Mobile Banking and Customer Interaction

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1 Effective omni-channel customer engagement: the key to satisfying the digital banking consumer Across many industries, consumers have a growing and apparently insatiable appetite for digital relationships with companies and service providers. The relentless appeal of the digital life is amply illustrated by January s announcement by Apple of the best quarterly profit for any company ever - $18 billion on revenues of $74.6 billion. This was driven by record iphone revenues, including the sale of a staggering 74.5 million units. Not that consumers necessary recognise their relationships as digital as their usage of smartphones and tablets becomes ever-more central to their daily lives, so they increasingly come to expect effective, straightforward and immediate means of interacting with their chosen suppliers via the channels that are most convenient at any given moment. The fact that such relationships are digital is irrelevant to them; what matters is that they give them what they want at the moment they want it and recognise them as the same individual regardless of which channel they use. And nowhere is this phenomenon more significant than in the burgeoning area of mobile banking, where there is a growing recognition that this emerging capability is about far more than simply keeping customers away from the expense of the branch and voice communication channels. Rather, it is a means of providing increasingly sophisticated and demanding customers with the flexibility and value that they demand from all the organisations they deal with. Figures from the Office for National Statistics indicate that half of all adults and more than 75% of year-olds are managing their money online today. When it comes to mobile, it is estimated that some 20% of adults have made a payment on their phone, while 25% use mobiles to check bank balances. But this is set to change and fast: the Payments Council has predicted that by 2022, there will be a total of 1.5 billion UK transactions each year, up from the current 356 million. As the banking sector becomes exponentially more competitive, it s not enough for retail banks to seek advantage simply through offering mobile services, including the apps for Android and iphone that are now offered by all the major UK banks. Rather, it is those organisations that best understand their customers the expectations, needs, motivations Helen Staniszewski Feb 2015

2 and concerns of different types of customer that will emerge as the winners of the intensifying bank competition. For example, Santander s widely reported lead in current account switches in 2014 (winning 78,734 new customers while losing just 18,812 between April and June 2014) probably has more to do with traditional benefits like the 3% interest its 123 account pays on balances between 3,000 and 20,000 than with any mobile innovation. In other words, mobile is already morphing into a generic, must-have feature on which banks can build their differentiation strategies. Such understanding is a pre-requisite for outperforming the market in terms of responding to customer needs, improving service quality and increasing customer value. The ability to analyse and interpret customer behaviour is critical as it forms the essential basis for effective service implementation, delivery and organisational design. And the ability to convert this into a consistently positive and on brand experience for all their customers via every point of contact branch, voice, online, mobile, web chat, social media is set to become the key competitive asset for banks in the omni-channel era. The leaders of the future need to overcome the system and security challenges of today and be able to start a customer interaction on one channel and seamlessly continue it on another. This paper charts some of the challenges ahead for today s competitors as they seek to minimise the risks involved in developing, launching, integrating and evolving their mobile banking service portfolios. Current reality Today, we are still in the relatively early days of the mobile banking revolution. As a result, those service offerings that are available and most commonly used are comparatively unsophisticated, representing the basics of a rounded retail banking service. Typically, these include options to check one s balance, view statements, make transfers to other accounts, make payments to existing and new recipients, find help, information and product offers, and to access a limited number of location-based services such as the site of the nearest branch or ATM. Interestingly, few of these services actively leverage the advantages of today s mobile devices, including their streamlined access to data, their video and audio capabilities, their Helen Staniszewski 2 Feb 2015

3 portability and their ability to integrate different media sources. For this reason, mobile banking cannot yet be seen as fulfilling its potential as a truly value-added discriminator that drives fundamental points of difference between banks. That said, some different providers typically the largest tier-one retail banks and building societies have been offering apps for some time with specialist features that aim to make it as effortless and practical as possible for consumers to transact with them. These have recognised that mobile banking is evolving towards becoming the norm for more consumers. A good example is HSBC s Fast Balance, which offers access to your balance and recent transactions. Along with a range of generic services, Pingit from Barclays, also enables users to send cash to one another and provides the capability to split restaurant bills and leave an individual tip. This is an interesting example of a contextual approach to the customer, which seeks to encourage engagement dependent on a precise set of personal circumstances (i.e., sharing a bill in a restaurant with a number of other people). The NatWest app, meanwhile, includes an ATM locator; its Emergency Cash feature has been used for some time to spearhead its advertising for helpful banking and so add to the halo effect surrounding the brand. The evolving world of tomorrow The picture is going to become much more complex and competitive over the next three years, with the rapid emergence of new functionality that draws more effectively on the particular strengths of smartphones or tablets. Historically, innovation in the banking sector has tended to be slow by comparison with other industries, as it s widely regarded as tough to achieve, risk-laden and expensive. However, mobile banking clearly provides the greatest opportunity for innovation of any new development since the arrival of the Internet; the increased focus on understanding and fulfilling customer needs is a potent driver of innovation which will ensure the accelerated development and uptake of new services and products. Areas that are increasingly taking centre stage and in some cases are already here include: Video communications with agents and advisers, particularly in the sphere of highvalue services such as mortgages and investments Helen Staniszewski 3 Feb 2015

