Traditional banking providers have heard the cacophony of consultants screaming about “digital transformation roadmaps” and the importance of CX in the digital age.
And this has Andrew Stevens a little freaked out. Stevens is a banking expert at Quadient who says that the emphasis on “digital first” has actually lead to the creation of new silos at some financial institutions — something that can squelch the very momentum such projects are intended to create.
Have some financial institutions gone too far with their digital strategies? Perhaps. But if they have, at least the reasons why are understandable. After all, traditional banks and credit unions are facing tremendous pressure from digital entrants like Ally and Simple, and from all-digital offshoots of major banking brands including Finn (Chase) and Marcus (Goldman Sachs).
Both these new species present a host of fresh challenges for any organization hoping to compete in the banking sector. At least those with traditional roots in the banking world enjoy several advantages over newcomers and upstarts. Among them: customers, branches, and data.
Unfortunately most financial institutions are not fully exploiting this potential, according to Celent analyst Dan Latimore. Ironically, one thing holding them back is a too-narrow focus on building their new digital experience.
“Digital banking is inextricably linked with an omnichannel delivery model,” said Latimore. In other words, you can’t obsess exclusively over one channel at the expense of others. Traditional banking providers that make this mistake are surrendering their historical strengths.
The Battle Between ‘Digital Only’ and ‘Digital First’ in Omnichannel Strategies
A mishmash of buzzwords making the rounds in retail banking these days is “digital omnichannel experience,” something Stevens calls “an oxymoron.” Omnichannel means omnichannel, he explains. (For those who may have forgotten, “omni” is a word with Latin roots meaning “in all ways or places.”)
“Your messaging and understanding must be consistent across every single channel you have,” Stevens says.
Delivering a true omnichannel experience is difficult, however. As Stevens put it, “to many people, it seems like an unachievable Holy Grail” due to the complexity and cost involved in connecting silos and channels in the typical financial institution.
Stevens says there is absolutely nothing wrong with the ‘digital first’ message, per se. “The problem comes when ‘digital first’ becomes ‘digital only’,” cautions Stevens. “This is causing real concern for the overall omnichannel endgame in many banking providers.”
“By focusing on the execution of the digital channel before you’ve thought about a broader, cohesive, longer-term plan,” Stevens continues, “you end up actually building a silo with even higher walls than you had before — all the while trying to convince yourself that by building up that digital channel, you’re breaking down silos.”
“People focus on digital to the detriment of everything else. They shout, ‘Wow, we’ve got omnichannel figured out. All we had to do was just redefine it!'”
Stevens believes they are kidding themselves. He suggested that what they are really saying is that “You can get the same experience on your desktop and mobile devices, but we’ve not thought about any of the traditional channels or anything else about CX outside of the digital world.”
“So if you want consistency of messaging across your platforms,” Stevens advised, “take a step back from that digital-first strategy and be sure you are not thinking digital only. Otherwise, you could find yourself in an uncomfortable spot when a senior executive views your new digital platform and says, ‘That is amazing — now port it into staffed channels.’ Then you’ll have to explain just how much that will cost, because you would have to start from scratch with a new strategy.”
Read More: 25 Digital-Only Banks to Watch
CX – Not Products or Rates – Now the Ultimate Differentiator
“In a world of commoditized banking products, CX is the ultimate differentiator.”
— Dan Latimore, Analyst with Celent
Why is omnichannel banking so important for financial institutions to master? Celent’s Latimore pins it on “all the little interactions consumers make with their bank or credit union across all touchpoints that are, at the end of the day, what creates customer experience.”
According to Latimore, the customer experience is what builds relationships, and — in a world of commoditized banking products — it’s ultimately the primary point of differentiation between one banking provider and the next.
Several strategic imperatives flow from that conclusion. Latimore lists three specifically:
1. Move away from constantly selling. Instead, Latimore says you should focus on trying to help people without the expectation of an immediate return. Then when it is time for them to buy something, you’ll be in a good position. As an example, Latimore pointed to initiatives launched by Chase, Bank of America, and US Bank to help consumers with the car-buying process. Their programs help people find the car they want at a price they think is fair. “At the end, of course, the banks are there with a pre-approved loan,” said Latimore. “This is just the beginning of a wave that can be applied to all sorts of things—mortgages being an obvious example.”
2. Learn about your customers/members from all your interactions with them. In other words, you need a robust data analytics program.
3. Focus on delivering a superior customer experience. When you do, price matters less. For instance, Latimore says Quicken Loans is not competing on price, but on experience. “They are able to charge anywhere from 0.125% to 0.375% more on their loans because their customer experience is so seamless.”
Latimore suggests it all boils down to personalizing the experience — focusing on targeting, talking to and tailoring the experience for “a segment of one.” Don’t make consumers tell you what they need when you can figure it out based on their behavioral and transactional data. This data can also be used to show consumers how they compare with peers. Just make sure all your actions and requests are contextual and appropriate.
“Banking is a means to an end for consumers,” Latimore observes, “but many banking companies cling to the notion of ‘What is the next best offer,’ or ‘What can I sell to them next?’ The reality is there are not that many times when most people need a new banking product.”
Latimore says financial marketers should shift from a product focus to a focus on the financial health of the consumer — from “next best offer” to “next best action.” The action could be advice or encouragement, such as commending the consumer for reaching a savings goal.
“Fundamentally, financial institutions have to move to a new mindset — generating win-win interactions with consumers,” said Latimore. Technology, he added, makes many low-cost, high-value consumer interactions feasible now, that wouldn’t have been previously.