BANKING IN THE CUSTOMER EXPERIENCE ERA DAVID POOLE & JON DAY

BANKING IN THE CUSTOMER EXPERIENCE ERA DAVID POOLE & JON DAY

Banking is getting better faster, easier, more mobile, more connected, more transparent, and more personal. And, for many banks, there has been a very public and intentional renewed focus on customer advocacy on rebuilding the trust lost during the financial crisis. Yet, despite years of ad campaigns, a full 63 percent of consumers believe banks only care about their own interests. 1 We believe banks must bridge the divide between what they say they do and what they actually do with a new service orientation that responds to customers needs, wants, and desires. The future of banking is about enabling customers to realize their dreams. FIGURE01 Changing priorities Banks that thrive will simplify the product set and develop a complex and nuanced understanding of the customer. Simple understanding of the banking customer Complex product set Understand your customer and simplify your product set Earning public trust is a matter of the customer s banking experience living up to the brand s promise. This hinges upon a detailed understanding of the customer s changing expectations, particularly the need for purpose. We are seeing leading banks flip the current simple view of the customer, and endlessly complex view of the product set, on its head. Complex understanding of the banking customer Simple product set The successful bank will have a refreshingly simple product set built around relationships, and a more nuanced understanding of customers and their needs for breakthrough experiences (see Figure 1). The bank of the future will act on its wealth of customer data a shift in emphasis from systems of record (data stores) to systems of engagement (informing customers). 1 CG42. Retail Banking Brand Vulnerability Study. http://cg42.com/2013-retail-banking/.

Seventy-five percent of global banks are now investing in a customer-centric business model, marking a profound transformation of their business and culture. 2 Banks recognize that people don t buy a loan. They buy a car the loan is the enabler. Yet still, banks often lead with the product. Bank brands continue to speak to their consumers in a siloed, product-based way in part because the banking culture is riskaverse and overwhelmed by disruption, regulations, and the economy. In the past, banks and their agencies have been unremittingly focused on technology, product, and process, and the motivation to invest in new capabilities has historically been to reduce costs or increase sales. For example, significant savings were realized as customers shifted from teller to ATM, from ATM to online, and from online to mobile where each advance reduced the cost of service. This is, of course, valuable. But it comes down to why they set out to improve the banking experience. Banks should shift from driving costs down to driving consumption up. Although their first thoughts are to cut costs, banks can choose to delight customers (see Figure 2), thereby resulting in new revenue streams and efficiencies that are by-products of customers empowerment in money management. Most banks focused on fixing the foundational aspects of usability and usefulness will, over time, shift toward experience as they earn the right to delight. Winning customers will require going beyond the zero-sum game of rates and products; it will require a new focus on experience and delight. It isn t just about features; it is about the emotional connection or what we, in the experience practice, call sense. 3 FIGURE02 What customers say they want from a bank Customers care about the lowest rates and seek a bank which helps motivate them understanding their needs and helping them reach their financial goals. They also prefer a product that is easy to use. Most customers don t express interest in having a delightful banking experience, yet it remains essential to the future of banking. WHEN IT COMES TO CHOOSING A BANK, IT IS IMPORTANT THAT THE BANK Offers the best rates and terms Understands my needs Helps me reach my primary financial goals Offers products that are easy to use Makes banking delightful and enjoyable Source: SapientNitro online survey to our proprietary U.S. community, n=422 RANKING 1 2 3 4 5 AVERAGE SCORE 2.51 2.73 2.97 3.10 3.57 2 PwC. Retail Banking 2020. http://www.pwc.com/et_ee/ee/publications/assets/pub/pwc-retail-banking-2020-evolution-or-revolution.pdf. 3 We define five dimensions to help quantify the essential elements of experience (see Insights 2014: The Bottom Line on Experience ). Sense is defined as the extent to which a person discerns a meaningful, emotionally relevant story.