4 Enhanced transactional capabilities, including the wider implementation of the mobile wallet concept (i.e. a user s complete payment information located on one device, including services from competing brands) Targeted marketing activities, including product demonstrations, various forms of customer education and reaching new types of customer via the use of rich mobile content (such as games) on social media networks Actionable Alerts, which allow customers to make instant decisions, such as how or whether an imminent payment should be made The further extension of location-based services, such as mobile advertising and real-time Q&As The use of biometric data to assist with identification. The implementation of Near Field technology, negating the need to take your card out of your wallet to make a purchase Shared issues As these areas are targeted and developed over the months and years to come, all market participants will face an array of challenges revolving around a number of shared issues, some of which are listed below. It is important to recognise, however, that success in rising to these challenges ensures nothing more than the ability to participate in the mobile banking market. The discriminators of competitive success, some of which are highlighted on subsequent pages, will only be determined by superior customer understanding and implementation. Handset conformity and interoperability: the breadth of types of device currently make it difficult for banks to offer solutions that work on every smartphone or tablet Handset operability and security: a recent comment on the situation in the UK by the Financial Conduct Authority (FCA) has highlighted the potential risk of error involved for customers carrying out relatively high-value and complex financial transactions on small screens, and the potential for thieves to access accounts via malicious software or viruses. Hardware theft, too, is a high risk as devices continue not only to become increasingly desirable to thieves but also increasingly central to their legitimate owners lives, putting the onus on banks to protect customers mobile financial assets in the event of loss Scalability: the use of mobile services is set to grow exponentially in the years to come. According to the second Way We Bank Now report from the BBA and EY, more than 15,000 people downloaded banking apps every day in the UK throughout Helen Staniszewski 4 Feb 2015

5 2014, while internet banking services received 7 million daily log-ins. However, the as-yet untapped potential of 64 million UK bank accounts (source: Office of Fair Trading) means there is an immense infrastructure challenge facing the industry Accessibility and reliability: users of mobile banking services require access from anywhere in the world with 24 x 7 provision, so banks have to meet demanding performance expectations and provide robust and secure systems as a matter of course The customer at the centre These highlight some of the challenges that global retail banks need to overcome if they are to provide a mobile banking service of any sort. But these are not the determinants of competitive success. Instead banks need to provide a properly value-added and competitive service that outperforms the market based on understanding and satisfying the customer better than the competition. The ability to analyse and draw valuable conclusions from customer data is fundamental to all these areas, which include: Developing and reaching the market with apps that people really want and need: the development of contextual services that take account of what customers are doing at any given moment is an interesting trend that suggests banks are becoming more responsive to the circumstances that trigger particular needs and purchases. The easy availability of apps that meet such needs is set to become an important competitive battlefield as consumers judge their providers by the functionality that they provide. The most switched on and customer-savvy banks will therefore be able to make a direct contribution to the quality of their customers lives and create compelling reasons for people to choose them. And it is interesting to note that social media commentators are already providing positive and/or negative ratings on banking apps via established online stores such as itunes and Google Play. In other words, there is nowhere for a bank to hide a poor app for their customers. What s more, customers cannot be expected to keep their mobile banking application up-to-date by visiting and downloading from banking or other websites; rather, the banks themselves need to distribute the right apps to the right people through an accurate analysis of their behaviours, preferences and needs. Helen Staniszewski 5 Feb 2015

