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Customer Experience led Approach to Transformation

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Banks worldwide are facing a crisis of confidence. According to a nationally representative survey in the US, less than half the customers had confidence …

Banks worldwide are facing a crisis of confidence. According to a nationally representative survey in the US, less than half the customers had confidence
in the financial security of banks – not a faith-inspiring number when you consider the fact that this survey was conducted a week before the
Lehman Brothers filed for bankruptcy. The sub-prime fiasco, Madoff scandal and subsequent market downslide have destroyed customer faith
and trust in financial institutions. They are worried
about their savings and investments and will not
think twice about pulling out their money from banks
if they fear its safety is at risk.

Unfortunately for banks, this erosion of faith has come at a time when customers have also become more demanding. They expect outstanding service, customized products, anytime-anywhere access to their money and real time alerts on their investments and transactions across channels.
Their loyalty is directly proportionate to how well
banks perform on these factors. Any sign that banks
are slacking, and customers will simply turn to the alternate bank they perceive as better equipped to deliver.

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  • 1. Customer Experience-led Approach to TransformationUniversal Banking Solution System Integration Consulting Business Process Outsourcing
  • 2. Banks worldwide are facing a crisis of confidence. of the high risks and costs involved in the transition.According to a nationally representative survey in Core banking transformation demands enormousthe US, less than half the customers had confidence IT investments and involves substantive businessin the financial security of banks – not a risks in case of failure. A bank must also investigatefaith-inspiring number when you consider the fact the impact this transformation will have on all itsthat this survey was conducted a week before the stakeholders – customers, partners and its ownLehman Brothers filed for bankruptcy. The staff.sub-prime fiasco, Madoff scandal and subsequentmarket downslide have destroyed customer faith Banks choosing to take this big step have gone forand trust in financial institutions. They are worried one of two approaches. Those with smaller andabout their savings and investments and will not limited operations find the ‘big bang’ approach,think twice about pulling out their money from banks which allows for enterprise-wide core transformation,if they fear its safety is at risk. more feasible. However, data migration, change management and knowledge transfer areUnfortunately for banks, this erosion of faith has problematic areas in this approach.come at a time when customers have also becomemore demanding. They expect outstanding service, The other approach is a phased rollout where thecustomized products, anytime-anywhere access bank tries out a pilot project in a specific area, toto their money and real time alerts on their study its impact before a wider rollout. This approachinvestments and transactions across channels. has the obvious advantage of minimized businessTheir loyalty is directly proportionate to how well continuity risks but has other drawbacks of its own.banks perform on these factors. Any sign that banksare slacking, and customers will simply turn to the Phased Approach to Risk-managed Transformationalternate bank they perceive as better equipped to Knowing how important core banking transformationdeliver. is to their businesses, it is clear banks cannot afford to do without it. But how do they deal with the risksTherefore, customers play a major role in a bank’s involved? The secret is to pick an approach thatsuccess or failure. As simple as the logic ‘Keep mitigates the risk and maximizes advantages at allthem happy and survive. Make them unhappy and stages. That approach is a phased transformation.perish’, may seem, in practical terms this is not as Different from the phased rollout, such aeasily achieved. How do banks anticipate customer transformation is divided into several phases. Theneeds and respond to them? How do they retain bank has its own parameters on what these phasesold customers while seeking new ones? And that will entail, based on criteria it believes to be thetoo at a time when their margins are stretched and most important, such as business volumes orthe very foundations of trust have been shattered? segments, values and priorities.However, very few banks are in a position to keep This transformation can be approached from threetheir customers satisfied on all counts. For other inter-dependent perspectives:struggling banks, it is because while the bankingbusiness has changed dramatically, banks have • Product & Services Innovation-led Transformationnot adapted their IT systems and software to keep • Process-led Transformationpace with this change. • Customer Experience-led TransformationA 2008 survey by a consulting firm points out that While a bank may start off with any of thesealmost all top retail banks globally use legacy perspectives, it will have to concentrate on eachsystems from the 1960s and 1970s. These one of these at different points in time during theout-dated systems lack the requisite agility, flexibility transformation process.and scalability and cannot be relied on to meetpresent-day challenges. Despite this, if banks At the same time, the bank in the process ofcontinue to stick to legacy systems it is because transformation must always: Customer Experience-led Approach to Transformation
