Banks Are Not Just Being Challenged; They All Need to Change to Survive

I’ve written previously about the wave of “challenger banks” sweeping the UK banking and financial services market. There is a great opportunity for new brands to focus on improving service to the customer and taking market share from the big established brands.

But change in this market is coming from beyond new brands on the High Street alone. Digital banking is changing the banking sector in several ways:

Payment by phone

Services such as Apple Pay are now commonly accepted and stores with low-value items – like coffee chains – are experimenting with their own phone payment systems that connect into the loyalty programme. No more lost cardboard loyalty cards!

Niche services by app

Individual apps for individual banking services are here. Want to transfer money overseas? There will be an app offering this service. Want a loan to buy a car? Why not use a peer-to-peer app? Niche players are using the app store to offer almost every kind of possible banking service.

Location based services

Banks are already using location-based advertising across social networks so it’s only a small leap of the imagination to assume that they will use the same customer insight to directly offer their own services soon. For example, sending an offer on a loan if they can see you are spending more than usual in a month and are currently out shopping again.

Customer analytics

The data available on customers is now so complete that behaviour can be predicted before it takes place. For example, customers that will have trouble maintaining payments on their Visa card can be contacted before the problems become critical.

Omnichannel banking

It goes without saying that customers today expect the service at their bank to blend seamlessly between the branch and their online experience. But think about the reality – are most banks anywhere close to what customers expect? If you check out a new mortgage online and walk into a branch the next day, how would it affect your impression of the bank if the in-branch team were already aware of the type of mortgage you are interested in without you needing to explain all over again?

I think there is a potential existential crisis for the entire banking industry if they do not pay enough attention to these changes. Niche players offering individual financial services via apps can usually undercut the major banks because they do not have the overheads of a national branch network, so in theory these niche service providers should be able to win an enormous amount of business from the traditional banks.

Customer loyalty and inertia will prevent much of the potential business loss, but if customers are increasingly dissatisfied with the service they receive then they will look for an alternative. Why give customers a reason to go looking for a new service provider?

I think that a focus on how to deliver an omnichannel approach to customer service is now critical for all the major banks – as a way of retaining existing customers and for attracting new customers with a combination of their established brand and great service.

What do you think about the changing banking sector? Leave a comment here or get in touch via my LinkedIn profile.

 

Image courtesy Ken Teegardin.


Retail Banks: Are The Challenger Banks Enough?

UK retail banking has been through quite a change in the past 6 or 7 years from the previously unimagined bank runs on Northern Rock to nationalisation and back again. With the government now unwinding state investments in Lloyds and RBS and new ‘challenger’ brands emerging is the industry performing how customers expect?

No. Even with the High Street shake up driven by the challengers, this is an industry where customer expectations are diverging from what the banks are offering.

Look at retail for an example of how brands are reacting to customer expectations. House of Fraser is a great example as I was discussing some of their omnichannel strategy on LinkedIn last week. HoF is reorganising their management and customer focused teams to be driven entirely by the needs of their customer, whether that customer is in a store or online. They are removing the distinction and trying to offer a great service to all customers – not just those on preferred channels.

What is the reality in banking? Well, a recent publication by the British Bankers Association (BBA) features some revealing statistics:

  • 10.6 million banking app logins every day
  • 22.9 million banking apps downloaded
  • £2.9 billion a week transferred using apps
  • 43% decline in telephone contact to banks from 2008 to 2013
  • 6% decline in branch use in the past year

Look at the final two. Visits to bank branches are declining dramatically year on year and the use of telephone banking has been in freefall since 2008. Customers want more. They want the same convenience in banking that they can find from other industries – like retail.

Imagine going to a car dealer and being told that it’s easier to get a new car if you stick with the same manufacturer as your present one, and you can’t compare the prices of alternatives once the dealer gives you a quote on a vehicle?

It sounds absurd, but isn’t this how banks still treat customers? It’s often easier to get new products from the one that has your current account and if a product such as a loan or insurance is offered, how easy is it to run a quick comparison with a rival bank?

The challenger brands are shaking up retail banking on the High Street. Opening hours are being improved and services are becoming easier to purchase, but the entire industry is facing a new challenge from market entrants.

Companies that offer individual financial services are often able to give customers a better deal because they have a narrow product focus and no need to manage a branch network. Even big non-financial brands are offering financial services. You can ask car manufacturer Renault, or any of the big supermarkets, for a personal loan.

The Financial Tech (FinTech) market is also growing fast. Individual financial services offered via apps means that customers can download a tool, get a quick quote on a product and choose whether to use it, at any time of day or night.

So how can the challenger banks and the big established banking brands compete in this new world of financial services? By improving the customer experience. Customers still trust and respect their banks. This is where they have always conducted financial services and it remains the most obvious place to go for most customers. Peer-to-peer lending might be exploding in popularity, but it is still dwarfed by the amount of personal loans issued by the big banking brands.

But, as the BBA research indicates, if the gap between customer expectations and the reality of how banks treat customers get wider then there will be an exodus. Customers are already impatient. If the situation gets worse, the traditional brands and even the High Street challengers will look archaic in the way they treat customers.

What every bank executive needs to be thinking right now is how do I place the customer at the heart of what we do? How do we make it easy to ask questions? How do we make it easy to obtain services when the customer needs them? How do we make the customer journey so easy that banks inspire loyalty from happy customers?

The customer experience is now the number one priority for all banking brands, including the challengers, but it’s not just me saying this. Take a look at the BBA research for yourself by visiting their website here.

What do you think of the way that the challenger banks are changing UK banking and whether it is enough to keep up with customer expectations? Leave a comment here or tweet me on @DavidTurnerCXO


Challenger energy brands need to punch above their weight

Challenger energy brands need to punch above their weight in customer service to make their growth stick.

In the past three years, energy companies other than the big six of British Gas, EDF Energy, npower, E.ON UK, Scottish Power, and SSE have grown their share of the market more than nine-fold, from less than 1 per cent in 2012 to 8.7 per cent today. These fledgling challengers have seen an influx of customers in a space of time that most businesses could only dream of.

However, there is a risk that this could prove a mixed blessing if overwhelmed management systems lead to poor customer service, prompting the new intake to leave just as fast as they arrived.

Inevitably, avoiding this situation will require investment, but there are definite rights and wrongs when going about this and ways to make any expenditure go as far as possible to improve customers’ experience.

As if the rapid growth of these businesses didn’t present challenge enough, it is compounded by the fact that consumers are now more demanding than ever in terms of the ways in which they expect to be able to communicate with their energy suppliers. They want to be able to interact with their suppliers on the web, via desktops and mobiles, as well as by phone or email. Moreover, customers also expect to receive a consistent response regardless of which channel, or combination of channels, they wish to use. Solidly delivering this level of service in a rapidly growing business presents a real management challenge, not only in terms of getting the IT systems right, but also avoiding silos from forming that prevent effective sharing of information across different departments.

Thankfully, setting these systems up in-house is no longer the only option for these challenger energy companies, and the range of hosted customer-management services that are available, either to wholly outsource or to supplement the process, have proliferated in recent years. As well as avoiding significant upfront investment at a time of great change in a business, this type of service also allows users to tap into well-established infrastructures, managed by teams with a great deal of experience running customer communication programmes. At a time when the management needs to be wholly focussed on the commercial and operational sides of their business, this could be an especially wise choice.

If you want to read more about the challenge faced by the newer entrants to the energy markets and the hosted customer management services that are available to help, download our recent white paper: The Power to Compete.