Retail banks should take a lesson from omni-channel retailers

In a previous post I commented on the lack of innovation in retail banking in the UK and in other European countries. Riding the waves of the digital revolution, there is no doubt that most retailers will eventually adopt an omni-channel (‘OC’) approach to customer service. But is this equally true for retail banks?

With ‘omni-channel’ (‘OC’) increasingly being used in the context of both retail and banking, it begs the question if both OC business models have much in common. From personal experience and from what has been written about the two sectors, they certainly have a lot in common. This article highlights how they compare. What makes OC banking more challenging than its retail counterpart and more importantly: do customers expect the same kind of experience from their banks as they already demand from the digitally advanced retailers?

When buying products online, savvy retail customers are inclined to check with peers, experts and comparison sites before they commit to a transaction. Their click-stream is more and more easy to predict, and their OC journeys are becoming more intricate and rich. From personalised orders to click & collect - there are well-documented use cases that demonstrate the growing qualities of the OC retail experience. In short, no-one is in any doubt that OC is the future for retail.

Banks have a different product and service approach, characterised by high product complexity, low transparency, low seasonality & changeability, and increased scrutiny by national and international regulators. This would suggest that if banks can manage their compliance and reporting issues, they should - in theory - have an easier ride when adopting an OC model. Nothing is further from the truth. The one single word that describes why banks will have a more difficult journey than retailers is ‘legacy’. Banks have not only build complex products and services, they have also been masters in creating complex organisations, IT systems and business processes. Any initiative aimed at adopting OC as a target operating model faces therefore massive challenges. The recent onslaught on the British and other European high streets have shown us that ‘legacy’ can quickly turn into ‘history’. The smaller retail banks seem to be particularly vulnerable, because they lack the alternative investment income that their bigger counterparts can bring to bear.

The table below highlights some of these different features and how they may influence each other.

The pressure on banks, however, of having to satisfy both customers and regulators often cause them to be conservative and lower risk-takers than retailers. As consumer we have to rely on the sector to get its house in order. There is an emerging set of customer requirements that sets the tone of the conversation that is to be had with any forward-looking retail bank.

Every customer dealing with an online or OC retail bank would expect the following:

1. Their account and access (login) details are protected by the most advanced security and fraud detection technology, regardless of which channel they decide to use
2. All transaction-based services can be accessed and ported across channels without any deterioration of security as mentioned above
3. Improved customer service levels by giving customers a wider choice of access points, reduced waiting times, request turnaround times and less reliance on paper-based authentication and authorisation procedures
4. A ubiquitous service experience that ensures that no matter which channel a customer chooses, they will be able to continue a conversation, aborted transaction or specific request based on information that was already supplied to the bank before - fulfilling the long-awaited promise of the Single View of the Customer.
5. A personalised approach to (a) recognition of individual personal finance and banking needs, (b) highly-targeted and channel-sensitive advertising and cross-selling, and (c) restoring a lost sense of loyalty and brand value.

Despite the more pressing demands on OC security and the challenges of creating a true Single View of the Customer, the real challenge is the departure from channel-specific customer service and breaking down departmental and IT barriers in the legacy organisation that typically stop a customer from continuing a journey from a branch to a call-centre or website, because the existing operations or systems simply don’t allow it.

On the upside, banks do not have to worry about the complex supply chain and distribution issues that plague retailers. On the contrary, cutting down on physical distribution of statements, mandates, cheque books, and - further down the line - cash, debit and credit cards, provides an immense opportunity for retail banks to not only cut costs, but also serve and delight a growing contingent of ‘digital natives’. The proverbial exception to the rule might be the survival of the ATM machine. Predictions, such as in the authoritative Bank 3.0 that the ATM will find a new lease of life in a world dominated by smart screens on every street corner and in every store (including the surviving bank branch), appear realistic, but time will tell.

What brings these industries together is their shared quest for a superior customer experience. It sets them apart from their competitors, in terms of simplicity, ease of use, choice of channels, sense of brand identity and value recognition. The fact that most service providers killed loyalty in the past 10-20 years, does not mean that customers are not attracted to lasting relationships with their chosen suppliers. Switching banks may become easier, but for most of us it is still a leap of faith.

If only banks would recognise this and started to act on it.