequently define their financial goals, explore alternatives, select solutions, and keep themselves on track without any assistance from their banking provider. CEB says this radical transformation in people’s behaviors and preferences caught many retail banks and credit unions flatfooted.

While new technologies were transforming the industry and consumer expectations were experiencing tectonic shifts, retail banking providers largely reacted like nothing had changed. CEB says financial institutions still don’t know what consumers need, so they fall back on the old business model: continue offering undifferentiated products through an indiscriminate delivery networks.

In short, CEB says traditional financial institutions aren’t paying attention to the signals consumers are sending.

Sidestepping Branches

When branch traffic started waning, many financial institutions made a massive miscalculation. They assumed that consumers would follow the same buying patterns as they had in the past — that every person’s shopping journey would ultimately lead them them a branch, where the product or service would be acquired. Accordingly, banks and credit unions built their digital capabilities to support this preliminary shopping experience, with the goal of seamlessly migrating people into branches to finish the process.

The problem is that the customer journey has been completely remapped for the digital age. People don’t follow the same patterns of behavior that they did in a world where branches dominated the entire sales process. They learn about relevant financial solutions using some combination of news feeds, finance sites, blogs and social networks, and often identify a provider without ever “shopping around” in the classical sense.

Only 38% of customers who obtained a retail banking product last year said they actually learned about that product from their bank or credit union. Even among customers who visited the branch every week, only a third say they would even considered doing that additional business with the incumbent provider.

That’s why CEB says that financial institutions that wait for customers on their new digital channels the way they once waited for them in a branch will find themselves in deep trouble.

Loyalty: It Ain’t What It Used To Be

Back in the old days, consumers often consolidated their business with a single banking provider — typically their primary financial institution (PFI). Some did this for convenience, others to increase the value their PFI saw in them as a customer. But these are no longer relevant motivations. Banks and credit unions don’t reward consumers for consolidating their relationships like this anymore, and convenience is now only a fingertip away.

Consumers in the digital age can now accomplish the same kind of “one-stop experience” and enjoy best-in-breed solutions for every need by managing multiple providers using a single device: their smart phone.

As a result, CEB says digital customers are 60% less likely to consolidate all of their products at a single institution, and 30% less likely than non-digital customers to purchase their next product from any incumbent.

Becoming Part of the Customer’s Journey

CEB outlines a number of strategies financial institutions should consider to make themselves more relevant at a time when the role of branches has been diminished.

Automating Moments of Truth.Consumers believe that the biggest barrier to achieving their goals is not the absence of a good plan or sound financial tool, but rather their own daily behavior. CEB says that retail banks and credit unions are beginning to recognize the importance of these “moments of truth”, and are investing heavily to improve financial planning and to ease product purchase. They are focused on new digital capabilities to routinely intervene and help consumers stay on track, either by automating important tasks that are so difficult or unpleasant that they foster procrastination, or by showing people how their everyday decisions will impact goal attainment.

Social Media Networking. According to CEB, 71% of the consumer decision process now occurs outside of any bank’s distribution network — and therefore beyond any bank’s line of sight. That’s why CEB says financial institutions must join the vast learning network customers are already using: social media. However, less than 20% of financial institutions allow their staff to engage with consumers in social media channels. But CEB says you need to create an organized social media program — one that uses natural language filters to recognize learning or buying opportunities from consumers’ social media posts. An automated content engine can also create a personalized response with minimal effort (or none). Such systems can also ensure that social media responses are compliant. According to CEB, banks implementing this type of democratized approach to social media report that 17% to 20% of branch staff had become highly proficient social media users, and that expanding their ability to understand their customers’ lives enabled those individuals to increase their sales 15% to 40%.

Dynamic Routing. CEB says financial institutions need to serve the most complex and valuable customers with their most highly skilled associates, and vice versa. When people do enter a branch (or calls the contact center or uses live chat), you want to make the most of that opportunity by having the most appropriate staff ready and willing to assist. One bank is using dynamic routing to connect customers with the best resource. Say a consumer enters a branch with a complex question that the initial employee is unable to answer. The employee walks the consumer to a conference room and establishes a video link with an expert. The branch employee remains with the consumer so it’s not a hand-off. The institution incents the staff to seek and provide help. With dynamic routing, the institution cut its cost-per-sale in half and improved the productivity of its specialists by 240%. Furthermore, 64% of customers said that their experience with dynamic routing provided them with the best advice they ever received from a bank.

Embedded Mobile Engagement Tools. Mobile tools allow financial institutions to provide advice and offer appropriate products and services right when the consumer needs them the most. To help consumers achieve financial goals, one bank rolled out a purchase app that allows consumers to create a personal budget based on their previous spending habits. If the consumer is about to overspend, the app warns them and offers solutions. By regularly offering the customer product-agnostic advice focused on his or her goals, the bank earns the right to also use data-driven insight to suggest products. It identifies needs and offer solutions in the context of whatever life-task the customer is trying to accomplish. For example, if the customer is making a purchase that will require them to liquidate savings or investments, the bank might immediately offer a short-term loan as an alternative. To integrate that offer into the purchase now being made, the application is positioned as a “one-click upgrade” and digital documentation is presented. In just the first quarter of rolling out the app, 10% of consumers applied for a one-button loan to solve a funding shortage and 19% used the app to set up a savings account.

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Comments

  1. Out of coincidence, we just officially launched our WebRTC based Mobile and Branch Video Banking solution to the market on Monday, including dynamic routing, mobile Engagement and social media integration as mentioned in the article. We also do screen sharing and PC support, which is for branch or home. No downloads, plug-ins or SDK. So, can be apps or pure browsers (bcs of WebRTC) for new clients for digital account openings. We believe that is the way to go.

  2. Chris Yaldezian says:

    Banks will need a lot less branches. The journey will have bricks and clicks, but with a lot more clicks and a lot less bricks.

  3. The points made need to be tempered with much of what is stated: Will apply to certain types of consumers or segments. Applies to existing bank customers who will open additional financial accounts with other financial institutions. Bank customers on average have less than 2 bank products per household. Convenience is still the #1 reason a consumer opens a deposit account, where convenience is proximity to branch. They want to open their primary account with a person, much like buying their first car at a dealership.

    Regardless, most banks are like deer’s in the headlights. Most in this article will occur, but it will take longer, as the baby boomers die off and new generations outpace them. On a grouchy day at Chase I would say “We’re like dinosaurs. One says to the other ‘It’s getting sticky by my feet and there’s an oily smell.’ The other says ‘Don’t worry, there’s still plenty of leaves up here in the trees’.

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