As rates and features are further commoditized, banks seeking to remain relevant must deliver customer experience with the extraordinary power of delight and enjoyment (see Figure 3). Forrester estimates that addressing the enjoyability metric is worth $81 million in annual incremental revenue to banks. 4 Not to mention that the number one reason for opening or closing a bank account is the experience gap. 5 Invest in customer delight The delightful omnichannel banking experience does not yet exist and remains a white space for the first bank to deliver. These experiences require significant investment; however, banks current technology spend is increasing at a slower rate than other industries (see Figure 4). Even as banks prioritize their money toward omnichannel solutions, their overall IT budgets are growing slower than retail, manufacturing, or business services. Banks also tend to have older technology stacks, further reducing flexibility and increasing costs. FIGURE03 A significant gap With different objectives, banks have different priorities than customers rates and operational costs being just two examples. But both aspire to have delightful experiences for their customers and themselves. FIGURE04 Banks wants Delightful Conversion to sales Reduce operational costs ASPIRATIONAL EXPERIENCE GAP FOUNDATIONAL 2015 U.S. industry tech budget spending in billions 4 Customers wants Delightful Ease-of-use Best rates, meets my needs, and helps me reach goals Banks current technology spend lags behind the U.S. average, standing at 4.1 percent to 5.9 percent respectively. $1,382 $1,305 5.9% $1,231 6.0% $147 $140 5.3% $131 7.1% $168 $159 5.5% $148 7.4% $299 $254 $278 7.4% 9.7% $78 $75 1.2% $76 2.9% $134 $143 $153 6.3% 7.5% $217 $221 $231 2.2% 4.1% $272 5.3% $287 6.3% 2013 2014 2015 Percentage change from Percentage change from 2013 to 2014 2014 to 2015 Manufacturing Retail and Wholesale Business Services Utilities and Telecommunications Finance and Insurance Public Sector Media, Entertainment, and Leisure $305 4 Forrester Research. The Business Impact of Customer Experience. https://www.forrester.com/the+business+impact+of+customer+experience+2014/fulltext/-/e-res113421. 5 Ernst & Young. Winning through customer experience: EY Global Consumer Banking Survey 2014. http://www.ey.com/publication/vwluassets/ey_-_global_consumer_ Banking_Survey_2014/$FILE/EY-Global-Consumer-Banking-Survey-2014.pdf.

Like a fantasy football team (see Figure 5), we can imagine creating a fantasy finance team with the best touchpoints in the industry. Our favorites include Capital One 360 Cafes, Mint s personal finance management, the cardless ATM and Touch ID of RBS, safe-tospend by Simple Bank, Wells Fargo s cross-selling, the high cap on Ally mobile deposit, and USAA s customer service. Pick your own favorites and imagine them tightly integrated to deliver on your brand s promise. Reorganize to make it possible To deliver banking in the customer experience era, banks are looking inward as well. The internal organization of banks traditionally built around products and strongly siloed has inhibited strategic change. We ve started to see the development of entire new ways of aligning and organizing talent from RBS s journey managers, to U.S. Bank s new omnichannel organization, to TD Bank s Direct Channel organization. Banks are developing structures that help their employees look across products and focus on the customer experience. Banks are restructuring to implement their customer-centric business strategies. up with competitors who offer features such as swipe balance, video ATMs, or Apple Pay. However, we recommend starting with table stakes features, focusing less on being first to market and more on how to package the features together. Then, using the following traffic light model (see Figure 6), assess whether to invest in additional new features. FIGURE05 Many bank brands excel in customer experience in one or two touchpoints. Imagine if we could combine them to create a nearly unbeatable team. Capital One 360 Branch Commonwealth Bank Social FANTASY FINANCE EXPERIENCE mbank BMO Simple Mobile PFM Site Payment Email Mint.com Apple Pay RBS ATM Build your world When looking at the ambitious capabilities in the fantasy model, it is impractical to invest in everything. In our conversations with banks, we often work down into the weeds with discussions regarding individual components of the consumer experience components such as the website, mobile payment, the branch, and the role of social. There s a tendency to focus on novel technology in an attempt to keep Wells Fargo Ally USAA Garanti Cross-sell Mobile Deposit Fidelity Investments Wearables Customer Service Bradesco Robot Teller Integration

