Banking: In search of relevance - Preface

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Over the past 30 years, banks have increasingly lost their relevance to the customer. Thinking that primarily focused on their internal needs, and not their customers’, led to them to neglect emerging …

Over the past 30 years, banks have increasingly lost their relevance to the customer. Thinking that primarily focused on their internal needs, and not their customers’, led to them to neglect emerging customer trends and created a space for new competitors to challenge their position. Consumers learnt many valuable lessons during the financial crisis at the end of the first decade of the 21st century, which coincided with the phenomenal rise of social media and consumer-orientated technology, such as smartphone and tablet apps. Uncertainty educated them about the need to gain control over their money and social media taught them the value of their personal data. Banks can no longer assume that they can use consumers’ personal data without their approval. If regulators don’t force banks to become more transparent, consumers certainly will.

Banks continue to torture customers with push marketing techniques based on models with declining response rates, whilst ignoring the customers trying to buy across disconnected channels. Meanwhile, new lean non-bank competitors stalk banks, offering consumers compelling experiences by leveraging the new technology, a superior understanding of consumers’ needs (as they are not hindered by legacy product or channel-based thinking) and better use of data.

However, all is not lost for traditional banks that have lost relevance to their customers. Banking: In search of relevance outlines a new model to help regain relevance in the customer’s eyes and discuss how banks might survive the impact of the consumer and technology shockwave. The book will appeal to any executive running a multi-channel financial services business, either B2C or B2B.

