Revitalise retail banking agility by embracing the larger ecosystem

Last week I was invited to Lisbon to attend Diebold Nixdorf’s (DN) International Management Seminar (IMS) 2018 - ‘Revitalising Retail Banking Agility’. This was the 31st IMS and comprised 120 guests, mainly banks and financial institutions, from 36 countries brought together to share knowledge, develop connections through networking and solve problems.

With retail banking currently undergoing large-scale disruption - eg regulatory change, new market entrants (challenger / digital banks and fintechs), demanding tech-savvy customers and the need to focus on cost reduction and efficiency - the event was both timely and very much on topic.

Day one of the three-day event was a dedicated workshop solely focused on consumer journeys in retail banking. Participants were given a variety of perspectives about journeys in retail banking, retail and within a wider ecosystem. DN’s Norbert Knievel hosted this workshop and highlighted the importance of the statement ‘touch-points matter but it’s the full journey that really counts’. He illustrated this with an example of a stadium journey from a consumer perspective. 

Retail guru John Ryan shared insights and hands-on examples about how retailers are already successfully embracing journey thinking within the shopping journey, and how they have ‘started to eat the banker’s lunch’ by more and more tapping into the payments and banking landscape. Diebold Nixdorf’s journey expert Markus Doeinghaus shared some approaches on how banks can leverage data (their main asset) and open APIs to enable E2E life journeys such as buying a house. 

The workshop included site visits to a number of businesses across Lisbon including Nespresso, McDonalds, Santander, Activo Bank, BPI and Continente, to examine how they develop / improve their businesses by focusing on customer journeys. What was noticeable was the importance these businesses attached to retaining the option for human interactions between their staff and customers; “human elements make customers feel valued” and can be vital in “getting customers to return to their branches and stores”, as John Ryan said.

The second day opened with Devon Watson, Chief Marketing Officer of DN, welcoming everyone and opening the formal event. His introduction discussed four ‘mega-trends’ or forces affecting retail banking: Rising competition, Shifting cost base, Consumer evolution and Unbundling (ie regulation requiring banks to open-up their market to new entrants).  In response to these trends, Mr Watson stressed that whilst many banks were focused on digitisation or omni-channel strategies, “digitisation isn’t enough, banks need to use technology to enable friction to be eliminated from customer journeys”.

He suggested that banks should focus on complete end-to-end (E2E) customer journeys rather than seek to improve the individual transactions comprising the journeys. They need to consider how consumers move through their daily lives and how they can add value, provide insight or harness up-sell opportunities at every step. This is the idea behind DN’s ‘Connected Commerce’, the ability of banks to compete to own the customer’s whole value chain, staying with the consumer every step of the way. Hence, this new strategic approach based on the consideration of E2E customer journeys goes well beyond both basic digitisation and omni-channel.

Following the introduction to the event, there were a series of presentations from senior representatives of retail banks from around the world explaining the transformation journeys their organisations were working on. A flavour of these presentations can be given by their titles: Digital transformation, Re-inventing how banking serves people, Re-imaging customer experience in the digital world, Evolving physical banking in the new digital context.

It was clear from the presentations that the banks have been focused on improving their interactions with customers including both in-branch and mobile channels. They have looked to make a step-change in the whole branch / sales experience through the combination of self-service ATM machines offering a large range of services supported by tellers and sales staff. Indeed, some banks are using an agile, inter-active approach, adjusting the self-service (ATM) to personal service via tellers (staff) model as determined by local customer preference. One bank had re-invented and re-launched the idea of a mobile branch in a truck allowing them to access customers in remote areas and at specific locations - music festivals, fairs, beaches etc.

A presenter said that “digitisation is at the heart of branch transformation” and that, post transformation, 91% of his bank’s in-branch transactions were now completed directly by customers using self-service ATMs. Indeed, issues with processing cash deposits were the main reason why the bank’s self-service target of 95% had yet to be met. 