FIGURE06 Deciding where to invest The traffic light model for deciding what banking capabilities to invest in. WAIT AND SEE PASS CRITERIA Capability untested in this banking market Low public awareness CHANNEL EXAMPLE Branch: Robot teller Mobile: Microsoft HoloLens Desktop: Games ATM: Custom card printing Call center: Voice biometrics ON THE VERGE TEST CRITERIA Offered by banking innovators Delivering results in other industries CHANNEL EXAMPLE Branch: Beacon Mobile: Smart watch app Desktop: Massive Online Open Courses (MOOC) ATM: Cardless transaction Call center: Virtual assistant TABLE STAKES INVEST CRITERIA Demanded by customers Driving switching behavior Offered by competitors Available as white label service (e.g., Yodlee and Mitek) CHANNEL EXAMPLE Branch: Video conference Mobile: Quick swipe balance Desktop: Budgeting or Personal Financial Management Tools (PFM) ATM: Biometric security Call center: Single customer view

Conclusion Crucially, these touchpoints work best when part of a cohesive world inspired by an organizing idea, implemented in a way that feels like a humanized expression of the brand. The sum of these parts needs to live up to the bank brand promise wherever and whenever customers come calling. Great brands sell themselves, not their products, and this shines through every interaction on each channel. When this is successful, customers react in a positive manner regardless of the channel through which they interact with the brand (see Figure 7). While individual touchpoints (e.g., mobile, ATM, etc.) between banks and their customers have advanced in isolation, a seamless, holistic packaging of these touchpoints has yet to occur. It s their combination that will accelerate the vision of humanized and enjoyable banking. FIGURE07 Desired future-state descriptions The future of banking must have a service orientation and respond to customers needs, wants, and desires. Banks should seek positive descriptions, whether the nature of the engagement is a transaction, a product/service, an educational opportunity, or advice. TRANSACTION That was as easy as it could possibly be. PRODUCT/SERVICE I understand my options. EDUCATIONAL OPPORTUNITY I feel more confident. ADVICE I know I made the right decision. The time has come for the omnichannel financial experience. The question is whether a bank, retailer, or technology company will do it first.

David Poole Senior Strategist, SapientNitro Boston dpoole@sapient.com David leads strategy for the Financial Services Center of Excellence, which is responsible for supporting our global network of clients in thought leadership, innovation, transformation, and consumer insight. Jon Day Director & Global Lead, Financial Services, SapientNitro Toronto jday@sapient.com With over 22 years of experience in financial services, Jon guides our development of thought leadership, insights, and research related to dramatic trends and movements that redefine customer experience and how brands connect to customers in the financial services sector. INSIGHTS WHERE TECHNOLOGY & STORY MEET The Insights publication features the marketing intelligence, trend forecasts, and innovative recommendations of boundary-breaking thought leaders. The SapientNitro Insights app brings that provocative collection now in its digital form to your on-the-go fingertips. Download the full report at sapientnitro.com/insights and, for additional interactive and related content, download the SapientNitro Insights app. SapientNitro, part of Publicis.Sapient, is a new breed of agency redefining storytelling for an always-on world. We re changing the way our clients engage today s connected consumers by uniquely creating integrated, immersive stories across brand communications, digital engagement, and omnichannel commerce. We call it our Storyscaping approach, where art and imagination meet the power and scale of systems thinking. SapientNitro s unique combination of creative, brand, and technology expertise results in one global team collaborating across disciplines, perspectives, and continents to create game-changing success for our Global 1000 clients, such as Chrysler, Citi, The Coca-Cola Company, Lufthansa, Target, and Vodafone, in thirty-one cities across The Americas, Europe, and Asia-Pacific. For more information, visit www.sapientnitro.com. SapientNitro and Storyscaping are registered service marks of Sapient Corporation. COPYRIGHT 2015 SAPIENT CORPORATION. ALL RIGHTS RESERVED.