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  • 1. In search of relevance. Adapting your business to sense and respondIn search of relevance Adapting your business to sense and respond Extracts from “Banking: In search of relevance. A new model for a new reality” by Graham Flower, Phil Fawcett and Stuart Harle.© Intelligence Delivered (Asia) Limited 2012
  • 2. In search of relevance. Adapting your business to sense and respondPrefaceIn search of relevance In response, banks are searching for differentiation, something that distinguishes them from their competitors in aRelevance: it is one of the great topics for debate in the late crowded market. Maybe it’s the striking colour of their20th and 21st Century. Technology, changing economic branding or a snappy brand-marketing message. But thissituations and future uncertainties are causing people misses the mark with many customers who have a totallyconcerns about the ‘meaning of life’ and they are questioning different real-life experience of the brand.the relevance of work, governments, economics and financialinstitutions in their lives. A bank that is looking at these solutions to differentiate them in the market is not necessarily thinking about customers firstIt is evident that the relationship between banks and their and it is an example of ‘bank-in’ thinking. Banks should becustomers is changing and the customer is, rightly, gaining thinking about their relevance to customers as their primarymore control of the relationship. The on-going economic crisis differentiator. This will unify the many disparate customerhas only further destroyed trust in banks and has accelerated experience and business process re-engineering initiativesthis trend creating a point of inflection. As a result, they are no into a common customer-centric and practical solution thatlonger grateful for what their bank gives them, they want more differentiates them from the competition – and makes them– something that benefits them individually, or helps them valued by customers.solve a problem. They are searching for the relevance of theirbank in their lives. All this in an era when governments across A bank’s size and position in the market will not protect themthe globe are withdrawing from all but the minimum pension from the changes now occurring. Some argue, and weand health provision, arguably there has never been greater wouldn’t disagree entirely, that their size might work againstlatent demand for the products and services banks them in the new reality.traditionally provided. A perfect storm.© Intelligence Delivered (Asia) Limited 2012
  • 3. In search of relevance. Adapting your business to sense and respondSo how did banks lose relevance with customers? instead a new problem arose, driven by increased customer demand, as it became easier to contact the bank.Open at 9.30 close at 3.30 weekdays only and definitely notopen on Bank Holidays! So was born the second-generation of channel strategy as banks started to compete on convenience of access, newHard to believe but that was banking just 20 years ago. thinking such as the 24x7 bank First Direct came intoArguably, it was a much simpler world where banking was existence. However, banks suddenly realised these multipledelivered through one channel and almost all processing was channels were not connected by data or culture. Thedone in each branch. Having a bank account was far from a experience became fragmented; service quality declined andgiven and more of a privilege requiring two or more personal the inadequacies of legacy ‘silo’ systems were exposedreferences. directly to the customer.Products were created to fit the organisation’s (or A world of banking based on product silos moved slowlygovernment) needs and then ‘pushed’ at customers. towards channel silos, the customer often an unwelcome interruption. Relevance started to evaporate and was replacedGetting your account balance involved driving to a branch in a by increasing disintermediation.street where parking is impossible, queuing at the enquirycounter, signing a form and a member of staff would Now we live in a world where the market is saturated withdisappear into a back room, check your signature, obtain your banks (some of which are new non-traditional players), muchbalance from the mainframe and scribble it on a piece of of banking is becoming commoditised and choice of contactpaper. Not something you would do every day. methods proliferates. Being relevant to your customers and having the capability to deliver the right experience will decideThe first-generation of channel strategy revolved surprisingly who will ultimately survive or fail.not around the customer but was focussed on reducingoperational costs. Branch based back offices were How do banks regain relevance?centralised, first in local area and then to regional, nationaland often offshore centres. Call centres were created to take So we come to third-generation of thinking. This is incalls out of branches and provide ‘efficient’ handling. response to the real-world where consumers, regulators andStrangely, few if any, banks achieved the cost reductions; markets demand transparency, joined up secure data, where© Intelligence Delivered (Asia) Limited 2012
  • 4. In search of relevance. Adapting your business to sense and respondcustomers are treated with evidenced fairness and, of course, We call this third-generation thinking – Intelligence – that is,intelligence! driven by the customer where, the banks senses and responds to the customer in real-time and where allTwo main agents of change, the customer and technology, interactions with the customer are relevant, timely andare starting to shape banks’ established channels. In this new personalised.reality second-generation channel thinking will increasingly failto meet customers’ needs for relevancy. Fundamental to this new way of thinking is accepting that banks really cannot create customer demand; they need toThis new reality requires a new model. focus on stimulating latent demand and building or sourcing products that meet this demand, transparently and effectively.© Intelligence Delivered (Asia) Limited 2012
  • 5. In search of relevance. Adapting your business to sense and respondAbout usIntelligence Delivered provides retail banks with fact-based analysis and practical recommendations designed to supportsustainable performance improvement.We are independent and business focused. Our approach is based upon our practical experience in the retail banking industry andthrough engagements with banks in Asia Pacific Europe, North America and the Middle East.Our experience allows us to pinpoint areas for improved market share, sustainable revenue enhancement, customer experienceimprovement or cost reduction and to support implementation through the transfer on knowledge.Here are some examples of how we can help you:• To deliver an effective ‘joined-up’ experience to your customers;• Understand and realise the value of your data;• To understand and segment your market to deliver tailored customer contact;• Increase productivity and sales across channels working together.To find out more about how we can help you, please click here.For more information about our forthcoming book: ‘Banking: in search of relevance. A new model for a new reality’, please clickhere.© Intelligence Delivered (Asia) Limited 2012 48
  • 6. In search of relevance. Adapting your business to sense and respondCopyrightApart from any fair dealing for the purpose of research or private study, or criticism or review, as permitted under the Copyright,Designs and Patents Act 1998, this publication may be reproduced, stored or transmitted, in any form or by any means, only withthe prior permission in writing of the publisher, or in the case of reprographic reproduction in accordance with the terms andlicences issued by the Copyright Licensing Agency. Enquiries concerning reproduction outside those terms should be addressed tothe publisher’s agents at the following address:Intelligence Delivered (Asia) LimitedLevel 21The Center99 Queens Road CentralHong KongPublished by Intelligence Delivered (Asia) Limited.Intelligence Delivered (Asia) Limited believes that the sources of information upon which this book is based are reliable and hasmade every effort to ensure the complete accuracy of the text. However, neither Intelligence Delivered (Asia) Limited, the authorsnor any contributor can accept any legal responsibility whatsoever for consequences that may arise from errors or omissions or anyopinion or advice given.                                                                                                                i Leading on demand businesses – Executive as Architects, S H Haeckel, IBM Systems Journal Vol 42, No 3, 2003© Intelligence Delivered (Asia) Limited 2012 49