The coronavirus pandemic has created a sense of urgency for the digital bank.
In this coronavirus times, banks are now talking about the bank 5.0 to mean a bank of the future that is highly advanced and sophisticated when it comes to anticipating and meeting customer needs. However, to win with the digital agenda, automation must be at the core of the entire banking ecosystem. In these three-part digital series, Mustapha B Mugisa, Mr Strategy explores, bank 5.0 – a digital bank of the future.
An advanced digital bank keeps customers away from the banking hall. That is the kind of sophistication and capability required to win. When asked why to require customers to first visit banking halls to open bank accounts, many bank officers give the excuse that “the regulator requires so.”
Yet, innovation is the ability to overcome challenges at the least cost. In the absence of challenges or budget constraints, no need for innovation or strategy. Banks must look at the regulatory requirements as some of the challenges that the digital agenda must solve while overcoming any business constraints like the need to lower operational banking costs.
How to set up a 5.0 Digital Bank?
To build a bank of the future calls for a deliberate strategy. Three areas that must be considered are:
a) understand the customer journey and expectations,
b) invest in the digital core infrastructure to facilitate banking at scale;
c) scale-up operations into an ecosystem for enterprise transformation.
- Understanding the customer journey
Gone are the days when the customer was king. Today, the customer is a dictator. Customers want convenience and will speak with their cash. The rate of idle bank accounts increases by the day. The easiest way to churn a brick and mortar bank is to just ignore the bank account since the official closing attracts a charge. all customers do is to just withdraw their money and abandon the bank account.
Traditional banking has focused on products. The product-centric banking approach delineates customer experiences and makes banking uninteresting, stressful, and slow. Banking products have not changed– personal banking, business banking, corporate banking, investment banking, and wealth management. However, technology changes the way such products are offered with an emphasis on customer banking experience.
Winning with the customer
A bank 5.0 is customer-centric. The starting point to understand customer needs is to engage with the customer through a survey at any contact point. The customer satisfaction survey, that also seeks feedback on current and future banking needs are critical. Indeed, customer-centric banks undertake bi-annual or annual customer satisfaction surveys to inform their new product and service innovations. There is no need in introducing products which customers do not want.
Winning with the customer entails offering products and services which customers adore. As a bank executive or officer, please answer the following questions:
- What are the top five things that make customers afraid to bank with you? Is it transaction insecurity (confidentiality, integrity, and availability) over all channels and contact points – ATMs, internet, and mobile banking, or such is not an issue? If transaction security is an issue, what is the best way to assure it and make customers happy?
- What is the cost of a retained card by an ATM? What is the cost of a customer doing a transaction in your banking hall? What is the cost of a customer going to your ATM and finding it offline? How long does it take your customers to withdraw funds and transact and what does it cost them? If a customer spent just 10 minutes in the banking hall, how much would such cost them in terms of and fro the banking hall?
It is difficult to answer the above questions without listening to the customer.
One of the challenges of the local banks is the copy and paste of the corporate strategies and initiatives from the head office to the local market. In the end, some initiatives that cost a lot of money are implemented yet they add zero value as far as improving the customer experience is concerned.
Take a case of one client bank that needed transformation. The first stage was to engage with the current customers through informed data analysis. Customers were asked what they valued most, and the following were the responses:
- Eliminate cash transactions
- Enable convenient savings via Internet and mobile
- Undertake a seamless end to end banking service online without the need to visit bank branches
- Reward me for my business
- Power over savings – decide how much to fix, and for how long without coming to the bank to apply
- Power to decide where to invest the funds
- A convenient banking ecosystem the conveniently facilitates savings and investments without the need to have physical contact with the bank staff
- Empower me to monitor my cash flows through my bank account
- Link my bank account to my business so that other bank customers can pay me directly in case I offer the services
- Do not shame me – allow me to undertake my credit risk assessment and know the maximum loan I can get based on my input data
- And of course, the ability to network with other bank customers especially at bank training events and customer get-togethers.
- And many more…
With the above insights, the bank was able to assess the required banking process value analysis and ideal technology to power the transformation into a digital bank. In part 2 of this article, we explore how the bank rationalizes the required capabilities to win with the customer.
And in part 3, we shall explore the execution discipline to transform the bank with a digital agenda as part of the strategic core.
Copyright Mustapha B Mugisa, 2020. All rights reserved.
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