6 Reaching consumers in the right way with the right offer: in the omni-channel environment, it is essential that banks can conduct a fully rounded relationship with their customers, regardless of the communications channel being used at any specific moment. Consistency in terms of brand values and customer experience, whatever channels are used, is essential in achieving this capability. But so too is a recognition that mobile offers more than simply a means of replicating existing banking services. Quite simply, the effective development of mobile banking services enables banks to move further into the sphere of value-added features that can form the basis of a truly bespoke, individualised service. Social media is having an ever-increasing role in reaching potential consumers with the services and applications that are likely to be of most interest to them. The power of the multi-social super customer is ever increasing. We are also seeing the growth of customer collaboration, as groups increasingly act en masse in their interactions with organisations. A key area of interest, first developed in the retail industry, is emerging in the form of sentiment analysis. Here, analysing users social media profiles and behaviour enables the identification of those individuals whose word-ofmouth carries a particular weight of influence over the buying decisions of others. By adopting such an approach, banks can open a new channel of communication with prospects via a conduit that is already influential over their buying decisions, while adhering to data protection requirements. Developing effective, value-added personalisation: to be a properly value-added feature of a mobile banking relationship, personalisation needs to move beyond the basics that might currently be defined as including on-screen formatting, preferred language, default transactions, alerts and more. Rather, based on a detailed understanding of a customer s personal history, it might extend on the one hand into product suggestions for gentle cross-selling, and on the other into true personal financial management (PFM) functionality. While this might be hard to achieve without charging a premium, in the US, Mint.com claims to have 16 million users, a majority of whom take advantage of its free mobile alerts to keep them abreast of payments. And development is rapid, particularly in opportunities to segment the market. In the US, the launch of Kiboo.com, for example, is enabling young users to organise their personal finances via mobile, online and social media channels, giving them an Helen Staniszewski 6 Feb 2015

7 environment to learn about money management that is relevant to their day-to-day lives. In the UK, products like Money Dashboard and a recently launched solution from Yorkshire Building Society are hinting at a PFM future that embraces mobile. Anticipating and responding to the circumstances that drive financial product purchase: analysing the purchasing history of customers can help banks predict the real-life situations such as a new job, changed family circumstances, a move of house that lead customers to purchase specific financial products. This right contact at the right moment by the right channel delivers new opportunities for customer capture and product sales. This is particularly relevant when assessing credit-worthiness and supporting customers through life events that may alter their circumstances. Achieving organisation-wide customer orientation As in all areas of this omni-channel world, success is dictated purely by the quality of customer outcomes not the channels themselves. Customers will only use new channels if they are at least as effective for them as existing ones; in an application like mobile banking, they will inevitably expect the added value that mobility delivers with no detriment by comparison with other channels. This means that every successful organisation not only needs a fully integrated channel strategy it also needs to understand deeply which channels are most appropriate for which types of interaction, and then enable their customers to choose accordingly and switch between channels if one does not meet their needs. Such customer decisions must, in an increasingly competitive sector, be driven by the quality and efficiency of each interaction the days of effectively penalising customers for selecting the most expensive channel are ending. They key therefore is to develop high-quality digital (and therefore cost-effective) channels (including mobile) that customers will come to select out of preference, dependent on their specific needs and current circumstances. And, of course, it is essential that effective backend integration ensures that every customer and their interaction history are recognised and acknowledged, no matter which channels they select. Helen Staniszewski 7 Feb 2015

8 These are some of the key learnings, highly relevant to the development of mobile banking capabilities, that the experience of successful competitors in an omni-channel world have given us over recent times. This experience has highlighted how the data that can be gathered through effective customer segmentation and analysis is invaluable in matching service delivery with consumer expectations. This is the driver behind the personalisation that boosts customer satisfaction and brand loyalty. To quote the Serco paper Transforming Customer Service for the Digital Age, Having a clear understanding of the characteristics, capabilities, attitudes and requirements of different types of customers is essential. And in a recent paper on Omni-Channel Customer Care, the Aberdeen Group highlights how companies that successfully deploy an omni-channel customer strategy can drive substantial improvements in both customer retention and year-on-year revenues. Indeed, the wealth of data at their disposal means that banks are in an enviable position to gain and leverage the deep customer understanding that s necessary for building the highquality mobile services that customers will select ahead of the competition. There s no substitute for the real life experience of communicating and engaging with millions of people, leveraging the opportunity to delve into customer behaviour and motivations to help protect market share and fuel growth. Indeed, the ability to delve deeper and deeper into the drivers, motivators and evolving needs of existing and potential customers not only helps to create powerful and persuasive service propositions. It also erodes the potential for risk. It is essential that organisations cease looking at mobile as a differentiator in its own right. Any retail bank that is serious about making it as convenient as possible for consumers to interact with it already needs an evolving mobile offering; but it is those with the capability to deliver high-quality products and conduct interactions seamlessly across multiple channels that will be the winners in the digital era. Helen Staniszewski Business Development Director Serco Global Services Mobile: helen.staniszewski@serco.com Helen Staniszewski 8 Feb 2015