  • 3. • Adhere to regulation and compliance norms stringent of customer demands.• Make simple but vital changes and ensure that Embarking on the transformation journey, focused these changes are visible to stakeholders in a on the customer experience-led approach, the bank sophisticated manner must make a vital decision based on its business priorities. It must clearly outline the customerProduct and Services Innovation-led Transformation segments that will first be impacted by the transformation. Some examples could be:Banks have changed from a very product-centric,one-size-fits-all approach where the customer was • High net-worth individualstaken for granted to a more customer centric • Mass affluent customersapproach. To succeed in today’s hypercompetitive • Rural customersenvironment, a bank has to tailor its products and • Customers the bank has engaged with lesserservices to individual customers or customer- number of products vis-à-vis those engagedsegments. At the same time, banks must re-align with a larger spreadtheir products to meet their business objectives • Corporate customersand strategies. Having established this sequence of priority, theProcess-led Transformation transformation, with a robust core banking systemThis approach streamlines and optimizes banking at its heart, can enable the bank to:processes across the institution with a view toincreasing productivity and enhancing customer • Consolidate customer informationsatisfaction. • Leverage actionable data • Develop customer strategyCustomer Experience-led Transformation • Redefine customer experienceCustomer experience-led transformation, the focusof this paper, is based on the premise that the Consolidate Customer Informationcustomer is king. Customer patronage is paramount Banks must have an idea of who their customersto a bank’s survival and if customers today demand are and what they expect from the bank, so thatmore of everything, it becomes incumbent upon they can fulfill customer needs. The first step thatthe bank to honor those demands or risk their banks must take when starting on a customerdisapproval, and subsequent loss of business. experience-led transformation is to consolidate information about their customers and manage itWhat more do customers want? They want products judiciously, so as to provide them with the productsto be customized to their requirements, ask for they need.more simplicity, convenience and integrated offering,expect more transparency and demand that banks A bank must realize that managing customerare more perceptive to their needs. How well a information effectively allows it to delight customers.bank scores on all these fronts determines its Hence, it must build a knowledge repository ofsuccess or failure. customer information that permits a holistic view of the customer. Such a view will also help banksA recent survey of customers from top US financial gauge the reasons for certain customer behavior.institutions revealed that more than half their clientsfelt that their bank was not doing what was in their Information could be gathered by carefully listeningbest interest. This clearly shows that banks need to customers during their numerous interactionsto know what is on the minds of their customers, with their banks. Customers could also be askedunderstand and know them well if they have to for their active feedback and suggestions. Onerespond to their needs satisfactorily. This kind of way of incorporating customer feedback is throughknowledge can help them design products a customer advisory board where the banks shareaccording to specific customer profiles, thus helping their plans and seek customer opinion on them.them sell the right product to the right customer at Such an exercise will help a bank gain credibilitythe right time, and allowing it to meet the most with its customers. Customer Experience-led Approach to Transformation
  • 4. This intellectual capital of consolidated knowledge Banks must also leverage their consolidatedshould be centralized, allowing no room for knowledge to educate existing customers aboutduplication, and shared with all stakeholders – both the bank’s prospects and products and to empowerinside and outside the bank. Armed with such them financially. This can also be used to attractknowledge, all bank employees across all branches new customers.and channels will be in a position to matchcustomers with products. Develop Customer Strategy The next step for the bank is to develop a customerIt is also imperative that banks respect the strategy which helps in forming a preferential pricingsuggestions and feedback of customers, not just framework and prioritizing customers based onto gain their loyalty but also because such feedback various segments. This ensures that customerscan provide valuable inputs on its own standing are sold products suited to their profile, while atwith respect to competition. Customer information the same time fulfilling their financial needs. Forand feedback are invaluable in understanding example, a bank may bundle a savings bankchanging market dynamics and reacting to them. account and an insurance scheme for senior citizens, offer custom-bundled products created byMuch of the turmoil in the world banking scenario customers for themselves, treat existing customerstoday is because of a fatal error on the part of and their families to preferential deals or bundle afinancial institutions – that of not doing a thorough low-risk product with a mortgage to anotherdue diligence on the customer and his repayment segment.capability. This led to the granting