Paul Adams is chief executive at Glory Global Solutions
With digital solutions gaining popularity every day, McKinsey has suggested that once a credible digital-banking proposition exists, customer adoption will be swift and digital laggards will be left behind.
There is a powerful economic argument here, with the research estimating that banks can remove 20-25% of their costs by leveraging this digital shift to transform how they process and service their customers, writes Paul Adams. That makes the move to digital extremely attractive to banks seeking to cut costs and modernise.
But in the rush towards digital banking, are banks in danger of abandoning one of their best ways to engage with customers – their branches?
To date, banks have tended to view digital transformation as a phased, and often still incomplete, process. When taking out a bank loan online, the customer journey may begin on the bank’s website, but in many cases it will end with a phone call to the bank or even a trip inside the branch. McKinsey cites the airline industry as an excellent example of how to move from this phased digital offering to automating almost every aspect of the customer experience, creating efficiencies without risking safety, something that could work equally well in the retail banking sphere.
Certainly, digital banking is the future and UK banks need to catch up with their more advanced counterparts in other countries. For instance, ING bank in Turkey has already piloted new-look digital branches that revolutionise the in-branch experience and are far ahead of the service offered by even the most innovative UK market players.
This fusion of new technology with the traditional branch format could be the future of the high street branch. Our experience of working with the most forward-thinking retail banks around the world is that digital services will increasingly complement existing cash management solutions, rather than replacing them.
The fact is that people are emotionally tied to both cash and branches. Even when attractive alternatives exist – like mobile banking, text payment methods, and NFC card technology – many customers like having a variety of options available to them. For this reason many legacy elements of the banking service chain remain in place, for example cheques. And if banks in five or 10 years’ time are going to have to be digital and still handle cash, then it’s how they are managed from a customer and cost perspective that becomes key.
We recently conducted research which showed that 9 in 10 people feel frustrated by self-service technology, with a preference for human interaction cited as a top reason for avoiding digital alternatives across the retail industry.
Undeniably, bank branches cannot stay as they are. Many already look out-dated and unappealing. Queues are often too long, and customer service can be poor. But, if we think about how they are likely to change, we are already seeing the traditional differences between bank branches and ordinary shops eroded. It’s often discussed that bank branches are becoming stores, while shops – often recycling their own cash – will become more like banks.
However, it’s the lessons banks learn from these retailers that are key for success. With the soon to be launched Apple Pay moving Apple firmly into the payments space, banks need to ensure their in-branch and digital channels offer the same cohesive service. While Apple has an excellent online presence, its stores are still flooded with customers. The company has adapted its physical store offering – theoretically redundant in an online world – to make the customer experience central to the reason for visiting, and providing a powerful selling point for the brand.
Like Apple, the most innovative banks are investing in branch makeovers to appeal to customers more emotionally. The branch goes from being a place where you have to go, to a showcase for services, many of which consumers will buy online.
There is also the human element. If you take out an online mortgage or loan application, you’ll notice reams of terms and conditions. Often, the reason these transactions are finished by phone is that many people want reassurance from an adviser. Money is a very emotional subject, something we seem to miss when discussing digital transactions. Some people may be buying their first car, first house, setting up a business or passing other life milestones where the support from a bank in the form of personal – and often face to face – interaction is reassuring and helpful. From the bank’s perspective, that personal contact is the opportunity to cross-sell and to build a relationship with customers.
Ultimately, embracing digital is crucial to the future success of UK retail banking, but it’s also just part of a bigger picture. Over the coming years the most forward-thinking players will be those who innovate to ensure their digital presence is tied into a wider plan that taps into customers’ human needs and makes branches an attractive space to do business.