Other banks placed emphasis on innovation through an Agile methodology using multi-discipline ‘scrums’ of staff to develop and implement change. The innovation work at one institution focused on both digitisation (process improvement, removing friction) and, importantly, also on “human centred design principles for enhanced customer experience”. They also used data analytics to investigate what customers were using their ATMs for, using data to understand the good and bad in their customer journeys and identify areas for improvement. Another institution commented that, through a (seemingly brave) focus on innovation, their bank had “learned to fail fast” when trying different approaches to serving customers and markets.

It appeared that the best retail transformations generally featured getting two aspects right: 

• branches - the correct location, look-and-feel, self-service via ATM / human interaction experience, and a
• new digital ecosystem - the provision of a quality digital experience via mobile applications, the use of AI / data analytics to provide insight to both customers and marketing departments, partnering with specialist fintechs.

All of which lead to the personalisation of, and improvement to, the customer’s experience of the bank and hence the value the customer attaches to that relationship, their propensity to remain loyal to the bank and recommend it to their friends and family. 

However, when compared to Devon Watson’s opening presentation, it was interesting to note that, despite their significant efforts to date, the banks had really only completed the first two of the five steps suggested as necessary to truly revitalise retail banking, ie

1. put the customer at the focus of their activities, personalising and streamlining their services
2. be more agile and innovative in their business
3. think in end-to-end journeys, both within the bank and the connected commerce outside of it
4. that touch-points matter, but that it’s the full journey that really counts.
5. go beyond traditional industry boundaries, embracing a larger ecosystem.

By continuing and extending their existing work on customer journeys to include external partners, developing E2E ecosytems, banks could gain both a strategic opportunity to grow their business into the future and meet the threats posed by new market entrants, particularly GAFAA. The strategic opportunity appears to be for banks to look at the key life journeys of their customers - eg house purchase, starting a family, opening a business - and work with partners to develop all-embracing, seamless solutions, using Open APIs to provide the connection between them.

These themes were continued into day two when I attended a press roundtable with Gerrard Schmid, President and CEO of DN. Mr Schmid stressed that despite various cashless society initiatives around the world, he still believed that there was “a long tail to cash” with, for example, cash usage in Mexico growing at 20% a year, cash remaining very important in Singapore and to small businesses generally. In relation to this, he said that fintechs had generally been ignoring ATMs - the “hard stuff” as he put it.

He then emphasised the importance to banks of re-inventing their retail experience: transforming their branches, enabling self service through new ATMs and mobile banking facilities and the importance of remaining relevant to their customers at all times.

In support of the banks’ transformation programmes, Mr Schmid said that software represents the fastest growing area of DN’s business and that the company has “the ability to provide software to support banks in a period of change”. Indeed, DN’s mission statement was to ‘enable self-service’ to bank customers via sophisticated ATMs, mobile banking and AI based products. He also discussed DN’s Connected Commerce initiative which enables banks to link-up their customers’ journey between banks, retailers and other providers via Open APIs.

The third day of the event included further bank presentations and panel sessions involving DN executives which focused on the transformation of retail banking through the development of ecosystems. One presentation provided a useful definition of the various aspects of a retail customer’s behaviour, or expectations, of their interactions with the bank; ie mobility, transparency, real time, smart data, new contents, personalisation and omni-channel. 

By implementing a digitisation strategy based on this approach the bank had successfully turned their web and mobile channels into a sales force - with more than 50% of their new sales achieved digitally. Further, this bank’s digitisation strategy includes a statement that “we look at open markets as a potential opportunity” hence they appear to be on the way to stealing a march on he opposition by developing E2E ecosystems with partners.

IMS 2018 was certainly well received by all attendees who left very much looking forward to next year’s event. Finextra Research in cooperation with Diebold Nixdorf will shortly be issuing a White Paper entitled: Revitalise Retail Banking Agility – Embrace the Larger Ecosystem.