of loans to thosewho had no way of paying them back. An exhaustive A good customer strategy must also respect thecustomer profile can help prevent a recurrence of customer’s request for flexibility and conveniencesuch disasters. and distribute offerings to a wide range of customers – from the affluent class to the economicallyLeverage Actionable Data backward, and from the old to the young.However, of what use is an extensive repository Transformation approached from the customerof customer knowledge, if it is not utilized by a bank experience perspective must necessarily includefor its benefit? This customer data is an intellectual a phased plan to relook at products and servicescapital which should be mined to shape the bank’s marketing strategies, sales strategies, and supportofferings to specific requirements, and leveraged strategies, from the vantage point of the customer.to define customer segments to make profits. It is also important for banks to adopt a strategy toAt a time when customers are ready to shift loyalty educate customers about their products andat the drop of a hat, acting on customer preferences services, empower them to take the right financialcan maximize a bank’s competitive edge, allowing decisions and get customers to recommend theit to offer specific customer centric products before bank’s products and services to friends and family.the competition does. Once a customer’s profile is This will enable banks to extend their reach toconsolidated, it is a simple matter of interpreting prospective customers.his/her requirements and delivering on them asquickly as possible. It is also critical that banks inform and educate customers about the transformation agenda. ThisBanks must also use their integrated customer is critical, especially in the event of a temporaryprofile to sort out customer irritants as quickly as service interruption, as the bank progresses on thethey occur. Integration of a bank’s multiple channels transformation journey.helps provide a 360-degree profile of customers,their interactions, accounts, transactions, and In fact, a resourceful initiative would be to conductpreferred products and services. a small but focused formal or informal survey among selected retail and corporate customers Customer Experience-led Approach to Transformation
  • 5. (representating of various segments, age groups, Technologyregions and channel users), at the onset of the For banking transformation to succeed, the businesstransformation initiative. This will be useful to help plan has to align with the right technology. Service-determine the top 10 desirable and the top 10 oriented Architecture (SOA) is the best approachavoidable service components, from the customer in this context.perspective. A similar exercise can also beconducted among the bank’s relationship managers SOA enables bundling and cross-selling of productsto obtain their feedback to create the best possible and customization of services. SOA helps bankscustomer experience. use data mining techniques to understand customer behavior. Banks can also introduce value add-onsIt will be useful to add to the transformation agenda, to offerings, like personal financial planning toolssmall but useful innovations that the customer consumer online banking sites and real-timeperceives as value-additions in the near term. A reporting and analytics for corporate cashgood example is that of online real-time alerts for management solutions.transactions. These interventions will serve to buildcustomer confidence and enthusiasm. ConclusionIt is key that the bank focuses on making customers Customers are vital to a bank’s survival. To meetfeel important and appreciated. This will go a long the needs of this core component, banks mustway in ensuring customer loyalty. have a complete profile of customers which will, in turn, help in selling the right product to the rightRedefine Customer Experience person at the right time.For any bank, holding on to its customers entailsdelivering compelling customer experiences. As a Banks must use the right technology that helpsfirst step, simple but vital process changes that them analyze customer behavior and serve theirimpact customers by bringing in more simplicity requirements through a customized and consistentand convenience, with greater efficiency and banking experience at every turn.efficacy for transactions, can be undertaken. Thesewill serve as a precursor to the positive changes Reference:that help customers view the bank’s transformationjourney in a positive light. ‘Consumers Less Confident in the Strength of the Financial System’, Morpace, Sept 29, 2008With customers using multiple channels to interactwith their banks, it is critical that they are minimallydisturbed and are impacted by no loss of existingfunctionality. In the event that the bank augmentsthe back-end driving the channels, it is importantto ensure that the user experience at the front-endis not impacted, unless positively. Presentingcustomers with a unified and consistent experience Authorthrough multi-channel integration is of paramount Rajashekara V. Maiyaimportance. This also helps customers choose the Product Manager – Finaclemost effective, user-friendly and convenient channel. Infosys Technologies LimitedAlso, uniform interactions across channels ensurecustomer delight, leading to their loyalty.Banks must keep all promises they make. This willensure that customers stay with them and makelarger investments. Customer Experience-led Approach to Transformation
  • 6. Join us on Twitter, LinkedIn and Finacle Whiteboard at www.infosys.com/finacle/networking.asp

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