Andrew Birmingham

About Andrew Birmingham

Andrew Birmingham is the director of the Which-50 Digital Intelligence Unit.

The high standards of customer experience we now expect have those in the banking industry scrambling to catch up, as Andrew Birmingham explains.

 

The success of retailers building ever better customer experiences is contaminating the banking industry, making it even harder for financial institutions to keep up, according to a new study in the US by the Banking Administration Institute and software provider, SAS.

The report, entitled “Digital Banking and Analytics: Enhancing Customer Experience and Efficiency”, describes the influence of leading retailers and suggests that “by engaging customers in superior buying experiences, these retailers are conditioning customers to expect the utmost in convenience and personalization. As a result, customers now expect the same–or better–from their financial institutions.”

The study reinforces earlier work done by companies such as Capgemini, who found that even though banks and financial services businesses are improving their performance, those improvements are not adapting fast enough to keep up with the needs of consumers.

The bottom line of the report is that customers take the best digital experiences in any context and apply them to every context, thereby raising the bar for everyone. Among some of the headline findings: 40 percent of respondents use online banking at least five times a month; 22 percent use mobile banking with the same frequency; in addition, 43 percent reported using online bill pay at least twice a month. According to the study’s authors, “Many respondents indicated online or mobile is their preferred channel for a variety of relatively sophisticated tasks. In addition to the 66 percent who prefer these channels for transferring funds, 46 percent prefer them for managing investment accounts and 18 percent even prefer them for resolving an issue with an account.”

Digital services are also having a corrosive effect on brand loyalty, with respondents to the survey indicating a strong willingness to shift financial services providers if better digital services are available. That disloyalty is more marked among younger consumers. The study reveals that Financial Institutions (or FIs) of all sizes recognise the importance of expanding their digital services and are prioritising these investments. “The BAI Retail Banking Outlook Report, based on a survey of FIs, revealed mobile banking to be a key short-term investment priority. Although FIs across the size spectrum indicated the branch remains the most popular channel, they also reported substantial usage of online bill pay, person-to-person (P2P) payments, mobile bill pay and remote deposit capture (RDC).”

While customer satisfaction is critical, financial institutions are also viewing digital through the prism of cost containment and acquisition. “One of the most immediate advantages is reduced costs,” claim the authors, with 41 percent of FIs identifying the migration of customers to online and mobile channels as an opportunity to reduce expenses. “With the premium customers place on these channels, FIs have a rare opportunity to make investments that can increase customer satisfaction and control costs.” Just under 20 percent of FIs consider acquisition a critical business challenge, according to the BAI Report. “Well-developed digital channels create opportunities for FIs to address this challenge as well as increase their share of wallet and expand their market share, which 28 percent and 33 percent of FIs, respectively, consider priorities.

“The foundation of these opportunities is the data that digital channel transactions generate on customer behavior, such as buying habits. This data, which is objective and gathered without human intervention, can show how customers behave throughout all channels. When data from multiple channels is combined, FIs can see a clearer, more complete picture of their customers.”

This article first appeared in Which-50.com. It is reprinted with permission.

 

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