Will bank branches vanish in a multichannel world?


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Will bank branches vanish in a multichannel world?

  1. 1. Retail Banking Technology in Asia Rapid technological advancement in retail banking, coupled with the increasing sophistication of consumer behavior when it comes to digital technologies, is having a sweeping impact across Asia. With Internet and mobile banking to become a significant profit generator for Asian banks, the all-important question is: Will Asia’s consumers gravitate online? Should Asian banks start calling their property agents and start selling off physical branches? In a comprehensive report conducted by McKinsey & Company entitled “Retail banking in Asia: Actionable insights for new opportunities”, key trends in Asia were highlighted including “rapid shifts in three consumer behaviours—heightening demands on frontline services, fast adoption of new mobile platforms, and increasing need for credit and a larger variety of products alongside growth of the middle class and urbanization, amongst others.” Banks in Asia have a unique chance to capitalize on digital innovation. Around the world, we are seeing rapid “digitalization” of many sectors of society. Fast internet connections, easy access to mobile networks and cost-friendly digital services are now the norm that many consumers enjoy. Add to that, the rise of cloud computing, big data, mobility and related enterprise-technology innovations, all of which are paving the way for an unprecedented reduction in costs and profit enhancing opportunities for companies. “The result is a once-in-a-generation chance to create a new customer-centric, digital business model for banking.” Building a customer-centric business model makes a lot of sense as Asian customers are becoming more and more digitally savvy: “By the end of 2011, China and India already ranked first and third in the global league table for number of Internet users. Mobile platforms have been critical: in China, 65 percent of mobile-phone users regularly access the Internet via their phones, while in India, mobile-only Web browsers are expected to comprise 55 percent of the total Internet user base by 2015.”
  2. 2. The rise of mobile has created a fertile ground on which mobile banking can flourish. McKinsey notes that “Asian consumers were visiting branches less often than in earlier years. And the percentage drop recorded in Asia’s emerging markets—26 points—was almost the same as the 29-point fall seen in the region’s developed markets.” This statistics is in stark contrast to the marked increase in digital-channel usage – an astounding 36% and 39% increase in developed markets and emerging Asia respectively, according to the same study. Will branches become obsolete? This game-changing reality is now putting added pressure on physical branches to deliver more value than what has been traditionally expected of them. Will branches become obsolete? The simple answer is NO – at least according to McKinsey – but it will have to reinvent itself for it to stay relevant and valuable. The report explains: “By and large, Asia has not yet jumped on this trend toward multichannel banking. With the notable exceptions of some small markets such as Singapore and Hong Kong, most Asian banking markets, especially India and China, are still characterized by the bricks and mortar of the traditional branch and ATM.” While it’s true that important markets such as India and China are still, by and large, a “bricks and mortar” economy, the changing demographics might make it more difficult for physical branches to be justified. In the last two decades, there have been a significant increase in university graduates across Asia and the proportion of Asia’s population aged below 30 was registered at 48.8% in 2012, according to a study by Euromonitor. Simply put, Asia’s young, educated population, who are much more comfortable and attuned to the latest digital trends, is likely to change the dynamics of the whole banking industry.
  3. 3. Banks in Asia have a unique chance to capitalize on digital innovation. Around the world, we are seeing rapid “digitalization” of many sectors of society.
  4. 4. The silver lining here is that this doesn’t have to be an “either/or” proposition. Rather, they should be viewed as complementary and an opportunity to innovate. Physical branches will still serve a crucial role in the customers’ overall banking experience. But, this could be enhanced exponentially by taking advantage of the multiple platforms available to engage customers. And retail banks who know how to take advantage of today’s multi-channel world have a bright future ahead. One of which is Citibank. Citibank: A Case Study Understanding the importance of enhancing customer experience through a multichannel approach, Citibank has embarked on developing a Mobile Banking Application that incorporates social media into the app to increase engagement with the users. Citibank’s highly admired @AskCiti initiative is a shining example that Citibank “gets it”. In a news report by Wall Street Journal, it’s remarkable to note that just a little over two years ago, “the bank's social-media agents were required to get third-party approval before answering even the most mundane questions, a process that stretched response times to as long as 24 hours— the equivalent of light years on the Web.” Key officers of the bank set out to change that mindset and “they persuaded Citigroup's lawyers to give social media agents wide latitude to respond to questions about customer accounts, products and services on their own, without requiring third-party approval. Other queries that pertained to the thornier issues of government affairs, branding or strategy still had to be referred to the appropriate Citigroup executives. The different scenarios were codified into a playbook that offered guidance on how the agents should handle complaints.”
  5. 5. What resulted is a much faster and more convenient way for customers to get customer support utilizing a social media such as Twitter. The Road Ahead The rise of multichannel usage in consumers, juxtaposed with the distinctly Asian characteristics of big consumer markets, is an interesting proposition. How will it play out? Only time will tell. At the end of the day, implementing the latest technology that helps improve customer’s experience is what matters most. Anything short of that and retail banks could find itself losing its competitive advantage. Learn more how to implement latest technologies to support innovative business strategies and improve financial services in retail banking at the 5th Annual Retail Banking Technology Asia 2013 Summit happening on 3-4 December 2013 in Singapore. For more information, visit www.retailbankit.com Sources: Citi Won't Sleep on Customer Tweets http://online.wsj.com/| Retail Banking in Asia by McKinsey & Company http://www.mckinsey.com/ Disclaimer: Please note that we do all we can to ensure accuracy and timeliness of the information presented herein but errors may still understandably occur in some cases. If you believe that a serious inaccuracy has been made please let us know. This article is provided for information purposes only. IQPC accepts no responsibility whatsoever for any direct or indirect losses arising from the use of this report or its contents.